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Breaking Down Clean Energy Funding in the Inflation Reduction Act

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The following content is sponsored by the National Public Utilities Council

infographic breaking down clean energy funding in the inflation reduction act

Breaking Down Clean Energy Funding in the Inflation Reduction Act

The Inflation Reduction Act (IRA), signed into law on August 16, 2022, is the largest climate legislation in U.S. history.

Along with fighting inflation and boosting domestic manufacturing, the IRA ultimately aims to help the U.S. achieve its goal of reaching net-zero emissions by 2050.

This infographic sponsored by the National Public Utilities Council breaks down the $392.5 billion in clean energy and climate spending in the Inflation Reduction Act, based on estimates from the Congressional Budget Office.

Note: The figures in the graphic and article refer to the IRA’s estimated spending for each program. Spending estimates tend to be lower than the total amount of funds allocated by the act.

Deconstructing the Inflation Reduction Act

The IRA’s clean energy and climate spending can be broken down into seven broader categories:

CategoryEstimated Spending (2022–2031, millions)
Clean Electricity Tax Credits$160,940
Air Pollution, Hazardous Materials, Transportation and Infrastructure$41,870
Individual Clean Energy Incentives$36,878
Clean Manufacturing Tax Credits$36,877
Clean Fuel and Vehicle Tax Credits$35,995
Conservation, Rural Development, Forestry$34,681
Building Efficiency, Electrification, Transmission, Industrial, DOE Grants and Loans$27,270
Other Energy and Climate Spending$18,000
Total$392,511

Clean Electricity Tax Credits, which include the Clean Electricity Production Tax Credit (PTC) and Investment Tax Credit (ITC), account for the largest share of climate spending at 41% of the $392.5 billion.

Furthermore, the IRA mobilizes around $42 billion for programs aimed at air pollution, hazardous materials, and infrastructure. The Individual Clean Energy Incentives and Clean Manufacturing Tax Credits programs each receive $37 billion to incentivize residential clean energy use and domestic manufacturing of clean technology components.

Below, we’ll unpack the IRA’s clean energy spending in further detail.

Clean Electricity Tax Credits

Of the $161 billion of funding for Clean Electricity Tax Credits, $132 billion is for just three programs.

ProgramEstimated Spending (2022-2031, millions)
Credit for Electricity Produced From Renewable Resources*$51,062
Clean Electricity Investment Credit$50,858
Zero-Emission Nuclear Power Production Credit$30,001
Energy Investment Credit*$13,962
Clean Electricity Production Credit$11,204
Credit for Carbon Oxide Sequestration*$3,229
Other$624
Total$160,940

*Indicates extensions or modifications of existing credits.

The Credit for Electricity Produced from Renewable Sources is a PTC that provides from $5 to $25 per megawatt-hour (MWh) of electricity generated from renewable facilities. Wind, solar, geothermal, marine, biomass, hydro, and landfill gas facilities are eligible for this credit.

The Clean Electricity Investment Credit is an ITC with a base credit of 6% (rising to 30% if other requirements are met) on the total cost of installed equipment for a zero-emissions power generation facility. Besides renewables, nuclear, fuel cells, and battery storage systems qualify for this credit.

Nuclear is set to get a $30 billion boost through the Zero-Emission Nuclear Power Production Credit, which offers from $3 up to $15 per MWh of electricity generated from nuclear reactors. This is applicable for all reactors in service in 2024 and continues through 2032.

Clean electricity projects can either claim the PTC or the ITC (not both). Projects with high capital costs are likely to benefit from the ITC. On the other hand, projects with high capacity factors could benefit from credits per unit of electricity from the PTC.

Air Pollution, Hazardous Materials, Transportation and Infrastructure

Nearly half the spending for programs in this category–around $20 billion—is for the Greenhouse Gas (GHG) Reduction Fund.

ProgramEstimated Spending (2022-2031, millions)
Greenhouse Gas Reduction Fund$19,980
Climate Pollution Reduction Grants$4,050
Hazardous Materials$3,000
Grants to Reduce Air Pollution at Ports$3,000
Neighborhood Access and Equity Grant Program$2,900
Use of Low-Carbon Materials$2,150
Low-Carbon Transportation Materials Grants$1,700
Clean Heavy-Duty Vehicles$1,000
Other$4,090
Total$41,870

The GHG Reduction Fund, managed by the Environmental Protection Agency (EPA), aims to provide grants for clean energy and climate projects that reduce GHG emissions, with a focus on low-income and disadvantaged communities.

Similarly, other policies in this category provide the EPA with funding for grants to reduce various kinds of air pollution and curb hazardous material usage.

Individual Clean Energy Incentives

The IRA provides various tax credits to incentivize clean energy use and energy efficiency in American households.

ProgramEstimated Spending (2022-2031, millions)
Residential Clean Energy Credit$22,022
Nonbusiness Energy Property Credit*$12,451
New Energy Efficient Home Credit*$2,043
Energy Efficient Commercial Buildings Deduction$362
Total$36,878

*Indicates extensions or modifications of existing credits.

The Residential Clean Energy Credit, accounting for $22 billion in spending, provides a 30% credit on the cost of residential clean energy equipment. This includes rooftop solar panels, geothermal heating systems, small wind turbines, and battery storage systems.

The Nonbusiness Energy Property Credit, now known as the Energy Efficient Home Improvement Credit, offers up to $3,200 annually for energy efficient home upgrades, including insulation, heat pumps, efficient doors, and more.

Clean Manufacturing Tax Credits

Besides energy generation, the IRA incentivizes domestic manufacturing of clean technologies with the following credits:

ProgramEstimated Spending (2022-2031, millions)
Advanced Manufacturing Production Credit$30,622
Extension of the Advanced Energy Project Credit$6,255
Total$36,877

The Advanced Manufacturing Production Credit is a tax credit for the domestic production of solar and wind energy components, inverters, battery components, and critical minerals. The credit for critical minerals is permanent, unlike credits for other items, which will phase out in 2032.

Other Climate Funding in the IRA

In addition to the policies above, the IRA sanctions another $116 billion for clean energy and climate programs.

This includes incentives for clean hydrogen production, electric vehicle purchases, and alternative fuels. Furthermore, the Department of Energy receives around $9.8 billion for clean energy innovation and infrastructure loan and grant programs.

The act also invests in environmental conservation and rural development. It includes an estimated $9.6 billion in assistance for rural electric cooperatives, along with other incentives for energy efficiency and renewable energy.

With billions in climate funding, the Inflation Reduction Act is set to provide a significant boost to America’s clean energy plans. According to an assessment by the Department of Energy, the IRA could help reduce economy-wide GHG emissions to 40% below 2005 levels by 2030, marking a major milestone on the road to net-zero.

Click here to learn more about how electric utilities and the power sector can lead on the path toward decarbonization.

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Clean Energy

Which U.S. Utilities Are Investing in Clean Energy the Most?

In this graphic, we show which U.S investor-owned utilities have allocated the most capital expenditure toward clean energy.

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The preview image for a radial bar chart showing which U.S investor-owned utilities have allocated the most capital expenditure toward carbon-free sources of electricity.

Which U.S. Utilities Are Investing in Clean Energy the Most?

Decarbonizing the power sector will require significant investments in clean energy as utilities replace existing fossil fuel infrastructure. 

In this graphic, we show which U.S investor-owned utilities (IOUs) have allocated the most capital expenditure (CAPEX) toward carbon-free sources of electricity. 

The data comes from the latest edition of the Annual Utility Decarbonization Index, created in partnership with the National Public Utilities Council, which quantifies and compares the status of decarbonization among the largest U.S. IOUs. 

The Carbon-Free Investment Ranking

The Utility Decarbonization Index ranks companies on six metrics based on the latest available data, specifically those that pertain to their fuel mix, carbon emissions, and decarbonization goals. 

The sixth and final metric measures the share of each utility’s planned CAPEX for carbon-free electricity generation, such as nuclear power and renewables. 

Here are the top scorers out of the 47 IOUs included in the report.

RankCompanyShare of Planned Generation CAPEX
Allocated To Nuclear & Renewables
#1NextEra Energy100%
#2Public Service Enterprise Group100%
#3Avangrid100%
#4Pacific Gas and Electric*96%
#5Alliant Energy94%
#6National Grid93%
#7AES Corporation92%
#8Constellation Energy90%
#9WEC Energy90%
#10Emera86%
#11Dominion Energy*84%
#12American Electric Power83%
#13TransAlta81%
#14MGE Energy78%
#15Duke Energy68%
#16Evergy68%
#17DTE Energy Company67%
#18Fortis Inc.67%
#19Consumers Energy66%
#20Southern Company63%

*Planned CAPEX unreported, shows 2022 realized CAPEX

Avangrid climbed to first place in 2022, tying with NextEra and PSEG, who both maintained their 100% carbon-free investment plans from 2021. This marks an improvement from Avangrid’s 98% the year prior.

Meanwhile, National Grid pulled off the most significant percentage increase, from 3% to 93% from 2021 to 2022. 

Overall, carbon-free investment is up 3 percentage points year-over-year from 63% to 66% for the top 47 IOUs.

Which Utilities Are Included in the Decarbonization Index?

The IOUs ranked in this year’s Utility Decarbonization Index are the 47 largest in the U.S. by their 2022 net owned and purchased electricity generations.

U.S. IOUs that had fewer than 2 million megawatt-hours (MWh) of owned generation were excluded from the report. 

The 47 IOUs featured in the Index accounted for over two-thirds of the nation’s electricity generation in 2022. As a result, these utilities’ decarbonization efforts will significantly impact the 33% of U.S. emissions that come from the power sector.

Download the 2024 Annual Utility Decarbonization Report

In addition to the Decarbonization Index, there’s much more to explore in the 2024 report, including:

  • Inflation Reduction Act impacts
  • Market trends
  • Year-to-year progressions
  • Fuel mix rankings for the largest public utilities
  • Gas utility emissions rankings 

Are you interested in seeing the rest of the rankings? Download the 2024 NPUC Annual Utility Decarbonization Report now.

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Clean Energy

Visualized: Renewable Energy Capacity Through Time (2000–2023)

This streamgraph shows the growth in renewable energy capacity by country and region since 2000.

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The preview image for a streamgraph showing the change in renewable energy capacity over time by country and region.

Visualized: Renewable Energy Capacity Through Time (2000–2023)

Global renewable energy capacity has grown by 415% since 2000, or a compound annual growth rate (CAGR) of 7.4%.

However, many large and wealthy regions, including the United States and Europe, maintain a lower average annual renewable capacity growth.

This chart, created in partnership with the National Public Utilities Council, shows how each world region has contributed to the growth in renewable energy capacity since 2000, using the latest data release from the International Renewable Energy Agency (IRENA).

Renewable Energy Trends in Developed Economies

Between 2000 and 2023, global renewable capacity increased from 0.8 to 3.9 TW. This was led by China, which added 1.4 TW, more than Africa, Europe, and North America combined. Renewable energy here includes solar, wind, hydro (excluding pumped storage), bioenergy, geothermal, and marine energy.

During this period, capacity growth in the U.S. has been slightly faster than what’s been seen in Europe, but much slower than in China. However, U.S. renewable growth is expected to accelerate due to the recent implementation of the Inflation Reduction Act.

Overall, Asia has shown the greatest regional growth, with China being the standout country in the continent.

Region2000–2023 Growth10-Year Growth
(2013–2023)
1-Year Growth
(2022–2023)
Europe313%88%10%
China1,817%304%26%
United States322%126%9%
Canada57%25%2%

It’s worth noting that Canada has fared significantly worse than the rest of the developed world since 2000 when it comes to renewable capacity additions. Between 2000 and 2023, the country’s renewable capacity grew only by 57%.  

Trends in Developing Economies

Africa’s renewable capacity has grown by 184% since 2000 with a CAGR of 4%. 

India is now the most populous country on the planet, and its renewable capacity is also rapidly growing. From 2000–2023, it grew by 604%, or a CAGR of 8%.

It is worth remembering that energy capacity is not always equivalent to power generation. This is especially the case for intermittent sources of energy, such as solar and wind, which depend on natural phenomena.

Despite the widespread growth of renewable energy worldwide, IRENA emphasizes that global renewable generation capacity must triple from its 2023 levels by 2030 to meet the ambitious targets set by the Paris Agreement.

Learn how the National Public Utilities Council is working toward the future of sustainable electricity.

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