Decarbonization Channel

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:

Category	Estimated 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.

Program	Estimated 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.

Program	Estimated 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.

Program	Estimated 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:

Program	Estimated 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

Charted: Progress on 2030 Renewable Energy Targets by Country

In this graphic, we visualize whether major electricity-consuming countries are on track to meet their 2030 renewable energy targets.

Published

4 weeks ago

on

November 7, 2023

By

Selin Oğuz

which countries are on track to meet their 2030 renewabl energy targets

Progress on 2030 Renewable Energy Targets by Country

The International Energy Agency states that the global installed capacity of renewable energy must triple by 2030 to limit global warming to 1.5°C above pre-industrial levels.

This makes the next six years critical in the climate fight, with the upcoming United Nations COP28 event in Dubai representing a great time to assess the progress of countries toward achieving their 2030 targets.

Checking in on Progress

As set out by their Nationally Determined Contributions in the Paris Agreement, many countries, including major electricity consumers such as the U.S., European Union, China, India, and the UK, have set ambitious targets for increasing their solar and wind power generation capacities by 2030.

The data, however, suggests that many are struggling to keep pace with the required annual capacity additions that will allow them to hit these targets.

Currently, China stands out as the only nation on track to meet its 2030 target. In 2022, it not only met but significantly exceeded its required capacity additions to remain on track, adding 168% of the required 101 GW.

Let’s now take a closer look at how each of these countries are faring, comparing how much wind and solar capacity they needed to add with how much they actually did in 2022.

Country / Region	2030 Target	Annual Average Wind and Solar Capacity Additions Needed to Hit 2030 Target			Actual Capacity Additions in 2022
		Wind	Solar	Total	Wind	Solar	Total
India	40% zero-carbon generation by 2030 (includes nuclear)	16 GW	19 GW	35 GW	2 GW	18 GW	20 GW
China	28% renewables by 2030	57 GW	44 GW	101 GW	55 GW	115 GW	170 GW
United States	739 GW of wind and solar by 2030 to reach zero-carbon electricity by 2035	34 GW	35 GW	69 GW	11 GW	21 GW	32 GW
United Kingdom	60% renewables by 2030	4 GW	3 GW	7 GW	4 GW	1 GW	5 GW
European Union	REPowerEU: 42.5% renewables by 2030	38 GW	48 GW	86 GW	16 GW	38 GW	54 GW

Overall, the U.S. and India were the furthest off from their targets in 2022, adding only 46% and 57% of what was needed, respectively. European countries, on the other hand, made progress but still need substantial annual additions to meet their targets by 2030.

Playing Catch-Up: The Path to 2030

Collectively, the U.S., European Union, China, India, and the UK account for more than 60% of global electricity consumption, underscoring their profound responsibility in decarbonizing their electricity sectors.

Investments in research and development, policy support, and infrastructure development are all crucial pieces of the puzzle when it comes to achieving 2030 targets.

With swift and bold action, these nations have an opportunity to transform the global energy landscape and move the needle toward achieving net-zero on a global scale.

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

Clean Energy

Breaking Down the $110 Trillion Cost of the Clean Energy Transition

The clean energy transition will cost $110 trillion in global capital investments between 2021 and 2050. Here’s that sum broken down by sector.

Published

2 months ago

on

October 11, 2023

By

Selin Oğuz

The $110 Trillion Cost of the Clean Energy Transition

The Energy Transitions Commission estimates that achieving net-zero by 2050 requires an average annual investment of $3.5 trillion globally between 2021 and 2050.

That’s a total of $110 trillion in capital investment, or 1.3% of projected global GDP, over the next three decades.

The question then arises: where should this substantial sum of money be allocated?

In collaboration with the National Public Utilities Council, this graphic delves into the answers to that question utilizing data from the Energy Transitions Commission.

How Much Will the Clean Energy Transition Cost?

Of the $3.5 trillion dollars that needs to be invested annually into a net-zero economy, around $2.4 trillion should flow into the electricity sector, according to the Energy Transitions Commission. This accounts for 70% of the annual investment.

Decarbonizing the electricity sector holds significant importance as it can serve as a catalyst for the decarbonization of all other sectors, including:

Buildings, which are becoming increasingly electrified through the growing use of heat pumps
Electrified road transportation
Electricity-intensive industrial activities, such as cement, steel, and chemical production
Green hydrogen production

Now, let’s take a collective look at the avenues of investment needed to reach net-zero by 2050 in more detail.

Sector	Subsector	Average Capital Investment Needed Per Year 2021-2050	Total Sector Investment Needed Per Year 2021-2050
The Power Sector	Zero-Carbon Power Generation	$1300B	$2400B
	Power Networks	$900B
	Power Storage and Grid Flexibility	$200B
Buildings	Retrofits	$230B	$500B
	Heat Pumps	$130B
	Renewable Heating	$140B
Transport	Road Charging Infrastructure	$130B	$240B
	Aviation	$70B
	Shipping	$40B
Carbon Removal	Natural Climate Solutions (NCS)	$100B	$130B
	Hybrid and engineered carbon removal solutions	$30B
Clean Hydrogen	Production	$40B	$80B
	Transport and storage	$40B
Industry	Chemicals	$40B	$70B
	Steel	$10B
	Cement	$10B
	Aluminum	$10B

All figures are in real 2021 U.S. dollars

Overall, the diversity of the table above underscores the multifaceted approach required for a low-carbon transition.

Is the World on Track to Reach Net-Zero?

In 2022, the global capital investment in the clean energy transition totaled $1.1 trillion—approximately one-third of the required annual average to reach net-zero.

With that said, it’s important to note that the $3.5 trillion figure is an average across 29 years. Opportunities to catch up still exist, although the window is closing quickly.

According to the Energy Transitions Commission, investments must double from their current levels to around $2 trillion by 2025 and peak at around $4.2 trillion by 2040.

To remain on track to net-zero, therefore, we must make significant and rapid investments in all sectors, with a primary focus on the power sector.

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