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Join our work today to help us build a thriving and just clean energy future. 

Five Ways the Inflation Reduction Act Can Help Us Hit Our Clean Power Goals

A guide to the key provisions in the IRA that will help decarbonize the power sector, address climate change, advance environmental justice, and create jobs.

President Biden talks with Sec. of Energy Granholm during a tour of the National Renewable Energy Laboratory in Arvada, Colorado on September 14, 2021.

Energy is at the core of climate change and the key to the solution—and clean electricity is the linchpin to our decarbonization plans. Clean power is necessary to decarbonize not just our electricity sector, but also transportation, buildings, and even some heavy industry. That’s why it is so critical we hit our nation’s goal of achieving 80 percent carbon-free power by 2030, and ultimately, 100 percent clean power by 2035.

The good news is that we’re already on our way. After passing the historic Inflation Reduction Act (IRA) in August 2022, Congress and President Biden set us on the path to increasing carbon-free electricity in the U.S. from 40 percent in 2022 to 66 percent in 2030. And a new report from the National Renewable Energy Laboratory (NREL) and U.S. Department of Energy (DOE) shows that the combined potential impacts of the IRA and the Infrastructure Investment & Jobs Act (IIJA) could power us to 80 percent by 2030—but only if the laws are implemented correctly and several other conditions are met, including a robust buildout of transmission. 

Here are the five main opportunities within the IRA that we must seize to decarbonize the power sector effectively and equitably—all while lowering costs for consumers, creating good-paying jobs, advancing environmental justice, reducing pollution, and improving public health. 

This is an edited excerpt from our paper with NRDC, “Powering Toward 100 Percent Clean Power by 2035.” (Click the links below to skip to that section.)

  1. Clean Energy Tax Credits: The IRA provides a long-term, full-value extension of the federal investment and production tax credits (ITC and PTC) for clean power. The credits were expanded to cover energy storage and interconnection costs. These credits also promote projects that pay prevailing wages, use registered apprentices and Made-in-America technologies, and benefit disadvantaged communities—through the use of bonus credits. The incentives are made more accessible with the option for non-profits without tax liability to receive an elective payment in lieu of a tax credit.
  2. DOE Loan Guarantee Program: The IRA provides $8.6 billion for DOE clean energy loan guarantees, enabling $290 billion in loan guarantee authority. The Loan Guarantee Program is a powerful tool for leveraging major private sector investment in clean and innovative energy technologies, especially for grid decarbonization.
  3. USDA Rural Utilities Financing: The IRA’s $12.8 billion for the Department of Agriculture financing programs will help rural communities deploy more clean energy. These funds could be used to help rural co-ops retire their coal-fired power plants through debt forgiveness, and to build out renewable energy and energy storage through grants and loans.
  4. EPA “Force Multiplier” Programs: The Environmental Protection Agency’s Greenhouse Gas Accelerator, State Climate Grants, and Environmental and Climate Justice Block Grants will help us build a cleaner, more resilient, affordable, and equitable power sector—helping slash carbon pollution and deliver on environmental justice through Biden’s Justice40 goals.
  5. DOE Transmission Funding: The IRA and IIJA both contain funding for DOE to allocate grants and loans to build new transmission lines and facilitate their siting. These programs are contained within DOE’s new Grid Deployment Office.
Blog Post Image - Tax Credit Infographic

Infographic on the benefits IRA clean energy tax credits can have over the next 15 years. (From our paper with NRDC, Powering Toward 100 Percent Clean Power by 2035)

Clean Energy Tax Credits

Long-term Extension of Clean Energy Tax Credits

The IRA delivers historic support for clean power. Major new federal investment and production tax credits provide the innovative, long-term support needed for power sector planning and deployment. Over the next 15 years, these tax credits are projected to cut around 2.6 billion metric tons of carbon pollution. IRA clean power provisions extend wind and solar tax credits, create new technology-neutral clean energy tax credits (that include energy storage) and nuclear tax credits, expand carbon sequestration tax credits, and fund programs to support local clean energy investment.

Prior to the IRA’s passage, the solar investment tax credit (ITC) was in the process of being phased down and the wind production tax credit (PTC) had expired. Now both the ITC and PTC will get expanded and extended through 2024. Then, beginning in 2025, the solar ITC and wind PTC morph into the innovative, technology-neutral Clean Electricity Investment Credit (CEIC) and the Clean Energy Production Credit (CEPC) that can support wind, solar, geothermal, battery storage, and any new net-zero power generation technology for the next 10 years or more. Facilities can choose to take either the CEIC or the CEPC, and the credit applies to any qualified facility that begins construction through 2032, or when power sector greenhouse gas emissions fall to 25 percent of 2022 levels, whichever occurs later. This marks the first time that the duration of a tax credit has been tied to greenhouse gas targets. This climate-focused credit will support any new power generation technology that is net-zero, spurring massive deployment of existing renewables and private sector development and innovation in new power sector technologies.

In addition, throughout the tax incentives, strong labor provisions encourage high-quality jobs. These provisions include apprenticeship and prevailing wage requirements to qualify for the full tax credits (receiving only 20 percent of the credit otherwise). Assuming labor requirements are met, the CEIC and CEPC reduce the price of clean energy by 30 percent and 1.5 cents per kWh, respectively.

Furthermore, all the clean energy credits rise in value if projects meet certain justice and just transition standards. Projects receive a 10 percent increase if located in former fossil energy communities or if using domestically-produced iron and steel—helping with justice and just transition goals. An additional 10-20 percent increase is available for projects in disadvantaged communities or qualified affordable housing. Taking advantage of these incentives in combination means that a qualified clean energy project could receive up to a 50–70 percent tax credit. In other words, clean energy is on sale for the next decade at up to 70 percent off. This structuring can help to ensure good-paying domestic jobs and equitable access to clean energy resources. Each of these adders and bonus credits is essential in targeting investment to the communities that have experienced the most economic pain from the transition to clean energy, as well as those that have suffered the most from disproportionate fossil fuel pollution.

The IRA also expands which utilities can use the tax incentives, with direct payments in lieu of tax credits available to municipal and cooperative utilities, Tribes, and nonprofits. Direct pay substantially widens access to these incentives by allowing organizations without tax liability to take advantage of them. Another key aspect is the law’s transferability provision for companies that do pay taxes (and are therefore not eligible for direct pay). Through transferability, project owners can sell their credits to another party for cash, allowing more companies to access the full benefits of credits regardless of federal tax liability.

Blog Post Image - Tax Credit Bar Graph

The potential to grow clean energy capacity using IRA tax credits (versus without IRA tax credits) over time. (From our paper with NRDC, Powering Toward 100 Percent Clean Power by 2035)

IRA tax incentives are more flexible and accessible, which will allow for the fastest renewables build-out in the U.S. to date. NRDC’s modeling projects that the tax credits could support 280 GW of new clean and low-carbon resources by 2030, growing to over 580 GW of new clean and low-carbon capacity by 2035. This would be more than a doubling of U.S. renewable and battery storage capacity between now and the end of this decade, with almost a quadrupling of capacity by 2035.

NRDC’s modeling finds that the clean electricity tax credits could cut about 250 million metric tons of carbon dioxide from the power sector in 2030 as compared to without the tax credits. This is equal to the carbon pollution from every power plant in Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia in 2021. By 2030, carbon pollution from the power sector is projected to fall to 66 percent below 2005 levels due to the IRA’s tax credits. Over the next 15 years, these tax credits are projected to cut around 2.6 billion metric tons of carbon pollution compared to a case without these tax credits.

This cleaner, low-carbon grid will reduce power prices by decreasing U.S. reliance on fossil fuels and their historically volatile prices. According to NRDC modeling, the tax credits are projected to cut the average residential bill by 3.4 percent in 2030 and 4.6 percent in 2035, relative to a scenario without these credits. These savings have been found to be progressive, with low-income households seeing much larger relative benefits. In total, U.S. households are expected to see $60 billion in electricity bill savings over the next 15 years. Saving consumers money makes it even more imperative to get to 80 percent by 2030 on the way to 100 percent clean power. 

The IRA’s tax credits will also reduce exposure to health-harming air pollutants. The annual national health benefits from power sector-related reductions in nitrogen oxides (NOX) and sulfur dioxide (SO2) stemming from the tax credits amount to $8.6–$9.0 billion by 2030, growing to $9.5–$10.1 billion annually by 2035. These figures represent the monetized benefits of avoided health issues, including avoided premature deaths, fewer ER visits and hospital admissions, fewer lost workdays and school days, and reduced childhood asthma attacks. 

At the same time, the clean energy tax credits significantly increase and accelerate efforts by the federal government to catalyze development, commercialization, and deployment of clean energy technologies to address climate change. Because of these numerous innovations, the Treasury Department must continue to issue guidance in a timely manner—and do it well. To that end, the department should work closely with DOE, the White House, and Office of Management and Budget (OMB), and others who have experience and perspective on the full intent of the clean energy tax incentives.

Download the Entire Report

The clean energy transition is at an inflection point. Download Powering Toward 100 Percent Clean Power by 2035.


    DOE Loan Guarantee Program

    The IRA includes $8.6 billion for DOE loan guarantees, enabling $290 billion in loan guarantee authority. The DOE Loan Guarantee Program, which sits within DOE’s Loan Programs Office (LPO), is a powerful tool for leveraging major private sector investment in clean and innovative energy technologies, especially for grid decarbonization. These investments include $5 billion for a new Energy Infrastructure Reinvestment Program, enabling up to $250 billion in loan guarantee authority, to retool, repower, repurpose, or replace retired energy infrastructure (like coal power plants), or build new clean energy infrastructure. Because of the substantial capital utilities invested in the construction of fossil fuel power plants and unpaid debt on those projects, utilities often want to hold onto their existing fossil facilities. Loans and loan guarantees can help utilities refinance this debt, retire old facilities, and put the savings into new clean energy infrastructure. With large amounts of new loan guarantee authority, DOE must quickly ramp up its operations and staffing to get loans out the door in a timely manner. The $250 billion to retool, repower, repurpose, or replace fossil fuel infrastructure, for example, must be spent by 2026. There is no time to waste. 

    The IRA also included $3.6 billion for clean energy loan guarantees, which enables another $40 billion in loan guarantee authority. Loan guarantees (and public finance instruments writ large) are powerful tools that can catalyze private investment far beyond the level of funding appropriated by Congress.


    USDA Rural Utilities Financing

    The IRA provides $12.8 billion to help rural communities deploy more clean energy, including $9.7 billion for U.S. Department of Agriculture (USDA) loans to rural electric cooperatives to obtain renewables and other carbon-free energy. These funds could be used to help rural co-ops retire their large coal fleets. Through the USDA Rural Energy for America Program, a further $3 billion is available for rural energy loans and grants for renewable energy, including up to $1 billion for all electric service providers, whether cooperative, municipal, investor-owned, or Tribal.

    The USDA Rural Utilities Service (RUS) should use its IRA funds to prioritize construction of clean energy projects that permanently replace coal generation on the grid. RUS should also fund planning and support for workforce transition for those displaced by these retirements. 

    This use of funding—replacing coal generation with clean energy—would have the highest impact in reducing carbon pollution, improving air quality and public health in rural communities, and lowering power costs for co-op owner-members. Any other use of funds, including for investments that prolong fossil generation, would not be in compliance with the IRA’s clear statutory mandate to maximize carbon pollution reductions— and would be a missed opportunity for the communities RUS was designed to serve. Since IRA’s clean energy tax credits offer direct pay to nonprofits, co-ops have a golden opportunity to retire polluting coal assets and transition to lower-cost clean energy.


    EPA “Force Multiplier” Programs

    Greenhouse Gas Reduction Fund

    The IRA provides $27 billion towards the Greenhouse Gas Reduction Fund (GHGRF) administered by EPA (Sec. 60103). The EPA Administrator is responsible for the distribution of funds, which will become available no later than Spring of 2023, and must be expended to funding recipients before the end of 2024. Through the GHGRF, EPA has the opportunity to support state and local clean energy leadership, and to build a robust nationwide ecosystem of green and equitable finance—allowing people and communities to leverage public and private sector investments for climate solutions. The GHGRF can and should be a powerful force in building a cleaner, more resilient, affordable, and equitable power sector. 

    The funding made available within the GHGRF is allocated into two programs: 

    • Zero-Emission Technologies Program: The zero-emission technologies section allows for $7 billion in grants to be made available to States, municipalities, Tribal governments, and non-profit institutions, to provide grants, loans, and financial assistance to enable low-income and disadvantaged communities to deploy zero-emission technologies like distributed solar. These funds should be prioritized for state, local, and Tribal programs that demonstrate a plan to deploy these investments equitably and effectively toward program goals. 
    • Clean Energy Accelerator: The Accelerator provides approximately $20 billion for grants to be made available to non-profit financing authorities to fund projects or efforts that reduce or avoid GHG pollution. The low-income and disadvantaged communities section ensures that at least $8 billion, or 40 percent, supports low-income and disadvantaged communities, consistent with President Biden’s Justice40 initiative.

    The EPA and the public and non-profit entities eligible to apply for these grant funds will play a significant role in shaping the impacts of this program. EPA has a great deal of responsibility in choosing which projects will receive funding, including the authority to decide what carbon pollution-reducing projects will be deemed “appropriate” for funding. As we have seen with other actions this administration has prioritized, EPA should favor projects with the greatest potential to reduce GHG pollution, those that support high-quality union jobs, and projects that benefit low-income and disadvantaged communities. 

    State Climate Pollution Reduction Grants

    The Climate Pollution Reduction Grants program, also called the “State Climate Grants” program, consists of $5 billion for states, air pollution control agencies, municipalities, and Tribal nations to develop and implement plans to reduce GHG pollution. This is an important program that EPA and the Biden Administration can use to support the next generation of state climate leadership—and state leadership on 100 percent clean energy. 

    This program is largely based on the State Clean Energy Challenge Grants first proposed in President Biden’s American Jobs Plan. It consists of three elements: 1) State Climate Planning Grants: $250 million, which must be spread to at least one entity in each state; 2) State Climate Implementation Grants: $4.607-$4.75 billion; and 3) State Climate Administrative Funding: $142.5 million (3 percent of Implementation Grants). EPA grants can cover all sectors of the economy—there are exciting opportunities for states to use these grants to lock in faster policy change toward power sector decarbonization. 

    Environmental and Climate Justice Block Grants

    The IRA funds $3 billion of Environmental and Climate Justice Block Grants for community-led projects to improve local environmental and public health in frontline and disadvantaged communities and to build community capacity to address disproportionate pollution and climate impacts. Grant projects could cover a range of activities, including pollution monitoring and prevention, climate resilience investments, mitigating health risks from climate-related events like heat waves and wildfires, increasing community engagement in public processes like rulemakings, and other small projects—including those that advance clean, renewable energy. 

    These funds are intended to go directly to disadvantaged communities for programs proposed and led by communities themselves, and EPA should prioritize applications accordingly. Funds for technical assistance can help build capacity in disadvantaged communities and assist organizations in applying for other grant opportunities. 

    The Environmental and Climate Justice Block Grants program is one of the IRA’s most critically-important tools for advancing environmental justice and equitable economic opportunity. It has the potential to support communities in building and realizing their own clean energy future, for themselves. One of the greatest opportunities for many disadvantaged communities could be in using these resources to help shut down polluting power plants and to build locally-developed and owned renewable energy and energy storage projects instead. 

    Dr. Leah Stokes on implementing the Inflation Reduction Act. (Evergreen Action & NRDC Present: The Roadmap to 100 Percent Clean Power)

    DOE Transmission Funding

    IRA Grants to Facilitate the Siting of Interstate Electricity Transmission Lines

    The IRA includes around $3 billion for transmission infrastructure. That includes $2 billion for transmission loans at DOE, $760 million in grants to facilitate transmission siting, and $100 million for interregional and offshore transmission planning. The bill also allocates $375 million to hire personnel at DOE, FERC, and the Department of Interior to process environmental permitting applications, which can help to facilitate transmission development across the U.S. 

    The $760 million grant program is intended for state, local, or Tribal transmission siting authorities to support accelerated siting of interstate electricity transmission lines. The Secretary of Energy is responsible for distribution of these grants by September 30, 2029, with use no later than two years after receipt. One of the biggest obstacles to deep decarbonization is America’s aging grid. To upgrade and expand electric transmission at the necessary pace, states must coordinate at a regional level and build out projects on a tight timeframe. These funds present a critical opportunity to support these efforts through expedited interstate transmission siting. In the absence of a permitting reform bill in Congress, these funds can help speed up the permitting process for transmission projects.



    We passed the biggest climate legislation in history, but now it’s up to federal and state agencies and government, community development organizations, Tribes, and others to take advantage of these provisions and implement them effectively to ensure we hit our climate, environmental justice, and public health goals. The IRA is just one piece in the puzzle. To learn more about how the U.S. can achieve 100 percent clean energy by 2035, download our entire paper

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    The clean energy transition is at an inflection point. Download the roadmap to 100 percent clean power by 2035.