IRA Spurs Clean Energy Boom, Electric Trucks Accelerate, Battery Demand Surges, EPA Cuts Power Sector Pollution

2022 was arguably the most important year in United States climate action: Landmark federal legislation and pro-climate state elections have paved the way for a clean energy boom in every corner of the country.

Private investment has already ramped up with billions in new projects to meet growing corporate and consumer demand for zero-emission technology.

Despite an ominous outlook for climate action and clean energy deployment heading into 2022, energy experts predicted ambitious federal action and accelerated clean energy adoption.

So what does 2023 have in store for climate policy, clean energy deployment, and electrified transportation?

Policy experts share their predictions for the year to come: Inflation Reduction Act (IRA) funding will spur a renewable energy boom along with equitable clean energy deployment in Tribal communities, as electric trucks and charging infrastructure shift into high gear, battery demand surges, and the Biden administration introduces new power sector pollution regulations.

IRA funding will supercharge solar+storage installations, job creation, grid resiliency

Mary Powell, CEO, SunrunRUN

The overall duration of power interruptions in the U.S. has more than doubled since 2015, and with natural disasters also on the rise, blackouts are inevitable. This leaves utilities challenged with adapting current energy systems to these worsening conditions. In 2023, we will see growing momentum across the country to incorporate home solar and battery capacity as regulators look to provide greater resilience to the electric grid. This will effectively reduce power plant pollution and save ratepayers money.

The Inflation Reduction Act is a transformational component to achieving climate goals, investing $369 billion in climate-related programs and incentives that will turbocharge our ability to decarbonize our electricity system and provide Americans with energy independence and security. With tax credits and consumer rebates for solar, electric vehicles and chargers, the IRA will help Americans fight against rising costs while democratizing energy production and decarbonizing their homes and transportation. With expanded and extended tax credits, Americans can get back 30% of the cost of a home solar and battery storage system through 2032.

The IRA will expand access even further down the income ladder with low-income investment tax credit (ITC) bonus credits. This means solar+storage projects installed in low-income areas can receive a bonus credit to the ITC (40% total) and can be awarded a bonus credit to the ITC (50% total) for projects installed on affordable multifamily housing.

The IRA will help generate hundreds of thousands of new, good-paying jobs across the country. We also expect it will lead to more collaboration between clean energy providers, utilities, and policymakers to make clean, affordable, and reliable energy more accessible to households everywhere.

Bold federal policy accelerates long-term investments in distributed clean energy

Daniela Shapiro, Managing Director, Hannon Armstrong

After decades of half measures and expiring tax credits, the U.S. finally has a comprehensive energy policy framework thanks to the IRA. This transformative new law provides stable investment environments for clean energy solutions from grid-connected renewables to behind-the-meter applications and new technologies driving the next generation of carbon-free investing.

The IRA’s $369 billion in climate investments provide a major tailwind for behind-the-meter climate solutions, including distributed generation, energy efficiency, electric vehicle infrastructure, clean transportation, along with many energy storage, carbon capture, and clean hydrogen projects.

The IRA also sanctions clean energy tax credit transferability, which will considerably benefit distributed clean energy projects that historically have suffered the most to attract efficient tax equity investments. Community solar gardens are uplifted by the 10% tax credit adder for energy communities, broadening clean energy benefits to underserved communities. And the IRA’s adder for small( <5 megawatts) renewable energy projects in low-income communities will help finance low-cost, clean and reliable energy for more families.

Residential solar demand will also increase due to the revamped, expanded rooftop solar tax credit. Given the economic environment, residential power purchase agreements will likely increase versus residential loans, changing the competitive landscape as more residential solar players move from originators to asset owners and operators. Meanwhile more industrial, tech, and energy-intense businesses will adopt clean energy solutions given better economics and new financing alternatives.

The Biden Administration’s September 2022 announcement of the first-ever Federal Building Performance Standard, which seeks to reduce energy use and electrify equipment and appliances in 30% of the building space owned by the Federal government by 2030. This will attract higher private sector investments and securitization volumes in 2023 and beyond. Despite high interest rates and a potential recession, the IRA and other climate-focused federal initiatives will create exciting new investment opportunities in the year ahead.

Electric trucks and commercial charging stations accelerate into the fast lane

Neha Palmer, CEO, Terawatt Infrastructure

In 2023, we’ll see fleets transitioning from testing the waters with electric truck pilots to planning full-scale electrification. We’re reaching an inflection point spurred on by clean energy policies, ESG pressures, and increased funding for electrification. While passenger EVs have been the focus in recent years, developing charging infrastructure for medium- and heavy-duty trucks creates challenges that will take center stage as macro dynamics become more favorable.

IRA investments may help long-haul electric trucks reach cost parity with diesel trucks by as early as 2025, according to RMI projections. California, Massachusetts, New Jersey, New York, Oregon, and Washington have implemented the Advanced Clean Trucks (ACT) rule, requiring truck original equipment manufacturers to sell an increasing number of zero-emission vehicles (ZEVs), likely making these states hotspots for electric long-haul truck introduction.

California is strengthening their requirements through passage of the Advanced Clean Fleet regulation which places a timeline for commercial fleets to begin transitioning to ZEVs as soon as next year. These trucks require vastly different charging solutions with greater power to accommodate bigger batteries and higher daily mileage, as well as space to park trucks and convenient route locations—all at a cost that makes sense for businesses. Companies that are unable to support the energy needs and capital required for building their own charging infrastructure will seek charging specialists to power their fleet operations.

TeraWatt is developing the country’s first multi-state charging station network for medium- and heavy-duty trucking along Interstate 10 to enable electric long-haul transportation. The purpose-built stations will be able to fast-charge trucks alongside one of the busiest highways, with stations ~150 miles apart in Arizona, California, and New Mexico. By 2030, we hope to see significant market penetration of EVs across all the major segments of trucking operations, from drayage to last mile to long-haul.

Battery demand set to rise along battery prices in 2023

Evelina Stoikou, Associate, BloombergNEF

Battery demand will continue to grow in 2023 despite increasing battery pack prices, as R&D, manufacturing, and capacity investments improve technology and eventually drive costs down.

BloombergNEF expects lithium-ion battery pack prices to remain elevated and rise to $152 per kilowatt-hour (kWh) in 2023. The key contributors to these increases are rising raw material prices, particularly for lithium and nickel, given the uncertainty surrounding China’s reopening after lifting its Covid Zero policy, along with the continued disruption to metal supply chains due to Russia’s invasion of Ukraine. In 2022, lithium-ion pack prices increased to $151/kWh, a 7% rise from the previous year in real terms and the first increase since BloombergNEF has been tracking the market in 2010.

Sustained higher battery prices will force battery manufacturers, automakers, and stationary storage providers to re-think their strategies. Battery manufacturers and automakers are already adopting more aggressive strategies to secure raw materials, including direct investments in mining and refining projects. Higher battery prices could be partially offset by incentives, such as those included in the IRA, which include a production credit of $45/kWh for battery cells and modules produced in the U.S.

Despite these higher prices, global battery demand is expected to continue to grow and reach 845 gigawatt-hours in 2023, about 40% higher compared to 2022. Continued investment in R&D, manufacturing process improvements, and capacity expansion across the supply chain will help to improve battery technology and reduce costs over the next decade.

IRA will spur equitable clean energy deployment across Tribal communities

Chéri A. Smith (Mi’Kmaq descendant), Founder & CEO, Indigenous Energy Initiative

In 2023, access to affordable electricity will remain a matter of life or death for many Native communities on the front lines of climate change. Renewable energy’s potential to transform tribal economies is proven, and the Biden administration responded with accelerated infrastructure funding directly benefiting tribes. The IRA makes unprecedented financial resources available to tribes for clean energy development and is a giant leap in the right direction.

Our challenge is not resource scarcity. It’s garnering support to build tribal capacity to realize the full potential of available resources. It’s ensuring that self-determination and equity are driving principles in the transition to clean energy, so that its benefits – climate resilience, affordable energy bills, well-paying green jobs, and business opportunities are accessible to tribal members.

Traditional energy market structures helped build a largely reliable consumer experience for most of the U.S., but these markets skipped over much of Indian Country. Significant barriers impede a just transition, including discriminatory utility practices like rate gouging and blocking of equitable net metering and interconnection agreements.

Indigenous Energy Initiative (IEI) is an Indigenous-led nonprofit supporting tribes in navigating and eliminating barriers by collaborating with trusted partners in the public and private sectors. IEI is already responding to increased tribal requests for technical assistance to help develop energy master plans and plan, fund, build, and maintain clean energy projects. We are experiencing tremendous willingness from our federal partners to engage our investor and philanthropic partners in providing access to integrated capital solutions that build a strong foundation for regenerative energy infrastructure in Native communities, helping to form tribal utilities and reach the ultimate goal: true sovereignty and a sustainable, resilient, shared infrastructure.

2023 will pair massive economic development opportunities with a new, cross-disciplinary movement that brings clean energy development in Native America into mainstream finance.

U.S. EPA will rapidly advance comprehensive rules to cut power sector pollution

Holly Burke, Communications Director, Evergreen Action

In 2023, the U.S. Environmental Protection Agency (EPA) will advance several critical rules to comprehensively tackle power sector pollution, and must move fast to ensure those regulations are finalized before the end of President Biden’s first term. Last year, Biden made history with IRA passage—America’s largest-ever investment to fight the climate crisis and build an equitable clean energy future. According to Energy Innovation modeling, the IRA could cut U.S. carbon emissions approximately 40% below 2005 levels by 2030—bringing us closer than ever before to achieving Biden’s goal of a 50-52% reduction. But there’s more work to do. To close the remaining pollution gap, EPA must go further, faster on a comprehensive strategy to tackle power sector pollution in 2023.

Cleaning up the power sector is at the heart of America’s fight against climate change because other sectors, like transportation and buildings, rely heavily on electrification in their path to decarbonization. The good news is EPA Administrator Michael Regan announced a comprehensive plan to clean up the power sector with regulations to protect our air, water, and climate from harmful pollution. The bad news is that since the plan was announced, EPA has fallen behind, repeatedly missing its own deadlines to make progress on these critical rules in 2022.

Even more troubling, EPA’s latest timelines for key carbon standards threaten complete implementation before the end of Biden’s first term and could leave these rules subject to Congressional Review in 2025. EPA simply cannot afford further delays – the agency must pick up the pace in 2023.

EPA has its work cut out for this year, and is in a race against the clock. In 2023, the agency must charge ahead further, faster on its full suite of multi-pollutant power sector rules to lock in lifesaving pollution reductions and drive towards President Biden’s climate, environmental justice, and clean energy commitments.