In the news: The Inflation Reduction Act effect, global energy investment funds, energy news from California, tech talent needed by climate firms
December 13, 2022
Biden’s Inflation Reduction Act (IRA) and its effects, both positive and negative, have stayed on top of the climate news cycle.
As climate firms and the climate tech industry are poised for substantial investments as well as governmental incentives and tax credit created by the IRA, barriers to scale need to come down - and they are looking for experienced tech workers who can help them do so.
California is currently a case study in how energy deregulation is creating tension as demand outweighs supply. This situation has created conditions for dangerous rolling blackouts in extreme weather and an internal battle on the future of rooftop solar affordability.
We’ve summarized the top energy news stories below from the past month to keep you up to date on the top trends we are watching as 2023 is fast approaching.
“Climate Firms Want Tech Talent” - LinkedIn
- A silver lining for tech workers seeking new roles? Billions of dollars are being unlocked for climate-tech funding via the U.S. Inflation Reduction Act
- After the tech industry has shed over 100,000 jobs and counting this year, the climate tech industry is poised to take on those with transferable experience, especially at scaling enterprise quickly
“The California energy problem is structural, not political” - Utility Dive
- A question top of mind after the historic heat wave that hit California this summer and blackouts were avoided by curbing grid usage is - why does California face blackout risk every year and what can be done to fix it?
- Political entities on the right and left in California have their own explanations and solutions - but the problem itself actually points back to 1990s energy deregulation in the state
- Proponents of the supply and demand system created through deregulation of the market believed that it would lower costs for customers - but they failed to consider that demand can exceed supply or that extreme weather events could result in exorbitant energy prices during peak demand as a common occurrence.
- The biggest problem resulting from the idea that supply & demand will merely require power plants to turn on power systems that haven’t been running or buy power from neighboring states in peak demand
- Without investment for excess power capacity reliance is created by this model on other states to sell California power which becomes nearly impossible when the entire West Coast faces extreme weather all at once.
- The solution? Reforming their energy market by various mechanisms including adequate power capabilities & battery storage with renewables, building up reserve generation and investing their budget surplus in “new deal” infrastructure.
“U.S. must mass-produce floating wind, curb sea risks to hit targets” - Reuters
- President Biden committed to installing 30 GW of offshore wind by 2030 - which will currently consist of fixed-bottom technologies off the East Coast of the U.S.
- Since waters off the Pacific West Coast are too deep for fixed-bottom technologies, a R&D project was recently launched by the White House to reduce floating wind costs in order for the West Coast to install 15 GW of floating wind capacity by 2035 & open up access to offshore wind energy
“U.S. tax credits set to spur bigger wind farms, new siting strategies” - Reuters
- The Inflation Reduction Act is set to be a game changer for wind and solar growth in the U.S.
- As a means to combat the global economic headwinds that have hampered energy developers the IRA will provide tax credits and incentives that:
- Will allow for standalone projects for the first time
- Tax credits for the manufacturing of wind & solar components, which increase if the manufacturing is local and creates jobs
- Incentives for larger wind turbines
- Incentives for projects near disadvantaged communities
- Energy storage tax credits
- However, the pace of permitting and manufacturing will be a key factor for accelerating the industry. A Permitting Bill is in the works to remove bottlenecks to projects in the industry, which can cause extensive delays.
- Right now, rising costs for these projects are passed to consumers. Another pitfall? Small and medium sized developers don’t see as much incentive as larger ones.
“Aramco announces $1.5bn Sustainability Fund” - Aramco
- The world’s largest venture capital sustainability fund has been created to invest in technology that provides a stable and inclusive energy transition in support of the company’s net-zero 2050 ambitions
- The fund will target global investments in the following focus areas: carbon capture and storage, greenhouse gas emissions, energy efficiency, nature-based climate solutions, digital sustainability, hydrogen, ammonia and synthetic fuels.
- Aramco will also participate in the first MENA VCM carbon credits auction; the market is expected to be fully established in Saudi Arabia in 2023.
“California set to release anti-rooftop solar net metering plan” - pv magazine
- An ongoing battle to create cost shifting from power companies to rooftop solar owners in California would put an undue burden on middle to working class Californians who are currently the largest buyers of rooftop solar.
- Utilities are now arguing that incentives from the Inflation Reduction Act make fair net metering rates unnecessary, but many are not buying the ploy.
- Middle to lower income Californians are relying on the state’s residential solar program to take part in the cost savings of solar energy.
- Proposals for revised Net energy metering would slash credits seen on utility bills for sending excess solar-generated energy to the grid and incur monthly charges for all solar customers, which would cause many Californians to opt out of purchasing solar rooftop panels.
- However there is state level data available that is poking holes in the arguments posed by those utilities in favor of a new net metering plan, who say “cost shift” model has poorer Californians subsidizing solar for richer Californians.
- The argument is being made based on data from 16 states, that net metering has a negligible cost increase attributed to solar and instead has cost benefits. The numbers of middle to low income California households adding rooftop solar is encouraging news, underscoring the success of the state's current financial incentives.
- Despite the ongoing battle of net metering rates, community solar offers a pathway to 45% of Californians who rent their homes and 70% of those renters being considered low-income.
How we emerge from these next few years has the ability to shape the future of our global climate as we know it and there’s no doubt that the Inflation Reduction Act will play a big part.
As the IRA continues to send ripples throughout the energy industry well into 2023 and beyond, energy firms, regulators and tech workers are at a unique inflection point.
Climate tech is in the race for innovation, investments, favorable regulations and tech talent as the world watches and puts its eggs in the climate tech basket.
We share our thoughts on Industry news.
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