
Key Takeaways
- The Inflation Reduction Act (IRA), by providing generous subsidies to companies to spur the energy transition, marks a fundamental shift in the U.S. approach to addressing climate change that has broader bipartisan appeal.
- However, the contentious reconciliation process required to pass the IRA and the bill’s politicization over time have sparked political opposition from Republicans that may jeopardize the bill’s future.
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Implementation of the IRA has been a major challenge, with permitting, transmission, and workforce issues slowing progress.
During an October 23 Energy Policy Seminar that host Joe Aldy noted “wins the award for best title of any talk this semester,” Jason Grumet, CEO of the American Clean Power Association (ACP), visited his alma mater to assess recent U.S. progress on the energy transition. Under the title of “The Future Is Very Bright and Every Day Is a Freaking Crisis,” Grumet reflected on his personal efforts to effect bipartisan action to accelerate clean energy innovation while at the ACP, as well as in his previous role leading the Bipartisan Policy Center (BPC). Identifying key pieces of bipartisan legislation – namely the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA) – Grumet also took stock of the progress that the United States is making to spur the deployment of new energy technologies, the politics of these decisions, and the “promise and peril” that this progress entails.
Part of the reason that the Biden Administration was able to pass the IRA in a divided Congress, Grumet noted at the outset, is that the energy transition is appealing to both sides of the aisle because, at its heart, “it is all about innovation.” In a friendly jab at the economists in the room, Grumet pointed to the IRA’s focus on innovation and investment as a pivot from what he called “the greatest political malpractice in the energy-climate debate, which was deferring to economists to lead our politics.” Rather than focusing on a carbon price and refusing to “pick winning technologies,” the IRA is “building clean energy at a massive scale” – albeit not as fast as we may like.
In other good news, said Grumet, implementation of the IRA—and the injection of large federal stimulus into new industries—is going to “anchor a tremendous amount of political support [for the energy transition] in conservative parts of the country” by creating jobs and opportunities for those communities. Grumet cited ACP analysis that showed that up to 80% of investment since the IRA was passed has gone into districts run by Congressional Republicans. And that is a considerable amount of money—according to Grumet, $340 billion in investment has been announced since the IRA passed, more than eight times than what occurs in a typical year.
That’s the good news. On a gloomier note, Grumet called the process of passing the IRA “toxic,” which left a “strong distaste in the Republican party” that is causing opposition to form in Congress. Ranking Republicans in the Senate Energy Committee and House Energy Committee recently published a report entitled "IRA - Irresponsible, Reckless, Alarming," calling it one of the “most economically disastrous pieces of legislation ever created.” As a result, the IRA is a law that is being embraced by stakeholders but may be “in political peril.”
Criticism of the IRA has come from the political left as well. The IRA marked an ideological shift in the fight against climate change by focusing on incentivizing industry rather than focusing on a carbon tax or other regulatory approach. By giving tax breaks to large “rapacious” companies—many of whom have fossil assets—the IRA is, in Grumet’s words, “kinda not the vibe” of environmental groups. Getting behind big companies to solve the climate change problem is not resonating with many climate activists, despite the bill’s historic nature.
Implementation of the IRA has also proven to be a challenge. Issues are arising around the speed of permitting—something that was covered in a previous Energy Policy Seminar by Ana Unruh Cohen of the White House Council on Environmental Quality—as well as the lack of sufficient transmission capacity, new or insufficiently strong supply chains, and an underdeveloped workforce. In Grumet’s view, the government’s assertion that the energy transition is a top priority is “not being met by the facts on the ground”—there are not enough people in the government who are working on these issues and “translating the law into guidance has been excessively slow.”
Moreover, the rigidity of some of the requirements—such as the focus on domestic content—is delaying deployment. Grumet gave the example of the need to ramp up the manufacturing of steel poles for large wind turbines in the United States, where there are no current factories. The push to build new facilities and manufacturing capacity is also being challenged by inflation and high interest rates. With high up-front costs and nearly zero operating costs, the economics of the industry are now very different from what they were five years ago. The industry is trying to “build giant things fast” and the IRA has helped, but progress is slow.
Despite these challenges, Grumet closed with optimism, noting that the “fundamentals of the clean energy transition are sound.” Strong growth in power demand as well as an ever-declining levelized cost of energy (LCOE) of renewables are driving continued investment and adoption. However, there is a risk that “innovation in technology is not being matched by innovation in decision-making,” which, as Grumet urged, is a call to action for Harvard Kennedy School students.
When asked in the Q&A about his role, Grumet said, “It’s super fun. When do you get a chance to work on big, hard problems with people you like, where there are real consequences to success and failure?”
Watch a recording of Grumet's talk below.
Floyd, Matt. “Event Debrief: The Future Is Very Bright and Every Day Is a Freaking Crisis.” Belfer Center for Science and International Affairs, Harvard Kennedy School, December 21, 2023