Investments in Energy Communities
In 2022, President Biden signed the Inflation Reduction Act. The law contains unprecedented investments in domestic manufacturing and clean energy deployment. The law did so while directing major funding to energy communities across the United States, ensuring truly game-changing public and private investments in the years to come.
Clean Energy Tax Credits
The Inflation Reduction Act makes historic investments in clean energy deployment. Through renewed and expanded Investment and Production Tax Credits, the Inflation Reduction Act invests hundreds of billions in new clean energy. These credits can be applied to a diverse set of technologies, including solar, onshore and offshore wind, battery storage, and more.
These credits also will deliver good-paying, union jobs. For the first time, high-road labor and domestic content standards are coupled with clean energy tax credits. In order to receive the full benefit of the credits, developers will need to pay prevailing wage and utilize a registered apprenticeship program during the construction of the project.
Congress took a critical step to drive these investments into communities that have been economically dependent on fossil fuels. Projects located in an “energy community” will receive an additional 10% tax credit bonus. This policy is in line with the recommendations the BlueGreen Alliance made in its National Energy Transition Policy Framework. If implemented correctly, these policies will provide crucial incentives for clean energy development in energy communities with fossil-fuel-based economies that might otherwise fail to attract such investments.
While clean energy projects can receive partial tax credits regardless of location, the additional tax credit bonus is a key incentive to bring good-paying jobs to areas with coal mine closures, coal power plant unit retirements, or a high percentage of workers in the fossil fuel industry. If the energy community is also considered a low-income community, they are eligible to receive an additional 10% tax credit.
Rural Energy Investments
Additionally, the law provides $9.7 billion to the U.S. Department of Agriculture (USDA) for USDA Assistance for Rural Electric Cooperatives. With these funds, USDA’s Rural Utility Service (RUS) will make grants and loans for electric cooperatives to purchase renewable energy, purchase renewable energy systems and carbon capture and storage systems (CCS), deploy such systems, or make energy efficiency improvements. The funding can also be used for debt relief and other costs associated with terminating the use of facilities operating on non-renewable energy and related transmission assets.
Many of the communities served by rural electric cooperatives rely on coal plants for both electricity and jobs. As coal plant retirements continue, rural communities need investments to maintain reliable, affordable electricity and economic opportunity. USDA funds can help rural electric cooperatives create new jobs in the same communities that experience coal plant closures and continue to employ the same workers who have kept that community’s lights on.
In addition to providing rural electric cooperatives with new loan opportunities, the Inflation Reduction Act builds on RUS’s existing loan authority with $1 billion for renewable energy infrastructure loans. The law also makes it easier for electric utilities by requiring RUS to forgive up to 50% of the loan amounts. Funding isn’t only limited to cooperatives. Municipal, investor-owned, and Tribal utilities in rural areas are all eligible to take advantage of the new partially forgivable loans.
The USDA Rural Energy for America Program (REAP) received an additional $1 billion to issue competitive grants for the deployment of renewable energy and energy efficiency for rural businesses and agricultural producers. The USDA has specifically made energy communities eligible for REAP grants. With these funds, USDA can provide grants covering up to 50% of project costs.
Individual renewable energy projects can receive up to $1 million, and energy efficiency projects can receive up to $500,000.
Reinvesting and Retooling our Energy Infrastructure
The Inflation Reduction Act also creates a new program within DOE’s Loan Programs Office to help reduce emissions and re-use existing energy infrastructure: the Energy Infrastructure Reinvestment (EIR) Program. Congress provided “seed money” of $5 billion to be used to cover the costs of underwriting loans, and authorized the DOE to loan up to $250 billion. The reinvestment criteria are broad, including nearly any activity that lowers emissions. This includes everything from reducing emissions to continuing operations that will fully redevelop energy facilities for a different economic purpose. For instance, the loans could be used to remediate a retired coal power plant and use the land and existing infrastructure for clean energy production or manufacturing. Or, a power utility could remediate damaged land from a former coal mine and reuse the area by turning it into a pumped hydro storage facility.
If targeted the right way, this financing could support economic redevelopment in communities impacted by energy transition, explicitly supporting local community benefits and the acceleration of land remediation efforts
Planning for the Energy Transition
The Inflation Reduction Act also creates a new $5 billion Climate Pollution Reduction grant program at the U.S. Environmental Protection Agency (EPA) for states, municipalities, and Tribes to develop and implement plans to reduce greenhouse gas pollution.
The law provides $250 million for non-competitive grants to be distributed to all states, large municipalities, and Tribes to develop plans for greenhouse gas reductions.
Planning grants can be used to engage energy communities that could feel the direct impact of actions to reduce greenhouse gasses. Plans can be broad and can be used to identify opportunities to leverage federal funding from a variety of sources. Grants can provide necessary resources for planning for an equitable transition that keeps workers and communities whole.
EPA will then competitively award $4.6 billion for the implementation of these plans. These funds can be used for a wide variety of policies, including electric vehicle (EV) charging infrastructure, buildings, transit, natural infrastructure solutions, and more.
Targeting New Manufacturing Energy Transition Communities
The Inflation Reduction Act will support new clean technology manufacturing facilities in energy transition communities with an expanded investment tax credit. The law includes $10 billion for the 48C tax credit, which will support the establishment or expansion of manufacturing facilities to produce solar, wind, battery, electric vehicles, energy efficiency, and other clean energy technologies. The tax credit is also available to a project that re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20%.
Of the $10 billion allocated for 48C, $4 billion is reserved for manufacturing investments to boost job growth and economic opportunities in coal communities facing economic hardship from energy transitions. The funding is specifically targeted to communities that have had coal mines shut down since the end of 1999, coal-fired power units retired since the end of 2009, or are immediately adjacent to those. BlueGreen Alliance research estimates the 48C expansion will create more than 110,000 jobs over the next 10 years. Thanks to the $4 billion set aside, many of these will be created in energy transition communities.
Vital Support for Coal Miners
In addition to driving needed clean energy and manufacturing investments into coal communities, the Inflation Reduction Act permanently extends the Black Lung Excise Tax to maintain the funding that provides critical benefits to miners and families.
Rates of black lung disease among coal miners are increasing, especially in the Central Appalachian coal region. Black lung is a devastating disease with no cure, and miners with black lung are often totally disabled and unable to work or support their families.
The Black Lung Excise Tax supports the Black Lung Disability Trust Fund (BLDTF) and is paid by coal companies at the current rate of $0.55/ton of surface-mined coal and $1.10/ton of coal mined underground. The BLDTF pays for medical benefits and provides a small monthly living stipend to coal miners who are disabled by black lung disease and to their surviving dependents.
In recent years, Congress has provided only one-year extensions of the BLDTF, forcing coal miners, black lung advocates, and healthcare workers to expend limited resources on a perpetual fight for the needed funding. That fight is now over, thanks to the permanent extension of the BLDTF in the Inflation Reduction Act.