FRANKFURT, Ky. — On a recent day in the hot July sun, three men attached solar panels to the roof of a spacious two-story home near the banks of the Kentucky River, a few miles upstream from the state capitol where lawmakers have promoted coal for more than a century.
The US climate law that a year passed ago is offering a 30% discount on this installation through a tax credit, and that’s helping boost clean energy even in places where coal still provides cheap electricity. For Heather Baggett’s family in Frankfort, it was a good deal.
«To us, it’s not politically motivated,» Baggett said. «It really came down to financially, it made sense.»
On August 16, after the hottest june ever recorded and one blistering July, America’s long-sought response to climate change, the Inflation Reduction Act, turns one. In less than a year, it has fueled investment in massive battery construction and electric vehicle manufacturing in every state. Nearly 80 major clean energy manufacturing facilities have been announced, an investment equal to the previous seven years combined, according to the American Clean Energy Association.
“It seems like every week a new factory is announced somewhere,” said Jesse Jenkins, a Princeton professor and leader of Project REPEAT, who has been deeply involved in analyzing the law.
“We have been talking about bringing manufacturing jobs back to America for my entire life. We’re finally doing it, right? That is very exciting,” she said.
The IRA is America’s most important response to climate change, after decades of lobbying by oil, gas and coal interests stalled action while carbon emissions rose, creating a hotter and more dangerous world. It is designed to stimulate the buildup of clean energy on a scale that will double the arc. of US greenhouse gas emissions. It also aims to build national supply chains to reverse the initial dominance of China and other nations over this vital sector.
One of the goals of the law is cleaner transportation, the biggest source of climate pollution for the US. Siemens, one of the world’s largest technology companies, produces charging stations for electric vehicles. Executives say this alignment of US climate policy is driving higher demand for batteries.
“When the federal government makes an investment, we get to the tipping point faster,” said Barbara Humpton, chief executive of Siemens USA, adding that the company has invested $260 million in battery or battery storage projects in recent years.
The law also encourages more of the type of batteries that feed electricity into the grid when the wind is light, or at night when the sun is not hitting the solar panels. It could put the storage business on the same upward trajectory that solar burned a decade ago, said Michael McGowan, head of private North American infrastructure markets for Mercer Alternatives, a consulting firm.
Derrick Flakoll, North America policy associate at Bloomberg NEF, noted that sales of the largest US solar panel maker, First Solar, skyrocketed after the bill passed, leading to a large backlog of orders.
“These are years and years of manufacturing capacity that is already booked because people are bullish on the US produced solar market,” he said.
The IRA is also helping technologies that are expensive but have promise for decarbonisation in the short term.
Jason Mortimer is senior vice president of global sales for EH2, which makes large, low-cost electrolyzers, machines that separate hydrogen from water. Hydrogen as clean energy is still in its infancy. “The IRA accelerates the deployment of hydrogen at scale in about four to five years,” making the US competitive with Europe, he said.
But these changes, significant as they are, may just be the beginning, experts say.
“I think we are about to see a lot of investment in wind and solar related manufacturing in the US,” Jenkins said, adding that 2026 to 2028 is when the country will see the full impact of the law.
Other countries, some of them ahead of the US in the fight against climate change, have enacted their own additional efforts to accelerate the shift to clean energy. Canada has announced a matchmaking policy and Europe has its own measures to attract manufacturing, similar to the IRA.
“European and Japanese automakers are trying to think about how to change supply chains to try to compete,” said Neil Mehrotra, associate vice president and policy adviser at the Federal Reserve Bank of Minneapolis and a contributor to a report on US law published by the Brookings Institution.
The Congressional Budget Office initially estimated that IRA tax credits would cost about $270 billion over a decade, but Brookings says businesses could take advantage of the credits much more aggressively, and the federal government could pay three to four times as much.
The law is supposed to cut emissions from the US, the country historically most responsible for greenhouse gases, by up to 41% by 2030, according to a new analysis by Princeton researchers. That’s not enough to meet US goals, but it’s a significant improvement.
But those crucial greenhouse gas cuts are partially at risk if the US electric grid cannot grow large enough to connect new wind and solar farms and handle new demands, such as massive vehicle charging.
Despite the new investment in red states, not everyone likes it. Republicans recently proposed repealing important elements of the law. And Jessie Decker, a Frankfort resident whose neighbor has solar panels, said she wouldn’t consider them and that she doesn’t think the federal government should “lose money” on dubious climate programs.
Nor does the law mean that the oil and gas that contribute to global warming will disappear.
“Frankly, we’re going to be using fossil fuels for many decades to come,” said Fred Eames, regulatory attorney with the Hunton Andrews Kurth law firm.
On Baggett’s roof, Nicholas Hartnett, owner of Pure Power Solar, is pleased that business is up and running and homeowners are opening up to solar once they see how they can benefit financially.
“You have the environmental side, which is driven by the left, and then you have the option to use your own tax money that the government would otherwise have taken, which is driven by the right,” he said.