‘A little bit for everybody’: How the Inflation Reduction Act boosts clean energy | Science & Environment

Susan Millar had done almost everything she could to lower her carbon footprint.

She bought an electric car. She insulated her Near West Side home. She added solar panels on the roof. Millar even found an induction cooktop that fit neatly over her gas range.

The one remaining hurdle: How to heat the 88-year-old house without fossil fuel.

Millar called a local heating and air conditioning contractor to ask about replacing her gas furnace with a heat pump, which uses electricity to heat and cool air. They recommended she buy an air-source heat pump that would function in temperatures above 14 degrees and keep her gas furnace as a backup.







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Susan Millar cleans the electric stove in her Near West Side home. Millar installed the induction cooktop over her gas range as part of an effort to electrify her home, which is considered an essential but challenging step to combating climate change.




Three more contractors gave her the same response, Millar said: “Sorry lady, we can’t help you. You’re going to get cold.”

Eventually Millar got in touch with a Mukwonago contractor who agreed to install a Mitsubishi system rated for minus 14 degrees with an electric element for backup heat.

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Once it was installed in September, Millar called Madison Gas and Electric and told them to disconnect her gas line. After one winter, she has no complaints.

“The house is actually more comfortable than when I had a gas furnace,” she said.

Electrification, using electricity from increasingly cleaner sources for roles traditionally filled by fossil fuels, is seen as one of the most important but also most challenging steps to solving the climate crisis, especially in colder states such as Wisconsin where natural gas has long been cheap and widely available.

The federal Inflation Reduction Act, signed into law this week by President Joe Biden, could make it a lot easier — and cheaper — for Wisconsin residents like Millar to cut their dependence on fossil fuels.

In addition to making clean energy more affordable, the bill is expected to reduce the nation’s greenhouse gas emissions by about 40% from 2005 levels, according to the Department of Energy and two independent analyses. Scientists warn emissions need to be cut in half by 2030 and eliminated entirely by 2050 to avoid the most catastrophic impacts of climate change.

Rewire America, a nonprofit organization dedicated to electrification, called the bill “a must-do” for the planet, noting more than 40% of the nation’s greenhouse gas emissions result from using fossil fuels to power cars, heat air and water, cook food and dry clothes.

“The only way to remove these emissions is to have our households run on machines with plugs, not pipes,” the group said.

Carrots, not sticks

With an emphasis on carrots rather than sticks, the bill is the nation’s largest effort ever to combat climate change, packed with $369 billion worth of clean energy incentives.

There are tax credits and instant rebates to reward both consumers and corporations for investing in all types of clean energy — from solar, wind and hydroelectric to nuclear and hydrogen — as well electric vehicles, heat pumps and energy efficiency upgrades.

“This is industrial-strength energy policy,” said Michael Vickerman, policy director for Renew Wisconsin, a nonprofit that promotes renewable energy.







Bear Creek Solar (copy)

With nearly $370 billion in clean energy spending, the Inflation Reduction Act is the nation’s largest effort to combat climate change. The White House predicts the bill’s tax credits will spur a $4 billion statewide investment by 2030 in utility-scale solar farms like Alliant Energy’s Bear Creek facility, pictured in May, as well as energy storage.




According to the White House, the bill will stimulate a $4 billion investment in utility-scale clean power generation and storage by the end of the decade. But it also includes incentives that will improve the economics of biofuels, community-owned solar farms, energy storage and systems designed to use waste heat from industrial facilities.

“It’s a big toolbox for decarbonization,” said Tim Baye, a professor of business development and energy specialist at UW-Madison. “There’s a little bit for everybody here.”

The bill creates incentives for domestic manufacturing of equipment that is mostly imported today. Tax credits also apply to some electrical components, a boon to Wisconsin’s $28 billion power and controls industry, which includes companies like Johnson Controls and Generac.

Despite its name, the bill is not likely to bring down the rate of inflation in the near future, according to the Congressional Budget Office. But Rewiring America estimates households could save up to $1,800 a year in energy costs by investing in the technologies supported by the law.

Paid for largely with a new alternative minimum tax expected to affect about 150 large corporations, the bill is expected to reduce the federal deficit by about $264 billion, according to researchers at the University of Pennsylvania’s Penn Wharton Budget Model.







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Burke O’Neal, co-owner of Full Spectrum Solar, said a 10-year extension of 30% solar tax credit will provide the certainty he needs to expand his 20-year-old business.




Solar certainty

In Dane County, where residents worry about climate change more than anywhere else in Wisconsin, contractors and experts said that the bill will have a limited impact in the short run. But they said it offers stability that will grow the use of clean energy and climate-friendly technology over time.

“There’s far more work than we can handle,” said Michael Drews, owner of Madison solar contractor Drews Solar.

But year-to-year uncertainty about the future of tax credits have left solar installers hesitant to expand.

“I’m always one foot on the brake, one foot on the gas,” said Burke O’Neal, who co-founded Madison’s Full Spectrum Solar in 2002. “I don’t want to get overextended and take on a lot of debt if the market (is uncertain).”







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Despite an increasingly cramped space on East Washington Avenue, Full Spectrum Solar co-owner Burke O’Neal said he has been hesitant to expand because solar tax credits were scheduled to expire. The new Inflation Reduction Act restores the 30% credit for another 10 years. 




The tax credit had been scheduled to drop to 22% next year and would have expired for residential projects in 2024, but the new law locks it in at 30% for the next 10 years, which the White House estimates will result in more than 90,000 Wisconsin households installing solar panels.

Burke said that will provide the certainty he needs to take on more workers and expand the company’s cramped office and warehouse space, while also smoothing the year-end rushes that have historically preceded tax credit reductions.

The bill also includes cash subsidies for government and nonprofit organizations that don’t pay income taxes, which could open new markets.

Nick Aikens, a project manager for Full Spectrum, said the higher credit will sweeten the deal for customers who install for primarily economic rather than environmental reasons.

“Having a tax credit is going to make or break certain (installations),” Aikens said. “A lot more people are more likely to consider it.”

Electric car confusion

The bill extends the $7,500 credit for purchasing an electric vehicle or a plug-in hybrid another 10 years, and adds a $4,000 credit for used electric vehicles and plug-in hybrids.

But cost caps and rules about where cars are built and where the battery materials come from could limit the number of new models that qualify for the rebates.

Consumer Reports found only 14 EV models made in North America cost less than the bill’s maximum price, $55,000 for a sedan and $80,000 for trucks, vans and SUVs.

And the Alliance for Automotive Innovation, a lobbying group for the auto industry, warned that none of the currently available models would qualify for the incentive once all the requirements are in place.

Industry efforts to transition to electric models, other federal incentives and burgeoning consumer demand mean that the limited credit likely will not hinder the growth of the electric vehicle market, said William Sepic, president of the Wisconsin Automobile and Truck Dealers Association.

But the credit will be “very difficult to achieve” for manufacturers, he said, noting that dealers will likely have to repeatedly explain to consumers why their EV of choice does not qualify for a tax credit.

“I think it’s a legitimate concern,” Vickerman said, but creating a “significant and continuous demand” for domestically produced materials will ultimately prove beneficial in the long run.


From gas pumps to electric chargers: Madison company aims to support EV buildout

Franklin Electric, whose products include submersible pumps, hoses and gauges used in filling stations, is launching a “smart” switchgear designed to support EV charging stations.

Sen. Tammy Baldwin, D-Madison, said manufacturers will respond to the incentives to ensure more vehicles qualify.

“It’s all about customer demand,” Baldwin said. “And when you have incentives that are going to increase that demand, I feel very confident that vehicle manufacturers are going to listen and deliver.”

And as the supply chain begins to catch up with demand, prices will begin to drop, said Gregg May, transportation policy director for the environmental advocacy group 1000 Friends of Wisconsin.

“As we see more and more EVs come out, this extension of the tax credit should incentivize more people to jump on board,” May said.







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Shelves are stocked with wiring at Full Spectrum Solar’s warehouse. The White House says more than 90,000 Wisconsin households will install solar panels because of a 10-year extension of the 30% tax credit included in the Inflation Reduction Act.




‘Heat pumps are our future’

The bill also includes rebates of up to $8,000 for heat pumps, which are more efficient than electric resistance heaters and produce significantly less carbon than fossil fuels.

Though traditionally considered best suited for mild climates, some new models can perform at well below minus 10 degrees, temperatures that occur roughly four days a year in Madison, while software advances allow them to interact with other systems that can kick in when it gets too cold.







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Jim Beirne of Beirne Electrical Services wires a backup heating element on an air-source heat pump at Susan Millar’s Madison home last fall. The Inflation Reduction Act passed last week includes a new $8,000 rebate for heat pumps, which use electricity to heat and cool buildings.




“Everybody should have heat pumps now,” said Brad Spaugh, owner of Midwest Heating and Cooling, the contractor who installed Millar’s system. Spaugh said the technology is advancing so quickly it’s hard to keep up.

In a recent study, the Center for Energy and the Environment found that switching from propane or traditional electric resistance heaters can save households hundreds of dollars per year. But in states like Wisconsin, where electricity is relatively expensive, heat pumps typically cost more to operate than a gas furnace at temperatures below about 50 degrees.

“That may change next year,” with rising natural gas prices, said Abigail Corso, a co-author of the study and chief strategy officer for Elevate, a Chicago-based nonprofit promoting access to clean and affordable energy.

Corso said some contractors have been hesitant to sell them because they’re not confident in the technology.

“Contractors don’t want unhappy customers,” she said.

But that appears to be changing, thanks in part to incentives from Wisconsin’s Focus on Energy program.

Kendall Richards, president of All Comfort Services, said in the past month he installed as many heat pumps as he did in all of 2021.







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An air-source heat pump uses electricity to heat and cool Susan Millar’s Madison home more efficiently than a traditional electric heater and with fewer carbon emissions than a fossil fuel furnace.




While heat pumps account for less than 10% of All Comfort’s installations, Richards said the $8,000 rebate makes them a “no-brainer” for homeowners who qualify.

“Heat pumps are our future,” he said. “Whether you think so or not, the government thinks so.”

Millar said the system kept her home comfortable even on several minus-10-degree days this winter. And with her rooftop solar panels, she says her utility bill went down by nearly 40%.

While the heat pump cost about twice what a comparable gas furnace and air conditioner might, Millar expects to recover much of the difference over time.

But the retired anthropologist and climate activist is more concerned about her carbon footprint.

“Climate is the big one,” she said. “If we don’t get that right, nothing else matters.”

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