How Can States Make the Most of IRA? We Have Guides for That

Last week, the White House and Congress celebrated the one-year anniversary of the Infrastructure Investment and Jobs Act – IIJA, also known as the Bipartisan Infrastructure Law. Between IIJA and the more-recently enacted Inflation Reduction Act (IRA), the federal government has devoted almost $500 billion in grants, tax credits, and other incentives to accelerate America’s energy transition, electrify transportation, and address many of the energy-related challenges facing the nation. For all the attention paid to the work inside the Beltway, however, whether the U.S. realizes that potential hinges largely on what happens outside the Beltway.

From lowering electric bills and transportation costs, to creating jobs and revitalizing American manufacturing, lifting up communities that have been left behind, and cutting pollution while decarbonizing the economy, the IRA and IIJA have the potential to create a more prosperous, affordable, and secure future for America. While the federal government has an important role to play, the laws and regulations that determine what type of power plants get built (or retired) and where, what cars are sold (and by whom), and how efficient our homes are (and what fuel or electricity they use), are drafted, enacted, and implemented by state lawmakers, governors, and utility regulators across the country – from Annapolis and Albany to Indianapolis and Santa Fe.

And there is no one size that fits all. Each state has its own set of priorities, based on politics, economy, culture, and resources. While Michigan may prioritize the revitalization of the auto industry through EVs and focus on rebuilding its crumbling roads, Virginia is looking to become a hub for offshore wind and has solar farms growing in its rural communities. Within each state, government decision makers – governors, regulators, and lawmakers – have different policy and regulatory tools, and thus different roles and capabilities in the implementation of the IRA and IIJA.

At AEE, we’re working to help states make the transition to electrified transportation, efficient buildings, and reliable, affordable, clean electricity. To help state decision makers understand the incentives and access the resources in these laws, AEE has produced three in-depth IRA and IIJA guides – one for governors, one for regulators, and one for lawmakers.

Titled “Unleashing America’s Advanced Energy Future: Federal Resources to Combat Inflation, Create Jobs & Achieve Energy Independence,” these guides provide these distinct sets of decision makers with a comprehensive view of the IRA and IIJA resources and incentives for clean energy, transmission, transportation electrification, advanced energy manufacturing, and building efficiency and electrification. We explain the new provisions for expanding the advanced energy workforce, increasing the value and utilization of tax incentives (i.e., transferability and “direct pay”), and promoting the use of domestic content in clean energy and transportation projects.

Case studies, detailing how these provisions work and how incentives could be utilized, are interspersed to help policymakers and regulators better understand the implications of these policies. We also spotlight longer-term issues that could stymie advanced energy progress despite the best of intentions. Throughout this analysis we have woven AEE insights and recommendations – tailored to each group of decision makers – on the steps they can take to unlock IRA and IIJA potential in their state.

There is something for every decision maker in these guides, from red-state governors focused on growing their industrial base to blue-state lawmakers dedicated to cutting pollution in frontline communities and nonpartisan regulators working to rein in rising electric bills. Below are just a handful of the tailored AEE insights and recommendations decision makers will find in these guides:

• The Energy Efficiency and Building Electrification section of the guide details two programs (HOMES and HEEHRA) to which the IRA appropriated $8.6 billion. These programs, administered by State Energy Offices, can help households, especially low- and middle-income households, purchase energy efficient appliances and go electric. We unpack how Governors can utilize these resources to help residents reduce electric bills and cut energy waste.
• The IRA and IIJA will make it even more affordable for families, businesses, and state governments to make the switch to EVs. In the Transportation Electrification section, we break down these programs and recommend that Governors direct their administrations to utilize the fleet electrification tax credit (45W) with direct pay, as well as other federal resources, to speed the electrification of the state fleet and help local governments and school districts do the same.
• America is on the cusp of a new era in domestic manufacturing, catalyzed in large part by tax incentives, programs, and policies in the IRA and IIJA, as the Advanced Energy Manufacturing section discusses. Governors should work with state economic development teams to ensure they attract new plants to produce solar panels, wind turbines, and EVs, revitalizing industry and creating durable middle-class jobs.
• The IRA and IIJA provide billions in financial resources to help State Energy Offices and other arms of state government finance renewable projects for low-income consumers, school bus electrification, energy efficiency in multi-family housing, and similar projects, as detailed in the Versatile Support for State Advanced Energy and Transportation Actions Lawmakers should make sure their states have the statutory and financial infrastructure – e.g., to establish a “green bank” – and necessary capacity (staff, technical expertise, etc.) to secure and use these resources.
• In many parts of the country, clean energy is the most affordable form of electricity generation. The IRA and IIJA only serve to further improve those economics, as our analysis in the section on Clean Electricity and Storage Incentives We recommend that state lawmakers establish and accelerate the ramp-up of 100% clean energy standards to make sure they’re taking advantage of these incentives, cutting energy costs and emissions in the process.
• The rapidly falling costs of clean energy and storage should also change the resource plans and procurements of utilities across the country, as we discuss in the Clean Electricity and Storage section of the guide for Regulators. We recommend that these changing economics prompt commissions to require that utilities revise their integrated resource plans (IRPs) and, in some cases, re-issue RFPs for new generation and storage resources.
• Programs in the IRA and IIJA make it easier for families and businesses to become more efficient, make the switch from oil and gas heat to electric, and embrace distributed energy resources (DERs), as our analysis in the Energy Efficiency and Building Electrification section reveals. As a result, regulators should ensure that utilities are planning for an efficient, electrified future by facilitating the interconnection of DERs and making plans to avoid stranded costs, especially on gas infrastructure.
• The Transmission and Grid Infrastructure section enumerates the policies and loan programs established under the IRA and IIJA to help facilitate the planning and development of high-voltage transmission – and we detail why this issue remains a key obstacle to decarbonizing the grid. Regulators should take advantage of these federal resources and technical support to ensure effective planning and swift transmission deployment on a state and regional level.

To learn more about the range of programs and incentives in the IRA and IIJA, and how state decision makers can utilize those to lower energy costs, create jobs, bolster disadvantaged communities, and cut pollution click here and download these guides today.

To hear more about how state decision makers are tapping into IRA and IIJA resources and programs, join us on Tuesday, December 6, at 2 PM ET / 11 AM PT for our webinar, “IRA Opportunities & Obstacles: State Perspectives.”