By Haig Rickerby | Wed, August 24, 22
This summer has not only been one of the hottest on record, but also one that has seen record policy making to tackle climate change and accelerate beneficial electrification. In June, President Biden invoked the Defense Production Act to Accelerate Domestic Manufacturing of Clean Energy. During August, the impossible happened and senate democrats came together to pass the Inflation Reduction Act of 2022 (IRA), one of the most significant climate investments ever made in the US. This blog will look at how these two policies can work to accelerate building electrification and energy efficiency.
Defense Production Act
The Defense Production Act is a war time law first passed in 1950 that gives the White House power to tell private companies what to manufacture. It is meant to shape U.S. industrial production to support “national defense” which also includes “energy production.” Since President Biden entered office, it has been used to help with pandemic response and spur vaccine production. By invoking the DPA, President Biden has recognized that the climate crisis poses a threat to our health, security, and our reliance on energy sources that are vulnerable to price shocks, which has become more of an issue as fuel prices rise due to Russia’s war in Ukraine.
The Order provided the U.S. Department of Energy (U.S. DOE) with the authority to utilize the DPA to accelerate domestic production of five key energy technologies (1) solar; (2) transformers and electric grid components; (3) heat pumps; (4) insulation; and (5) electrolyzers, fuel cells, and platinum group metals. Using the DPA will allow the federal government to invest in companies that expand clean energy manufacturing and install clean energy technologies for consumers.
What Does This Mean for Efficiency?
Both heat pumps and insulation can help accelerate the transition to energy-efficient homes. Insultation will reduce energy usage and heat pumps provide an efficient way to heat homes and can be used for both space heating and cooling. Replacing gas furnaces with heat pumps could reduce carbon emissions by 38-53 percent. The use of heat pumps in the U.S. can reduce its reliance on other countries for oil and gas as well. The demand for heat pumps has increased drastically in the recent months, so much so that U.S. HVAC manufactures are having a hard time meeting it. The DPA will increase manufacturing in the U.S. and ensure that heat pumps are available as more buildings look to utilize them.
Properly-insulated buildings can reduce energy usage by 50 percent or more. Studies indicate that almost 50 percent of U.S. homes were built before modern day building energy codes, thus they lack the contemporary insulation that reduces energy waste. Not only do well-insulated buildings lower energy cost for families and increase the domestic clean energy workforce, they also provide “passive survivability” meaning that they can retain a safe indoor temperature for longer in the case of energy disruptions. Currently, U.S. insulation production is able to meet the demands of new construction, but it is essential that older buildings be retrofitted to reduce energy costs.
Over the next year, we will see how the use of DPA can increase and expand insulation manufacturing and heat pump manufacturing in the U.S. through U.S. DOE prioritizing the purchase of these technologies and spurring clean energy manufacturing and job growth.
Inflation Reduction Act
The Inflation Reduction Act has many components including health insurance, taxes, deficit reduction, and will be one of the largest ever investments intended to tackle climate change. Roughly $370 billion will be dedicated to “energy security and climate change” making this the single largest climate investment in American history. Below is an overview of some of the key provisions of the legislation:
High Efficiency Electric Home Rebate Act (HEEHRA): $4.5 billion in direct rebates for low- and moderate-income households that install new, efficient electric appliances. Low-income households will receive a rebate to cover the full cost of a heat pump installation, as well as $1,750 in incentives for a heat pump water heater and incentives to cover upgrading electric wiring and insulation, ventilation and sealing. Moderate-income households will receive the same rebates 50 percent of the costs.
Home Energy Performance-Based, Whole House Rebates: $4.5 billion in efficiency and electrification rebates for energy efficiency and electrification upgrades in low- and moderate- income single-family homes and multifamily buildings with more than 50 percent LMI occupants. The rebates available are up to $4,000 for a 20-35 percent reduction in energy usage and up to $8,000 if the project achieves savings greater than 35 percent.
New Energy Efficiency Home Credit: up to $5,000 to developers to build homes that qualify for the U.S. DOE’s Zero Energy Ready Homes Standard. This credit applies to single, multi-family, and manufactured homes, as well as those that undergo a deep retrofit.
Commercial Buildings Energy Efficient Credit: offers $2.50 to $5.00 per square foot for businesses achieving 25-50 percent reductions in energy use over existing building performance standards.
Enhanced Use of the Defense Production Act: includes $500 million to bolster domestic manufacturing of heat pumps and processing of critical minerals.
Environmental and Climate Justice Block Grants: $3 billion to enable disadvantaged communities to reduce greenhouse gas emissions, mitigate risks from extreme heat, improve climate resiliency, and reduce indoor air pollution.
Improving Energy Efficiency and Water Efficiency or Climate Resilience in Affordable Housing (formerly known as the GREAHT Act): includes $1 billion in grants and loans for retrofit projects that advance building electrification, improve energy and water efficiency, and more in affordable housing.
Zero Building Energy Code Adoption: invests $1 billion to ensure that more Americans are able to live and work in zero-emission buildings that meet the highest standards for energy efficiency, which will minimize energy bills, and improve health and safety.
Check out these resources from Rewiring America to learn more:
Inflation Reduction Act, The Electric Explainer
Inflation Reduction Act, Investments for Disadvantaged Communities
Household Electrification Incentives Calculator
Conclusion
These initial actions taken by the Biden Administration are likely to be the first of many steps taken to address the growing needs of the national health and climate crisis. They are an indication the Biden Administration plans to take a more proactive hands-on approach to engage with communities in order to foster a more efficient and sustainable energy future. It is essential for local municipalities to inform communities about the opportunities for clean energy so that citizens can take advantage of this new legislation.