Last week, President Biden signed the $750 Billion Inflation Reduction Act (IRA). The new law addresses inflation, climate, energy, prescription drug policy, and corporate tax changes. Roughly $370 Billion are focused on combatting climate change, including energy generation and transmission, manufacturing, transportation, agriculture, and environmental justice.
Some experts predict the nation’s electricity grid will double in capacity by 2030, largely with renewables. The IRA identified Grid-Enhancing Technologies (GETs) as an important solution for clean energy integration. The law will spur the building of new transmission and maximize the efficiency of the existing grid by implementing GETs.
The IRA reinstates and expands numerous clean energy incentives with an estimated $370 billion of new energy tax credits over the next 10 years. Microgrid development also could gain a tremendous market boost as the legislation includes up to 50 percent in investment tax credits and higher production tax credits for on-site clean power development. Some experts expect the IRA provisions to cut the cost of microgrids by 10 to 50 percent.
On the energy efficiency front, the bill offers tax credits and other incentives for improving the affordability of heat pumps and electrification in the residential and commercial building sectors. Building efficiency upgrades could accelerate lighting upgrades in existing buildings.
The IRA will affect smart building construction and operation in four main areas: energy efficiency, codes and standards, energy financing, and federal investments by the General Services Administration (GSA). The IRA provides many incentives and investments to improve and manage energy use by buildings, to which smart building technology will be key. Though many of its provisions relating to residential buildings, such as tax credits for homeowners to switch to renewable energy, the bill allocates $362 million for a commercial energy efficiency tax deduction. Many think smart building technology will be required as buildings integrate with the future smart grid, renewables, and EV charging infrastructure.
The drive to improve the building code structure began in November 2021 with the passage of the Infrastructure Investment and Jobs Act. That bipartisan law allocated $1.2 trillion for infrastructure programs and provided the DOE with $225 million over five years to fund competitive grants for “sustained cost-effective implementation of updated energy codes.” Supported by the International Code Council, the program aims to drive improvement in the implementation of energy codes, as well as water conservation and community resilience efforts. The IRA provides an additional $1 billion over 10 years for efficient building code adoption grants. Raising the bar for performance expectations will likely drive innovation and investment in more sophisticated and advanced building management and automation systems.
To distribute up to $27 billion to clean energy technologies, the IRA sets up a Greenhouse Gas Reduction Fund (GGRF). This Clean Energy and Sustainability Accelerator, or green bank, is going to deploy resources in communities that haven’t previously had enough resources deployed in them.
As established in the IRA, the GGRF will give the Environmental Protection Agency administrator authority to disburse $20 billion to eligible recipients, defined as nonprofit green banks that “provide capital, including by leveraging private capital, and other forms of financial assistance for the rapid deployment of low- and zero-emission products, technologies, and services.”
Of this $20 billion allocation, $8 billion would be dedicated to financial and technical assistance for low-income and disadvantaged communities. The provision also designates $7 billion to states, municipalities, and tribal governments to drive local investments in sustainability and efficiency—and smarten up their buildings.
Along with the incentives and funding for the private sector, the federal government plans to invest $250 million through the GSA to convert buildings owned or managed by the agency to high-performance building standards. The impact will be significant due to the sheer size of the GSA, which has an annual operating budget of $33 billion, oversees $66 billion in procurement annually, and manages approximately 8,700 owned and leased buildings. Its large footprint has enabled the GSA to become an influential leader in high-performance building and sustainable design efforts. Funding to improve the operations of GSA building stock will almost certainly involve upgrades in building management and other smart building technologies as part of the agency’s efforts to improve the operations of its significant portfolio.
The IRA helps consumers through a $9 billion home energy rebate program for buying electric home appliances and retrofits. Much of these allocations focus on low-income consumers.
The next decade could accelerate public sector assistance in rooftop solar, electric heating and cooling, and electric water heaters. Individuals who buy used electric vehicles could receive $4,000 in tax credits and $7,500 if they acquire a new EV.
Last year’s $1 trillion Bipartisan Infrastructure Law allocated $65 billion toward electric grid transmission infrastructure upgrades and construction. It also contained a $7.5 billion investment to build out a national network of EV chargers.