A group of Democratic governors said Thursday, feb. 9, 2023 that using federal money to expand clean energy options, like solar panels, education and affordable housing will benefit communities over the long term. (Courtesy of the city of Salem)
Clean energy developers, farmers, ranchers, forest and home owners in Oregon are slated to get hundreds of millions of dollars in grants, tax credits and incentives from legislation that passed the U.S. Senate this weekend.
The Inflation Reduction Act of 2022, an umbrella name for a climate and energy package that includes provisions for health care, could go to the U.S. House for a final vote as soon as Friday and is likely to pass under the Democratic majority. It is expected to cost more than $700 billion during the next decade, slightly more than the $660 billion in subsidies the coal, oil and natural gas industries received in 2020 alone, according to a report from the International Monetary Fund.
The 775-page package includes tax credits and incentives for producers of nuclear power, geothermal, wind, wave and solar energy as well as “clean hydrogen,” a controversial form of clean energy that not all environmentalists favor. It also includes rebates for farmers and forest landowners who invest in projects that sequester carbon dioxide and create less waste; for homeowners who invest in energy efficiency, solar panels and electric heating and cooling pumps; and for buyers of used and new electric cars.
Other provisions in the act:
Health care: The act would cap the yearly out-of-pocket costs for members of Medicare at $2,000 starting in 2025. The legislation would also allow Medicare to start negotiating drug prices in 2026. Beneficiaries would be entitled to free vaccines, including for Shingles.
Medicare is overseen by the Centers for Medicare and Medicaid Services and it’s primarily for those 65 and older or people with disabilities. There would likely be a trickle-down effect to others. Commercial insurers generally follow the lead of Medicare.
For more information on this, see our previous story: How Medicare prescription drug coverage would change under U.S. Senate Democrats’ bill
Oregon’s U.S. Sen. Ron Wyden, a Democrat, said in a press conference that he spent the weekend up all night on the floor, “batting back the efforts to block these reforms” by Republicans.
If it passes, it could cut almost in half U.S. greenhouse gas emissions during the next decade, compared with 2005 levels, according to an analysis by Rhodium Group, a research firm based in New York City.
A jump start for clean energy projects
Tax incentives for energy storage and solar energy facilities, offshore wind and wave projects would enable some cost-prohibitive clean energy projects in Oregon to move forward.
In Klamath Falls, a clean energy storage project called Swan Lake that has been on hold would be able to start up. During Covid, the price of materials and gas shot up, nearly doubling the cost of the project, which started at almost $900 million.
Swan Lake is a so-called gravity battery that uses gravitational forces to store excess energy from solar or wind operations for use at night, for example, when there’s less wind or solar rays.
Alicia Chapman, CEO of a Portland-based metal manufacturer, Willamette Technical Fabricators, hopes to provide steel pipes for the project. She said the new tax incentives from the Inflation Reduction Act are likely to jump-start the project.
The pipe sales could bring in $13 million for her company.
“That’s a year’s worth of revenue for me and would allow me to double my workforce,” she said.
In May, Chapman went to Washington D.C. as part of a delegation of Oregon businesses to meet with Wyden and his tax experts to discuss incentives they’d need to move projects like Swan Lake forward.
“We really thought this bill was dead, Build Back Better was dead,” she said of the infrastructure, climate and social programs package House Democrats passed more than six months ago that died in the Senate.
She said the inflation act gives Oregon the catalyst it needs for clean energy development.
“We can make Portland and Oregon and this whole region a center of excellence for green energy,” she said.
The act includes a 10% increase in tax credits for developers who source components from manufacturers in the U.S., such as Willamette Technical Fabricators.
The company is also working on prototypes for floating offshore wind platforms and wave energy projects with Oregon State University and the U.S. and Oregon departments of energy. She’ll meet next week with a delegation of European wave energy developers interested in funding projects in Oregon.
“We can move out of the prototyping phase and get into the ocean and start generating energy,” she said.
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Boost for capturing carbon
The package includes $50 million in grants to pay forest landowners for carbon sequestration projects and $100 million for grants to support projects that make new use of forestry residue, such as bark, chips, sawdust and shavings that can be used for wood pulp and bioenergy. It also includes $400 million in grants for boosting forest and ecosystem health and preventing fires for forest landowners with less than 2,500 acres or those in underserved areas.
For farmers and ranchers, the package includes $20 billion in technical assistance and grants for “climate smart” farming practices through the U.S. Department of Agriculture. Grants would go toward projects that can sequester vast amounts of carbon dioxide from the atmosphere and trap it in the ground.
Credits for homes, electric vehicles, busses
Homeowners who install solar panels would be able to claim a larger rebate on their federal income taxes. The package includes $9 billion for consumer home energy rebate programs, and boosts the income tax rebate on solar panels from 22% to 30% of the cost.
The Federal Housing Administration would get more than $1 billion to improve environmental conditions in homes, provide better access to transportation and enhance safety in disadvantaged communities. Rebates of up to 100% of the cost for clean heavy duty vehicles, such as school buses and garbage trucks, are also in the package.
For Oregonians interested in a new electric vehicle, a rebate up to $15,000 would be available under state and federal programs.
The federal package includes a $7,500 rebate for purchases of new electric vehicles and $4,000 for used electric vehicles. These rebates resemble those offered by the Oregon Department of Environmental Quality and could be claimed on top of the state’s rebate.
Advocates mostly welcome proposal
Celeste Meiffren-Swang, director of Environment Oregon, an environmental advocacy group, has been working on getting a large federal climate bill passed for more than a year.
“We did a lot of organizing last summer,” she said. Environment Oregon is one of 29 affiliates in the national Environment America network.
“We did phone calls, public events, petitions, emails. We needed to show Oregon’s federal delegation there was tons of support for this kind of legislation.”
When Build Back Better died in the Senate, Meiffren-Swango feared that would be the end of bills addressing climate change. “The indication we were getting was that it wasn’t moving forward, then two or three weeks ago, it looked like some life was breathed back into the idea of doing something,” she said.
Nora Apter, climate program director for Oregon Environmental Council, said in an email that the package is a win for domestic energy production and moves away from the high prices and volatility of oil markets.
“The more we can move toward electric vehicles and homes, the less we have to worry about the price of oil and gas being determined half a world away,” she said.
But both Apter and Meiffren-Swango said the bill is not perfect.
“We are acknowledging that this is a compromise,” Meiffren-Swango said. “We wanted to see something as ambitious as possible and something that could actually pass the Senate. It’s sort of a tightrope walk.”
Apter was disappointed in provisions allowing new oil and gas leases on federal land for the next decade and investments in what the plan calls “clean hydrogen.” Hydrogen emits water when burned, but gobbles up energy in the process. “We are disappointed that the bill includes provisions that support new oil and gas leasing, logging on public lands, and certain kinds of hydrogen development, which run counter to our climate goals and disproportionately impact low-income communities and people of color,” Apter said.
The plan would increase the royalties fossil fuel companies must pay the U.S. government on the oil and gas extracted from federal land. It would also more heavily tax some fuel industries, like natural gas, that produce methane, a potent greenhouse gas. Emitters would be forced to pay up to $1,500 per ton of methane emitted in excess of a threshold set by the Environmental Protection Agency and Congress.
Wyden said the bill is, in large part, an overhaul of the tax code which had traditionally favored the fossil fuel industries at the expense of investing in renewable energy.
“It takes the tax code and throws it in the trash can. No longer will the government be picking winners and losers and just giving out favors to the politically powerful,” he said. “For the first time, the more you reduce carbon emissions, the bigger the tax savings.”
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