The passage of landmark legislation in the US has sparked renewed competition – focused on fast-tracking the development and implementation of climate-focused technologies. While much of that funding centers on well-known tech such as electric vehicles and solar and wind power, there are also interesting incentives and opportunities for green technologies and applications that have yet to reach the mainstream.
There’s an old saying, ‘a little competition goes a long way.’ While it has many applications, this phrase is particularly apt for humanity’s ability to realize step-change developments in technology.
Just look at the ‘Space Race’ in the 1950s through 70s, for example. While rooted in geopolitical tension, the competition between two superpowers produced groundbreaking technologies that advanced (and even created) a wide range of critical industries – from telecommunications and computer science to micro-technology, materials science, and renewables.
Today, we face the collective threat of climate change. While the EU has historically positioned itself as a global climate leader, with strong emissions reduction targets and heavy investments in clean energy, the US has stepped up to the plate. Within the last 18 months, it has passed two significant pieces of legislation aimed at showing its potential to lead on climate action.
Together, the Infrastructure Investment and Jobs Act (IIJA) and The Inflation Reduction Act (IRA) aim to boost funding, incentives, technology developments, and jobs in critical infrastructure, green technology, energy security and more – which could see the US emerge as a climate leader. In fact, the IRA alone could see an estimated public and private spending of more than one trillion dollars on climate impact initiatives by 2030. While much of that funding will focus on advancing core climate technologies such as electric vehicles (EVs), and traditional renewable energy sources including solar and wind, there are interesting incentives and opportunities for green technologies and applications that have yet to reach the mainstream.
Here’s a look at a few of the ‘overlooked’ opportunity areas poised for growth as a result of these landmark pieces of legislation.
Both pieces of legislation include measures to bolster diversify and resilience of the US energy market by incentivizing the use of cleaner solutions, but the inclusive language of the IRA leaves the door open for the growth of more ‘alternative’ green energy solutions. This includes renewable natural gas, otherwise known as biogas, as well as microgrids, and energy-from-waste facilities. For example, there are currently around 2,500 biogas systems in the US. However, that number already had been projected to increase by 10,000 or more and new tax credits of up to 50% under the IRA could accelerate the rate of growth.
One group that could stand to benefit is the country’s 34,000 dairy farmers – who could leverage existing sites to generate biogas as an additional source of revenue. States such as California, Texas, and Idaho, where the concentration of dairy farms is highest, would have thousands of potential methane feedstock sources waiting to be leveraged for new biogas/RNG projects.
According to the EPA’s AgStar program, only 20 of the ~200 largest dairy farms (>5,000 heads of cattle) have existing anaerobic digesters with RNG capabilities – leaving much potential for new development. Using livestock waste alone as a feedstock, there are potentially some 8,500 new biogas sites that could be developed, as well as an additional 990 animal processing sites which could supply animal waste feedstock. The American Biogas Council estimates that tens of billions of dollars of capital could be deployed resulting in hundreds of thousands of short-term jobs and tens of thousands of permanent jobs.
Livestock manure is the largest application areas for new biogas systems
(Operational Biogas Gas Systems vs Potential Sites to Develop)
The IRA provides up to a 50% investment tax credit (ITC) for qualified green energy properties placed into service by 2025, of which the first 6%-to-30% is the base ITC for ‘Project Requirements’ (meeting various wage and apprenticeship requirements). An additional 10% ITC is provided for a ‘Domestic Content’ bonus (for steel, iron, and manufactured products made in the USA). Plus, there is up to an additional 10% ITC for an ‘Energy Community’ bonus credit (for underserved communities). The IRA also extends and increases Production Tax Credits (PTCs) for new qualified clean energy facilities that commence production before 2025, but you cannot claim in both ITCs and PTCs for the same property.
In addition to biogas or other biofuels, these green incentives also benefit projects involving real estate properties used for distributed energy or microgrid resources like fuel cells, energy storage, or combined heat and power (CHP). Across America’s urban and suburban communities, this expanded green energy ITC/PTC framework could enable many resilient energy transition projects, by lowering the total cost of ownership or operation.
Carbon capture has gained a lot of attention in recent years – becoming an exciting area of development as well as a source of debate as it doesn’t disincentivize the original production of greenhouse gas (GHG) emissions. Nevertheless, carbon capture, use, and sequestration (CCUS) is an important part of the wider climate action solution and is likely to accelerate in the coming years as a result of the legislation.
CCUS technologies offer significant strategic value during the transition to net-zero:
Combined, the IRA and IIJA total more than $26 billion in transferable tax breaks for CCUS business initiatives during the short-term transition to net-zero, through 2030. In the IRA, close to $10 billion is set aside to improve or retrofit rural electric cooperative generation and transmission systems for zero-emission systems like CCUS or to make energy efficiency upgrades. Another $5 billion in energy infrastructure reinvestment financing is allocated for projects that retool, repower, or replace existing energy infrastructure that has ceased operations (or will be retired) in order to be repurposed to avoid anthropogenic GHG emissions, including CCUS. And in the IIJA, there is nearly $7 billion over five years for the Department of Energy’s Advanced Fossil Energy Projects to support research and development of advanced fossil energy technologies, including CCUS.
The deployment of CCUS to date has been concentrated in the US, which is home to almost half of all operating facilities. This is due in large part to the availability of an extensive CO2 pipeline network and demand for CO2 for enhanced oil recovery. What’s more is that in recent years, dozens of conventional US power plants have been retired. The DOE’s EIA reports that ~16 GW of utility-scale coal and natural gas generating capacity is set to be retired in 2023, meaning there would be no shortage of retrofitting opportunities.
CCUS project financiers, developers, consulting engineers, and technology players can benefit by working with rural electric cooperatives as well as other owners of retiring fossil fuel power plants to brownfield CCUS projects at these sites.
Number of conventional* powerplant retirements 2012-to-2022
Includes coal, municipal biomass/waste, natural gas, and petroleum facilities
While the US fares better than many countries in terms of water resilience, it is not without significant water challenges. High-profile water crises such as in Flint, Michigan and Jackson, Mississippi, persistent drought conditions in the Colorado River, and recent extreme weather events and flooding across California have also called wider attention to the threats posted by ageing water infrastructure and climate change.
The IRA and IIJA include grants, contracts, and financial assistance programs to boost the quality and resilience of and access to domestic water supplies and promote water reuse and other efforts to address climate mitigation and climate adaptation. Additional funding, specifically the commitment of up to $49 billion to support climate-resilient water and sanitation infrastructure and services made during the UN Water Conference in March, is bringing further attention to the critical role water will play in the decades to come.
One noteworthy inclusion in the IRA is $2.6 billion in funding to boost climate adaptation in coastal areas through September 2026. Under the law, the National Oceanic and Atmospheric Association (NOAA) will provide coastal states, municipalities, higher education institutions, and non-profits with funding to adapt to extreme storms and other changing climate conditions. Communities impacted by regular flooding or seeking to improve stormwater management could utilize this funding to better manage runoff and extreme wet weather events.
As a result, there may be commercial opportunities for technology and equipment providers to assist these communities and organizations – and the tight timing for the funds to be utilized could encourage players to move quickly. The EPA has stated that stormwater runoff is the number one cause to water pollution in urban areas, so urgency is warranted.
Another $550 million in funding is available over the next eight years to ensure better access to domestic water supplies among disadvantaged communities, or households without reliable access to water. The World Economic Forum estimates that more than two million Americans lack access to running water and basic indoor plumbing and another 44 million have inadequate water systems – meaning there are water access project opportunities to be explored, such as water reuse processing, pipeline expansions, or infrastructure builds in remote areas – with the potential that Uncle Sam could foot the bill.
The initial international response to these landmark US acts was strong – with French President Emmanuel Macron stating protectionist features of the IRA would be “super aggressive” toward European businesses. Several major companies moved quickly to take advantage of the change in US policy including German chemicals giant BASF SE, steelmaker ArcelorMittal, and Swedish battery maker Northvolt AB.
But so far, it appears European leaders are opting to streamline existing policies as opposed to introducing new initiatives or funding packages. In February, the EU put forward the Green Deal Industrial Plan with the aim to simplify regulations, speed up access to financing, develop skills for green industries, and create a “more supportive environment” for manufacturing. A few weeks later, leaders announced the Net-Zero Industry Act and Critical Raw Materials Act, aimed at ensuring the bloc can compete in making clean tech products and access the raw materials needed to support the green transition, such as lithium, copper, and nickel.
A recent joint statement by President Biden and Ursula von der Leyen, President of the European Commission is now setting a more cooperative tone, stating that both powers are “committed to addressing the climate crisis, accelerating the global clean energy economy, and building resilient, secure, and diversified clean energy supply chains. Both parties recognize that these objectives are at the heart of the U.S. Inflation Reduction Act and the EU Green Deal Industrial Plan.”
In an uncertain political climate, the full impact of these legislative moves is yet to be seen. It’s promising, however, to see both the US and EU ramping up efforts to re-establish and re-shore manufacturing capabilities in support of the climate transition. While it may not be a new ‘Space Race’, we can expect this renewed focus will open new market opportunities for investors, manufacturers, and technology providers, all while accelerating the global response to climate change.