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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Red States Benefit Most From Biden's Inflation Reduction Act

  • Not a single Republican voted to support the historic Inflation Reduction Act (IRA) when it was passed in August.
  • Iowa and Oklahoma, some of the ‘reddest’ states with Republican governors and majority Republican state legislatures, lead the nation in wind power production.
  • Billions of dollars of new clean energy investment has been announced for solar, electric vehicle and battery manufacturing in Georgia and other southern states since the passage of the Inflation Reduction Act.
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Republicans are not exactly known to embrace renewable energy, with GOP elected officials and fossil fuel supporters frequently criticizing the clean energy drive. Not a single Republican voted to support the historic Inflation Reduction Act (IRA) when it was passed in August, while Iowa Republican Sen. Joni Ernst last year lambasted "the Democrats' push towards renewables," claiming that "'Biden blackouts' will make it impossible to run even fans and air conditioners on the hottest days of the summer”.

It, therefore, comes as a surprise to learn that red states are reaping the benefits of Democrats’ climate law much more than the Democrats themselves, with red states claiming more IRA funds and installing more wind and solar power than Democratic-leaning states in 2022. A new report by Climate Central reveals that U.S. wind and solar capacity grew 16% compared to 2021, with the U.S. generating 683,130 gigawatt-hours (GWh) of electricity from solar and wind last year, up from 588,471 GWh in 2021.

Interestingly, Iowa and Oklahoma, some of the ‘reddest’ states with Republican governors and majority Republican state legislatures, lead the nation in wind power production; California and Florida are the largest producers of solar power while Texas is a leader in both solar and wind power. The report says that state and federal incentives are also a big reason for the year-over-year growth in renewable energy generation. 

In 2018, California issued a mandate that requires most new single-family and multi-family homes of up to three stories to install rooftop solar panels starting 2020. Back in 2005, Iowa enacted the highest state tax credit rate for wind energy, at $0.015 per kilowatt-hour (kWh). Iowa remains the only state where clean energy credits are transferable, with tax credit recipients able to sell the credits to third parties who can then use the purchased credit to offset their taxes owed to the state.

Meanwhile, there are several reasons why renewable capacity, especially wind energy, has been growing like a weed in Texas. First off, Texas has been proactive in building out transmission lines to bring wind power to businesses and homes, making it possible for future wind farms to easily connect to this grid. Additionally, Texas has enacted laws that deregulate the state’ energy market making it conducive to lease land for wind turbines (just 2% of the land in Texas is regulated by the federal government).

Related: BP’s CEO Warns Of Oil And Gas Price Spikes If Energy Transition Is Rushed

Texas is rich in wind speed and rich in sun. While there is a lot of initial investment, after the wind turbines are erected, the cost of wind is cheaper,” Irfan Khan, assistant professor of electrical and computer engineering at Texas A&M, has told the Guardian.

Source: The Guardian

Battery Belt Embracing IRA Funds

It’s somewhat ironic that whereas Southern states led by Republicans did not vote for climate spending, they are embracing clean energy dollars a lot more than their blue counterparts.

Billions of dollars of new clean energy investment has been announced for solar, electric vehicle and battery manufacturing in Georgia and other southern states since the passage of the Inflation Reduction Act (IRA) in August, leading to this swathe of states being nicknamed the“battery belt.” And it’s the battery belt and other Republican-led states that have been claiming the lion’s share of IRA dollars: according to an analysis by American Clean Power, Republican-held congressional districts are now home to more than 80% of all utility-scale wind, solar farms and battery projects currently under development.

Under a scenario whereby states adopt clean energy technologies at a pace and scale needed to meet 2030 climate goals, red states would receive $4,221 in IRA funds per capita, much higher than what blue states would receive at $2,427 per capita.

Indeed, an RMI analysis has revealed that Texas could see $131 billion in IRA-linked investments this decade; Florida may see $62 billion while Georgia might realize $16 billion. Further, Republican-leaning states are also receiving larger climate investments per person than Democrat-led states. 

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But it’s Georgia that’s currently winning big time by the IRA, with billions of dollars of new clean energy investment and battery manufacturing already lined up:

It seems like all roads are currently leading to Georgia, it’s really benefiting disproportionately from the Inflation Reduction Act right now,” Aaron Brickman, senior principal at energy research nonprofit RMI, has told the Guardian. Brickman says that the $370bn in clean energy incentives and tax credits are a complete game changer, ‘‘We’ve just frankly never had that before in this country. The IRA has transformed the landscape in a staggering way.

Hyundai is currently building its first dedicated electric vehicle plant in the US--a $5.5bn facility in Bryan county, Georgia, which will create ~8,000 jobs when it opens in 2025.

By Alex Kimani for Oilprice.com

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Leave a comment
  • John Tramburg on March 01 2023 said:
    I don’t find it ironic at all since blue states typically over-regulate the crap out of building, anything new and tie up projects for years with their ridiculous permitting requirements.

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