Tavistock recently attended the Hydrogen & Fuel Cell Seminar in Long Beach. The below blog was taken from our Energy Transition weekly email, ALL CHANGE, which you can subscribe to here.
Each day of the conference was painfully opened by a song from Forrest Gump; specifically the scene when his leg braces shatter as he flees from the children throwing rocks at him.
I’d like to think this wasn’t a theatrical ploy by the organisers to set hope as a theme of the week, but I fear I may be wrong.
You could smell the optimism that arrived with the Inflation Reduction Act: a whiff of tax credits to capitalise on the economic boom that will surround a transition to cleaner energy.
Flying into LAX you can’t miss the swathes of land covered in solar panels utilising near-guaranteed sunlight to power the brightness of Vegas. Many think this is a sign of what’s to come under IRA. I’m still not sold.
The excitement around IRA is not surprising. For decades, America’s novel environmental laws passed under Nixon have emerged a rare bipartisan consensus that it takes too long to build things in the US.
The National Environment Protection Act (NEPA) ensures the federal government has to consider the environmental consequences of a project before permitting its development. This can take years to complete.
Environmentalism thus became a crusade of stopping things being built, and permit reform is one problem IRA is trying to tackle: political thicket rendering star tangled spanners that can’t build things in the land of the free.
But things still aren’t so clear. Biden’s administration still seems confused over its priorities. “America the Beautiful” aims to conserve 30% of the country’s land and waters by 2030, the same period that IRA wants to cut emissions by 40% below 2005 levels.
So, The Economist asks what wins? A solar farm commissioned to decarbonise electricity grids in the country’s vast desert land, or conserving a landscape that is home to a species of turtle?
I asked this question to the US Department of Commerce at the conference, who laughed and didn’t really have a response.
They also stumbled when being quizzed on how European tech companies, such as electrolyser manufacturers, can take advantage of retreating tariffs by working in the US when IRA is so focused on the transition benefitting American companies and, importantly, American people.
IRA includes a mandate to ensure 40% of economic benefits generated from the energy transition benefitted disadvantaged communities. “A just transition for all Americans.” But you can’t ignore the international play at stake here.
Subsidies and tax credits are emerging as a geopolitical instrument for countries to compete on creating the clean energy market of the future, whether that is for construction of clean technologies, taxes on carbon emissions or affordable use of green fuels.
Representatives from both the EU and Canada said they have something similar to follow IRA’s success. However, an abundance of tax credits may also result in nonsensical, and maybe even irresponsible, applications of fuels like hydrogen.
An example you can’t ignore from this arena is a hydrogen-powered bicycle from a Chinese manufacturer. Lots of comments circulating, most likely connected to the Red Emperor himself, about how the only “emissions” connected with this bike are water. I don’t know how this manufacturer managed to carbonise a bike, but they have done it.
So, excitement is brewing around tax credits as a way of generating much needed demand in the market. One tax lawyer at the conference went as far to say said it was the “apogee” of his career.
And I do think tax credits are a better system than allocated grant funding as they invite longevity and innovation for all, remove subjectivity, and importantly generate demand. However, on the surface it seems as though IRA will only be subject to the same “novel” legislation as passed under Nixon.
– Charlie Baister, Consultant