The American Society of Mechanical Engineers (ASME) is an American professional association that, in its own words, "promotes the art, science, and practice of multidisciplinary engineering and allied sciences around the globe" via "continuing education, training, and professional development, codes and standards, research, conferences and publications, government relations, and other forms of outreach.
The Inflation Reduction Act is expected to reshape the American energy industry. The bill would unlock roughly $369 billion to battle climate change, making it the single largest investment in combating global warming in American history. But, how exactly will the legislation impact the commercial HVAC/comfort engineering sector? Paul Fakes, director of government relations, ASME, offers his perspective on the legislation in the latest installment of The Blueprint Q&A.
Engineered Systems: What is ASME’s initial reaction to the passage of the Inflation Reduction Act?
Fakes: The bill provides important incentives for clean energy development and deployment priorities supported by ASME, many of which are complimentary to last year’s bipartisan infrastructure law. The new and expanded tax incentives will offer important assistance for homeowners to upgrade their appliances to more energy efficient water heaters, heating and cooling systems, as well as other home efficiency upgrades, including weatherization and electrical renovation to support rooftop solar and home electric vehicle charging.
Importantly, Congress provided long-term stability for homeowners and manufacturers by providing clear guidance on eligibility standards as well as a long-term authorization — through 2032 — for many of the key energy efficiency credits and incentives newly reworked by Congress to increase their impact on progress towards meeting U.S. emission reduction goals. They’ve also backed up a lot of these incentives with grant assistance for energy planning and conservation activities.
For example, the bill provides more than $670 million in grants for states and localities to assist in the adoption of the latest building codes, including those that meet or exceed the 2021 International Energy Conservation Code (IECC) for residential buildings or the ANSI/ASHRAE/IES Standard 90.1-2019 for commercial buildings.
Engineered Systems: Which provision(s) is ASME most interested in on behalf of the commercial HVAC sector?
Fakes: There are several, including:
- The Energy Efficient Home Improvement Credit — The newly expanded Energy Efficient Home Improvement Credit will be equal to 30% of the costs for all eligible home improvements made during the year, removing lifetime limits on the previous iteration of the credit that had limited its utility to consumers. The new credit will take effect Jan. 1, 2023.
- High-Efficiency Electric Home Rebate Program — The bill provides more than $4.2 billion for a new program to support states and tribes to allow rebates for qualified electrification projects at the point of sale. The rebate may be provided for projects carried out by a contractor if that contractor company is a properly certified.
- State-Based Home Energy Efficiency Contractor Training Grants — On top of the building code updates and assistance mentioned above, the IRA also includes $200 million through 2031 for states to develop training and education programs for contractors involved in the installation of home energy efficiency and electrification improvements.
Engineered Systems: What impact will this legislation have in the short term? Long term?
Fakes: Implementation will be key to ensuring success, both in consumer awareness and ease of access to eligibility information for homeowners and businesses. The bill places a great deal of responsibility on states to engage in energy and climate response efforts designed to meet the needs of that particular region. So, effective leadership at the state level to direct federal resources will be a key measure of success in the short term.
In the long term, the bill represents the biggest investment in addressing climate change since the American Recovery and Reinvestment Act (ARRA) of 2009 and expands on key lessons learned from what was successful in clean energy development policy over the last decade-plus of clean energy development and deployment incentives. Turning tax credits into cash flow for clean energy deployment was immensely successful, and dramatic expansion of renewable energy deployment in the U.S. following passage of ARRA bodes well for the IRA to continue this energy transition. With the IRA, I think there’s a big hope that we’ll see a similar revolution in building efficiency technology deployments.
Engineered Systems: What impact will this bill have on carbon? The smart grid? Energy storage? Renewable energy? Should engineering firms intend to increase activity in any of these areas? Why/How so?
Fakes: The carbon sequestration tax credit extension and addition of a new tax credit for hydrogen production are huge wins for the clean energy and decarbonization sectors. Nuclear power also receives some additional production tax credit support in recognition of the industry’s contribution to meeting our net-zero energy goals. The bill also includes billions in funding for smart grid investments, with an eye towards grid scale storage and electric vehicle infrastructure.
The USDA Rural Carbon Capture Program includes new funding for the ‘Rural Energy in America’ program, including $9.7 billion for assistance to rural electric cooperatives to promote resiliency, reliability, and affordability and for carbon capture and storage projects. The program will include $1 billion in funding for rural electrification loans, including for energy storage projects, with loan forgiveness available in some cases.
Engineered Systems: Obviously, the bill is still fairly new and everyone is still attempting to decipher its many layers. Does ASME have any questions regarding the bill?
Fakes: In addition to awaiting the finer details of programs like the new USDA carbon capture effort noted above, the bill includes some huge new investments in the U.S> Environmental Protection Agency (EPA) with billions in grants to assist greenhouse gas (GHG) reduction projects in low-income and disadvantaged communities as well as for state and tribal planning grants for air pollution control and GHG reduction. It will be interesting to see how the EPA proceeds in cooperation with the federal inter-agency process, state, industry, and community groups to support GHG reduction.
Engineered Systems: Anything else you’d like to add?
Fakes: It’s a very exciting time to be an engineer!