Manchin and Schumer’s “Inflation Reduction Act of 2022” Green New Deal & Climate Sections

by | Aug 3, 2022

Senator Joe Manchin, in a 180-degree about-face, agreed on a slimmed-down version of President Joe Biden’s Build Back Better bill that will increase corporate taxes; provide tax credits, grants and incentives to politically correct “clean” energy technologies such as wind, solar and electric vehicles; and seek to reduce greenhouse gas emissions, among other Green New Deal and climate initiatives.

Senator Joe Manchin, in a 180-degree about-face, agreed on a slimmed-down version of President Joe Biden’s Build Back Better bill that will increase corporate taxes; provide tax credits, grants and incentives to politically correct “clean” energy technologies such as wind, solar and electric vehicles; and seek to reduce greenhouse gas emissions, among other Green New Deal and climate initiatives. The Manchin and Schumer “Inflation and Reduction Act” still needs to pass the Senate with just a simple majority of 51 votes since it is positioned as a budget reconciliation bill. The House of Representatives also needs to pass it since it differs markedly from its own Build Back Better bill. Both bills need to be identical to be passed and signed into law. The bill supposedly raises $739 billion while spending $433 billion of which $369 billion is for energy and climate change related incentives, leaving about $300 billion for debt reduction. There are a number of provisions in the energy and climate portion of the bill; several of which are discussed below.

Tax Credits for Clean Energy Sources

One provision of the bill offers tax credits for “clean sources” of electricity and energy storage and roughly $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity. Clean energy by their definition is energy that does not emit carbon dioxide as a byproduct of combustion. Intermittent wind and solar power have had decades of tax credits with more than $40 billion spent on wind alone and yet they only supplied 12 percent of our electricity in 2021 and 5 percent of our total energy usage last year. The American public has been repeatedly told that wind and solar power are inexpensive because they have no fuel costs, when in reality they cannot supply energy 24/7 and require backup from natural gas or coal generators or even worse battery storage, which is extremely expensive and is not considered in the cost of wind and solar power. According to the Energy Information Administration, the levelized cost of battery storage is $128.55 per megawatt hour compared to $40.23 per megawatt hour for an onshore wind plant and $36.49 per megawatt hour for a solar PV plant. Storage is increasingly important as reliance on intermittent energy grows.

Offshore wind is even more expensive at $136.51 per megawatt hour—a technology that President Biden wants to exploit to the tune of 30 gigawatts by 2030.  The only offshore wind farm in the United States is off Block Island, Rhode Island and consists of 5 turbines. Four of those turbines were taken offline last year supposedly for “routine maintenance” to repair “stress lines” identified by GE. It is unclear, however, why more than a month of maintenance and repairs could be considered normal. Also, the cable from the Block Island wind farm to the mainland was not buried deeply enough, requiring the need to rebury the cable at substantial cost. Offshore wind will only increase electricity prices further. The Energy Information Administration reported that wholesale electricity prices this summer in some areas will be 2 to 3 times greater than last summer. That increase is due to Biden’s energy policies that attempt to reach net zero carbon electricity by 2035, which have helped make natural gas prices more than double this year.  Americans need only look towards Europe, where electricity prices are skyrocketing and industrial output is being shelved to see where higher priced energy from intermittent sources leads.

Further, according to the July report of the North American Electric Reliability Corporation (NERC), batteries are not going to provide the backup needed for intermittent renewables—wind and solar. Director of Reliability Assessment and Performance Analysis John Moura said, “Batteries aren’t going to do it, and we’re going to need a backup fuel for wind and solar. So this is important to invest in.” Moura also indicated more investment in gas infrastructure is needed as natural gas is a bridge fuel needed to backup wind and solar because of their inherent intermittency. Natural gas is not considered “clean” by advocates of the Green New Deal and others who advocate for an all-renewable energy system.

Tax Credit for Electric Vehicles

Another provision is a $4,000 consumer tax credit for lower/middle income individuals to buy used electric vehicles, and up to $7,500 tax credit to buy new electric vehicles. The $7,500 tax credit is an extension of a current tax credit for electric vehicles, but one that currently has a limit per manufacturer. The new credit appears to not be manufacturer-limited on number of sales. However, it is clear that the $7,500 tax credit helps the rich because electric vehicles are far more costly than gasoline or diesel vehicles, even when fuel savings are factored in. The average price for an electric vehicle in the United States is about $66,000, compared with $46,000 for all new cars, partly because the cost of batteries increased in price due to shortages of raw materials caused by demand driven by governmental policies.  Lack of public chargers, especially for apartment residents who do not have garages or private driveways where they can plug in, is another huge impediment. While numerous companies are competing to build networks and the Biden administration is providing funding, the number of stations is less than desirable. Vehicle range and the time it takes to charge are also factors to adoption. Further, customers who use quick charging stations find the cost exorbitant compared to charging at home.

Funds for Clean Heavy Duty Vehicles

Another provision is $1 billion for electric heavy-duty vehicles, like school and transit buses and garbage trucks. Recent experience has not been kind to these programs. For example, Connecticut plans to make its over 800 transit buses electric and is adding 22 electric buses to its CTransit bus fleet, making a total of 34 electric public transit buses when the new buses arrive in about 18 months. It will do so using an $11.4 million grant from the federal government that comes from the U.S. Department of Transportation’s Federal Transit Administration’s Buses and Bus Facilities Program already approved by Congress. The total cost to add the 22 electric buses is $25.7 million, which includes retrofitting garages with chargers.

Electric buses, however, are much more expensive than their diesel fuel counterparts. Generally, the purchase price of a diesel-fueled bus is $650,000, while the purchase price of an electric bus is between $950,000 and $1 million—about 50 percent more—without consideration of the infrastructure cost. Connecticut assumed that the electric buses would last 12 years—about the same amount of time as a diesel bus. However, one of the buses delivered in 2021 lasted only one year as its lithium-ion battery caught fire and firemen had to use “copious” amounts of water to extinguish the flames. Paris also experienced a similar situation when 2 electric buses caught fire in April.

Further, the weight from the batteries in electric trucks can be harmful to our roads and bridges. According to a study by the University of California’s Institute of Transportation Studies, long-haul electric trucks with a range of 300 miles are expected to be 5,328 pounds heavier than fossil-fuel versions in 2030. Short-haul and medium-duty box delivery electric trucks are expected to weigh 1,400 extra pounds. Batteries are heavy because the chemicals and materials in battery cells are densely packed and have a good amount of mass. Based on average market penetration, the batteries on electric trucks in 2030 could collectively equal 59.3 million pounds.

Fund to Help USPS Electrify

Another provision is over $9 billion for Federal procurement of American-made clean technologies to create a stable market for clean products, including $3 billion for the U.S. Postal Service to purchase zero-emission vehicles. The U.S. Postal Service had already committed to making at least 50 percent of its first $3 billion, 50,000-vehicle purchase be battery electrics, up from the 20 percent it had initially slated. In February, USPS had originally planned to buy up to 165,000 “next-generation” delivery trucks that are custom-designed to replace the Postal Service’s aging fleet — of which no more than 10 percent would be battery electrics. This was their finding after extensive research into the costs and benefits of electric vehicles. In February, EPA and the White House’s Council on Environmental Quality in a letter urged the Postal Service to reconsider that framework, as did a lawsuit filed by 16 states. Along with the 50 percent purchase, USPS proposed buying an additional 34,500 commercial off-the-shelf vehicles. Altogether, at least 40 percent of the Postal Service’s initial vehicle procurement would be battery electric based on the service’s blueprint. Not only has the federal government forced USPS to buy electric vehicles but now they are providing additional funding from taxpayers for the purchase. Americans can expect even more sluggishness to their mail delivery as performance problems arise from the electric vans in route to their deliveries.

Funds for Critical Minerals

Another provision is $500 million in the Defense Production Act for heat pumps and critical minerals processing. In the spring, President Biden invoked the Defense Production Act to seek an increase in domestic production of minerals used in making electric vehicles, such as nickel, lithium and cobalt. The president said that the country depended on unreliable foreign sources for many materials necessary for transitioning to the use of renewable energy. But, the irony of the situation is that in January, the Biden administration revoked the federal leases for the Twin Metals mine in Minnesota that contains copper, nickel, cobalt, and platinum-group elements and has stood in the way of other mine deployments. Instead of producing these metals domestically, President Biden indicated last year that he wants to import them, despite the United States having the most stringent environmental and labor standards in mining and processing. However, unless the Biden administration starts approving leases and permits, nothing is going to change. It is just more rhetoric for voters to believe he is accomplishing something. Instead, he is just spending more taxpayer money.

Methane Emissions Reduction Program

The Methane Emissions Reduction Program would require the oil and gas industry to face a first-time fee on the excess emissions of methane. Methane leaking from oil and gas wells, pipelines and other infrastructure would lead to fees increasing to as much as $1,500 a ton in 2026 for some operators. The legislation also includes hundreds of millions of dollars in incentives for the industry to monitor and clean up methane leaks. The fees would be in addition to Environmental Protection Agency efforts to limit methane emissions, including proposals to strengthen requirements for companies to find and plug leaks at oil and gas wells. The costs will be passed onto customers. About 180 million Americans use natural gas to heat homes and run appliances and about 5.5 million businesses use it to run their workplaces and manufacturing facilities. It is also the #1 source of electrical generation in the United States, which has allowed the United States to lead the world in reducing carbon dioxide emissions.

Conclusion

Most disturbing of all to Americans suffering from elevated energy costs is that there is nothing in this bill that would reduce the price of gasoline, make infrastructure permitting less onerous or ensure Americans of a stable energy environment. Energy costs have increased dramatically since Biden took office in January of 2020 and nothing in this bill will curtail that trend. Instead, the Biden Administration and allies in Congress will keep increasing energy costs to try to make the American public move in the direction that they want—a non-zero carbon electric sector by 2035 and a carbon-free economy by 2050. Those goals will result in a lot of pain for Americans, as they are seeing at the pump and in their rapidly rising utility bills.

Made available from The Institute for Energy Research 

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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

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