Inflation Reduction Act Increases Funding for Energy Transition Projects in the US
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On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 ("IRA"). In addition to enacting new tax benefits for renewable energy and other energy transition related infrastructure, the IRA establishes new or increased financial assistance from the government in the form of grants, loans and loan guarantees for multiple energy transition industries.
In many instances, the availability of these benefits is conditioned on the beneficiary ensuring that during construction or repair of qualifying projects, laborers are paid prevailing wages in the relevant region (as determined by the Department of Labor) and a minimum amount of apprenticeship labor is used and/or domestic iron, steel and other manufactured equipment or components are used.
The table below is a high-level summary of the most significant direct funding opportunities available to energy transition projects.
| Industry/Technology and Agency | Incentive/Program | Amount Available | Features of Note |
| Energy Infrastructure (USDOE) |
Infrastructure Reinvestment Loan Guarantee Program Financing reinvestment in projects that: (i) retool, repower, repurpose or replace energy infrastructure that has ceased operations; or (ii) enable operating energy infrastructure to avoid, reduce, utilize or sequester air pollutants or anthropogenic emissions of greenhouse gases "Energy infrastructure means a facility, and associated equipment, used for (i) generation or transmission of electric energy or (ii) production, processing and delivery of fossil fuels, fuels derived from petroleum or petrochemical feedstocks." |
US$250 billion in loan guarantee authority |
Includes ability to refinance existing debt Projects may include remediation of environmental damage Fossil fuel electric generation facilities must have controls or technologies to avoid, reduce, utilize or sequester air pollutant or anthropogenic emissions of greenhouse gases Up to 30-year term US$5 billion available for carrying out the program activities, which subject to rules to be enacted, may include cost of loan guarantees (i.e., credit subsidy cost), through September 30, 2026 |
| Innovative Energy Technologies (Greenhouse Gas Reduction/Avoidance) (USDOE) | Title XVII Innovative Technologies Loan Guarantee Program | US$40 billion additional loan guarantee authority |
US$3.6 billion available for payment of cost of loan guarantees (i.e., credit subsidy cost) Loan guarantees not available for projects benefiting from other Federal support (use of tax benefits, Federal lands, Federal insurance program under Atomic Energy Act are not disqualifying Federal support for this purpose) Available through September 30, 2026 |
| Methane (EPA) |
Financial assistance programs for: Reduction of methane and other greenhouse gas emissions from petroleum and natural gas systems Mitigation of legacy air pollution from petroleum and natural gas systems Improving climate resiliency of communities and petroleum and natural gas systems Improving and deploying industrial equipment and processes that reduce methane and other greenhouse gas emissions and waste Supporting innovation in reducing methane and other greenhouse gas emissions and waste from petroleum and natural gas Permanently shutting in and plugging wells on non-Federal lands Mitigating health effects of methane and other gas emissions Supporting environmental restoration |
US$850 million Additional US$700 million for activities at marginal conventional wells |
Includes grants, rebates, contracts, loans and other activities to provide financial and technical assistance Available through September 30, 2028 List of "applicable facilities" includes (i) petroleum and natural gas production, (ii) onshore natural gas processing, transmission compression and pipeline, (iii) natural gas underground storage and (iv) LNG storage, import and export |
| Vehicle and vehicle component manufacturing (USDOE) | Advanced Technology Vehicle Manufacturing Direct Loan Program, supporting manufacturing of electric and other advanced technology vehicles, and components used therein, that reduce greenhouse emissions | No longer subject to financing limit cap (previously US$25 billion) | Additional US$3 billion available for payment of cost of direct loans for reequipping, expanding or establishing manufacturing facilities in the United States to produce or for engineering integration performed in the United States of advanced technology vehicles that emit low or zero exhaust emissions of greenhouse gases |
| Vehicle Manufacturing – hybrid, electric and hydrogen fuel (USDOE) | Grant program – conversion of manufacturing facilities for domestic production of efficient hybrid, plug-in electric hybrid, plug-in electric drive and hydrogen fuel cell electric vehicles | US$2 billion |
Maximum 50 percent Federal share Available through September 30, 2031 |
| Energy Infrastructure – Transmission (USDOE) | New Direct Loan Program – construction or modification of electric transmission facilities | No additional specified loan authority |
US$2 billion to pay costs of direct loans to non-Federal borrowers Facilities must be designated as necessary in the national interest Maximum 80 percent Federal share Loan must have a term less than 90 percent of projected useful life of facility, not to exceed 30 years First priority security interest in financed asset Disbursements under this loan program will be available through September 30, 2031 First priority security interest in financed asset Disbursements under this loan program will be available through September 30, 2031 |
| Industrial and Manufacturing – Non-power (USDOE) | Financial assistance for deployment of advanced industrial technology in energy-intensive industrial processes (including iron, steel, steel mill products, aluminum, cement, concrete, glass, pulp, paper, industrial ceramics and chemicals), designed to accelerate greenhouse gas emissions reduction progress to net-zero at the applicable facility | US$5.812 billion |
Grants, rebates, direct loans and cooperative agreements Competitive award, based, among other criteria, on expected greenhouse gas emission reduction, the magnitude of benefit to people and number of people that will benefit from the project Maximum 50 percent Federal share |
| Alternative Fuels – Aviation (US Department of Commerce) | Grant program, supporting production, transportation, blending or storage of sustainable aviation fuel and developing, demonstration or application of low-emission aviation technologies |
US$244.53 million for projects relating to the production, transportation or storage of sustainable aviation fuel US$46.53 million for projects relating to low-emission aviation technologies
|
Competitive award, considering, among other criteria, capacity to increase production and deployment of sustainable aviation fuel or low emission technologies, project's projected greenhouse gas emissions and jobs projected to be created Maximum 75 percent Federal share, increasing to up to 90 percent if eligible entity is a small hub airport or non-hub airport Sustainable aviation fuel defined to be liquid fuel meeting multiple statutory criteria, including at least a 50 percent reduction of the aggregate attributional core lifecycle values Eligible recipients include air carriers, airport sponsors, R&D entities and entities engaged in the production, transportation, blending or storage of sustainable aviation fuel in the United States Available through September 30, 2026 |
| Transportation Infrastructure – Ports (EPA) | Financial assistance program for the acquisition of zero-emission port equipment or technology for use at, or to directly serve, one or more ports | US$2.25 billion |
Grants and rebates Competitive award Available through September 30, 2027 |
| Energy Projects Development (USDOE) | Tribal Loan Guarantee Program, supporting projects involving federally recognized tribes or tribal energy development organizations | Increases loan guarantee authority to US$20 million from US$2 million | |
| Renewable Energy; zero-emission; carbon capture (USDA) | Financial assistance for long-term resiliency, reliability and affordability of rural electric systems for zero-emissions systems, or carbon capture and storage systems, including making energy efficiency improvements to electric generation and transmission | US$9.7 billion |
Limited to rural electric cooperatives Must achieve the greatest reduction in greenhouse gas emissions associated with the applicable rural electric systems Available through September 30, 2031 No entity may receive more than 10 percent of appropriated funds Maximum 25 percent Federal share |
This list is not all-inclusive. Many other opportunities have been created or improved, particularly in the form of grants that are available to states and other municipalities to undertake projects by their own or to in turn provide financial assistance to other stakeholders with the purpose of introducing zero emission and greenhouse gas reduction technologies, in many cases to benefit low-income and disadvantaged communities or otherwise underserved communities, or to improve the siting process of transmission projects.
In addition to the new or increased loan or loan guarantee authority under several programs highlighted above, the IRA also provides funding to cover the cost of loan or loan guarantees (in some cases, including the credit subsidy cost, see for example, the Title XVII Loan Guarantee, ATVM and Energy Infrastructure Reinvestment Financing programs mentioned above). Availability of these funds will reduce the cost to the borrowers of using those programs, making it more attractive to use these funding opportunities.
Agencies will need to enact rules for implementing new programs or issue funding availability notices or solicitations before the financial assistance authority becomes available. However, increased loan and loan guarantee authority will likely become immediately available under existing programs such as USDA's rural loan guarantee programs and USDOE's Title XVII Loan Guarantee Program and ATVM Loan Program. Independent of the IRA additional authority, we note that USDOE recently solicited feedback on how to improve its Title XVII Loan Guarantee Program, signaling it is already in the process of updating its loan programs' rules to further facilitate the use of its guarantee and lending authority.
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