Joshua Rogol: Insights into the IRA’s impact on Clean Energy Development
April 7, 2024
The Inflation Reduction Act (IRA) represents the single largest climate-related investment by the U.S. government to date, allocating $369 billion (USD) for energy and climate initiatives to help transition the U.S. economy toward more sustainable energy resources. The signing of this act has dramatically changed the industry of clean energy in many ways. I recently had the privilege of speaking with Mr. Joshua Rogol about his involvement in a 2024 UNC Cleantech Summit panel discussion titled “The Effects of the IRA on Clean Energy Development.” He has worked at Strata Clean Energy for 6 years, where he has been the President for the last year.
We went through a list of questions revolving around the different aspects of the IRA where Mr. Rogol discussed his perspective on how this act changes things for his company.
Joshua Rogol: The Interview
Interviewer: “Has the IRA been enough to offset some of the headwinds against clean energy development- mainly higher interest rates and inflation?”
Josh: “The IRA is a transformative policy that will provide long-term certainty to the renewable energy industry. Having a 10-year runway will be impactful for developers making investments into scaling the deployment of clean energy and supporting the energy transition. While the IRA provides the foundation that will serve as a strong tailwind for the deployment of clean energy, there is still work that needs to be done. For example, further clarification is needed regarding some rules and regulations for successfully achieving certain benefits from the policy. In general, it is very helpful to have a 30, 40, or 50 percent investment tax credit, and that will open major pockets of demand At the same time, there are real costs to projects being driven by inflationary pressures for labor and materials in addition to the cost of financing in an environment of high interest rates. The IRA has unlocked new areas of demand as you look at the demand curve for products and services and new potential offerings to the market, including, for example, green hydrogen.”
Interviewer: “Is the political risk influencing investment decisions at clean energy development companies like Strata?”
Josh: “My personal view is that a wholesale repeal of the IRA is unlikely. Domestic energy supply and the creation of stable, well-paying jobs, particularly in communities that the energy transition has most impacted, generally have the support of the right and the left. Many local and state-level investments from the IRA are in red communities. There could be pressure around some areas of the IRA, and if you do have a house, senate and president that are all in the same party that is anti-IRA, there are risks associated with significant changes. However, there are key constituents from that base that are supportive of some portions of the IRA as well. Jobs, deployment of green hydrogen, carbon capture, etc., have the support of traditional oil and gas companies. Nothing is riskless, but my personal view is that there is durability in the IRA beyond this current Biden administration and term.”
Interviewer: “Are there particular areas within clean energy development that the company sees as particularly promising for growth?”
Josh: ”We see continued strength and demand for the traditional utility-scale solar, solar plus storage, and battery energy storage projects. That’s the core business of what Strata does. What’s cool is we’re seeing many cases where battery storage is beating out gas peakers and providing real capacity and grid resource reliability at costs that are less than gas. We also are seeing the emergence of new opportunities around what we call “P2X.” which is a huge opportunity around leveraging green hydrogen to go into various segments like green ammonia, sustainable aviation fuel, etc; different end products powered by renewable energy in input to hydrogen generation that then goes into other end products. We’re now spending time thinking about how we can leverage our core capabilities as a vertically integrated solar and storage developer to diversify into this new opportunity, which probably accelerated 10 years as a function of the IRA.”
Interviewer: “How does Strata Energy anticipate the IRA influencing regulatory frameworks relevant to the clean energy sector? Are there infrastructure challenges that the company anticipates addressing to optimize the impact of the IRA?”
Josh: “You have a base case tax credit as part of the IRA. And then there are various adders or bonus incentives for things like using domestically produced inputs or sitting in a community that formerly had a coal plant. The IRA incentivizes developers to cite projects in locations that qualify for a bonus credit based on unemployment rates related to traditional energy jobs that may no longer exist as part of the energy transition and decarbonization of the grid. Projects are being cited in those locations focusing on localized economic and employment development. Similarly, as the rules become clear around using products that do have manufacturing here in the US, you’re also eligible for another 10% adder. We’re working hard with both the regulators and other ecosystem partners in the supply chain to be ready for that and put ourselves in the position to qualify as best we can and make decisions in equipment that has a sort of a higher likelihood of qualifying under the eventual rules. And then more broadly, across almost every utility in the US, there’s reform in the way that a generator can interconnect. The rules are changing across almost every market so working with the utilities and with the ISOs and RTOs to understand what’s coming down the pipe, help them evaluate our concerns and be part of the stakeholder process, and advances our projects in a way that brings the highest likelihood of a positive outcome as those new rules and regulations are evolving.”
Takeaways
In conclusion, my conversation with Mr. Rogol highlights both the opportunities as well as challenges associated with the IRA’s impact on clean energy development. While the IRA has provided the necessary support, ongoing regulatory uncertainties, and infrastructure obstacles require proactive engagement and adaptation from industry stakeholders like Strata Energy. Overall, the IRA plays a critical role in molding the trajectory of clean energy development, steering innovation, and enabling sustainable growth in the sector.
This article was written by Paul Hollis, a UNC Cleantech Corner Initiative intern.