One Year In: Analyzing the Inflation Reduction Act through the Lens of Affordability and Equity

August 16, 2023 marks the one-year anniversary of the passage of the Inflation Reduction Act. For perspective on how this milestone legislation is impacting energy affordability and equity issues, we caught up with Jamie Wimberly, senior vice president, Utility Customer Strategy at E Source, and his colleague at the company, Ben Nathan, director, Affordability and Equity.

Q: One year into the Inflation Reduction Act (IRA), can you reflect on the significance of the legislation's passage? At a macro-level, what does its passage mean for energy affordability and equity in the greater (clean) energy discussion?

JW: Affordability and equity (A&E) are core to our mission at E Source, so we take this very seriously. We are already working with hundreds of utilities and other stakeholders through our Low Income Energy Issues Forum (LIEIF) and the Equity in the Clean Energy Economy (ECEE) Collaborative. But we are excited to be launching a much bigger A&E practice area bringing together all of our business units and expertise at our annual Forum in September. For example, we will be leveraging our data science expertise to more accurately pinpoint cohorts of customers to better educate, engage and enroll them into assistance and clean energy programs. I believe this alone could be a game changer. The IRA has sped up our planning and elevated the importance of the work.

Q: What is E Source doing to promote affordability and equity, and how has the IRA impacted these efforts?

BN: With this expansive, unprecedented, and often unclear opportunity, it’s challenging to know what “success” looks like. But we as an industry need to start measuring the success/performance of our efforts with equity in mind, like how our programs and investments result in targeted reductions in energy burden and arrearages, local pollution and emissions, positive health outcomes and local economic development, and other energy and non-energy benefits. If we start to measure, track, and see improvements in those metrics in the work we do, then that will look like real progress and success.

We need to think of this as not only an investment in cleaner communities but healthier ones. In other words, we could look at investments in efficient street lighting as investing in safe playgrounds, electric transportation as a means to solve for food insecurity into these communities or provide a way to get to good jobs, weatherization as a way to cut down on asthma, and so on.

As far as what “success would look like”: Success would entail us coming together as a nation to not only focus on clean energy but to move our economy into the future for the benefit of everyone. I would add that we need to think of this as broader than just energy or the climate. Folks in disadvantaged communities support cleaner energy and want to take action on protecting the environment, but they have so many pressing needs around security, education, health, and so on. 

 But will it be balanced and equitable?  I have my doubts the way things are going. Unfortunately, the IRA has also become a lightning rod of politics. So there is a political backlash brewing focused on any equity components of the legislation regardless of the merits. 

JW:  The IRA is intended to jumpstart the clean energy economy, meaning the public investment dollars in the grid, new technologies, etc. will be multiplied by the private sector over time. I believe – and strongly desire – that will be the case. We absolutely need to be proactive about managing climate change. 

 Q: What progress do you see happening in year two (and beyond) of the IRA? What will success on the A&E fronts look like?

BN: I agree with Jamie, which is why we encourage utilities to establish plans, goals/metrics, stakeholder engagement/empowerment groups, internal organizational structures, and evaluation frameworks with equity at the forefront, to make sure we deploy or leverage IRA funding in an equitable way.

In the past, this was not done and had extremely adverse impacts on the community which they are still struggling to overcome. Think of highways dividing communities of color as an example. We need to take the time to get this right.

My fear is that we are rushing to get the money out the door and will not adequately address each component in the implementation. For example, with procedural equity, it is critical to have the full participation of the community in the planning and prioritization process for any investments or programs made in that community. 

JW:  There are many important components of equity:  recognition, procedural, distributive, and restorative. Without going into the details of each here, suffice it to say that each component needs to be included in a sustainable energy strategy to address the needs of disadvantaged communities. 

Q: What roadblocks are impeding more progress from being made despite the best intentions of the IRA? How can we move past them?

JW: We are starting to see the regulations come out with revenue targets connected to the initiative. For example, the EPA just outlined $27B which will flow through green banks to fund clean energy projects in disadvantaged communities. That’s a start, but there is a long way to go to meet the 40 percent target.

 Q: What progress has been made over the last year on the A&E fronts that emanate from the IRA? Be specific.

BN: The IRA includes provisions for investing over $60 billion in clean energy, climate, and electrification measures that support disadvantaged communities (as defined in the legislation). Of this, the IRA provides at least $57 billion to enable electrification in disadvantaged communities, which has the potential to spur the creation of hundreds of thousands of good-paying jobs and deliver economic and health benefits in these communities.

JW:  The most important component is the Justice40 initiative. This is an executive order signed by President Biden to deliver 40 percent of the overall benefits of federal climate, clean energy, affordable and sustainable housing, clean water, and other investments to disadvantaged communities that are marginalized and overburdened by pollution. This is the right thing to do.

Q: What provisions in the IRA are most noteworthy from an A&E perspective, and why?

BN: I’d only add that we don’t want the IRA to be another chapter in the decades-long repeating cycle of government spending that typically benefits privileged communities at the expense of everyone else. If we don’t prioritize underserved and disadvantaged communities in the deployment of this historic funding, we risk repeating the mistakes of the past, which only widens the gap between the haves and have-nots.

I am hoping that the IRA could result in both cleaner and cheaper energy over time. But I am also concerned it could result in cost-shifting and increasing the energy burden on income-qualified customers. For example, the first nuclear reactor at Plant Vogtle just came on line in Georgia. While I support the idea that nuclear energy is an important part of any clean energy portfolio, the cost of this one plant is going to significantly increase the bills of struggling consumers over decades. It also personally irks me to subsidize EVs and residential solar for wealthier Americans potentially at the cost of the poor.

JW:  Passage of the IRA is extremely important not only to expedite the energy transition to mitigate climate change but also to bolster the economy as a whole. As a resident of Georgia, I see billions of dollars have been invested already in EVs and charging infrastructure, which will result in many good paying jobs, especially in rural areas of the state. But in terms of the impact on affordability and equity, it remains to be seen. 

 E Source will be exhibiting at the 2023 T&D World Live Conference and Exhbition in Sacramento on Sept. 12-14, Booth 412.