US power demand is set to boom. How will we meet it?
Feb 1, 2024
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Increased power demand in the US due to green industrial policies, AI computing, and electric machines. Challenges of meeting demand and the need for new infrastructure. Changes in tax finance and transferable tax credits for clean energy. Controversy over hydrogen tax credits. Shift happening in the clean energy market. Importance of investing in local news. The Biden administration's response to US natural gas exports. National security argument and emissions impact of US gas supply.
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Quick takeaways
The surge in electricity demand from President Biden's green industrial policies calls for urgent investment in new infrastructure to prevent reliance on polluting fuel sources.
The inflation reduction act's provision for transferable tax credits has opened up new financing opportunities for clean energy projects, potentially reaching $50 billion by the end of the decade.
The Treasury Department's recent guidance on the 45V tax credit for hydrogen production introduces stringent requirements to ensure low emissions, while concerns arise about the potential impact on project feasibility.
Deep dives
Increased electricity demand and the need for new infrastructure
The podcast episode discusses how President Biden's green industrial policies are leading to a significant increase in electricity demand, especially due to the growth of data centers, AI, and manufacturing facilities. This surge in demand has raised concerns about the current capacity of the power grid and the need for new infrastructure. The forecast for the next five years shows a doubling of electricity demand, requiring substantial investments in transmission and distribution systems. Without adequate infrastructure development, there is a risk of reliance on more polluting fuel sources to meet the increased demand.
Transferable tax credits opening up new opportunities in clean energy
The episode highlights the impact of the inflation reduction act, which allows tax credits to be transferable. This change in the tax code has opened up new opportunities for clean energy financing by enabling project owners to sell tax credits for cash. This shift in tax financing could lead to a significant increase in the value of tax financing of clean energy projects, potentially reaching $50 billion by the end of the decade. The market is evolving, with a wider range of deal types and sizes being observed, and the potential for hybrid deals that combine traditional tax equity with transferable tax credits.
Guidance on hydrogen tax credits and the challenges it poses
The podcast delves into the recent guidance provided by the Treasury Department on the 45V tax credit for hydrogen production. The guidance introduces stringent requirements, such as additionality, deliverability, and hourly matching, to ensure qualifying projects have low emissions. While this is seen as a positive step for promoting clean hydrogen production and preventing the use of fossil gas, there are concerns about the potential impact on project feasibility. The market is divided, with some supporting the strict rules to incentivize clean hydrogen, while others worry it could hinder development and limit the use of existing renewable resources.
The challenges and potential of EVs in cold weather
The episode highlights the challenges and potential solutions for electric vehicles (EVs) in cold weather. Cold temperatures can lead to reduced driving range and the need for more frequent charging. The discussion emphasizes the importance of preheating the EV, charging it before battery levels are too low, and considering factors like battery drain during winter conditions. Despite the challenges, the episode also highlights the evolving infrastructure with the expansion of charging networks and the development of EV-friendly practices to better cope with cold weather conditions for EV owners.
Pausing LNG export facilities for evaluation
The podcast addresses the Biden administration's decision to pause the approval process for new liquefied natural gas (LNG) export facilities. This pause aims to assess the impact of these facilities on both pricing and the climate. Concerns have arisen about the environmental implications of exporting liquid-fired natural gas, potentially exporting emissions to other countries. Environmentalists called for a review, citing studies suggesting that the emissions impact of LNG facilities could be substantial. The decision represents the first time the Department of Energy has implemented such a pause, indicating increasing scrutiny on the environmental impact of LNG exports.
As President Biden’s green industrial policies reignite the US manufacturing base, AI computing workloads soar, and machines across the economy turn electric, the power grid is facing an historic increase in demand.
After almost two decades of flat electricity consumption, suddenly America’s grid planners are doubling their forecasts for demand – raising the urgency for new infrastructure.
This week, we’ll ask: what’s needed, and what happens if we can’t build it?
Then, some major changes in the world of tax finance. We’ll look at how transferable tax credits are opening up new kinds of deals for clean energy – and take a deeper dive into the long-awaited and controversial details of hydrogen tax credits.
Katherine Hamilton of 38 North and Shalini Ramanathan of Quinbrook Infrastructure Partners join us this week to sift through these trends.
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