America is facing an uncomfortable question: Do we know how to build anymore?
House Republicans just passed a reconciliation bill that would repeal much of the Inflation Reduction Act while adding up to $5 trillion to the national debt. The legislation doesn’t just gut clean energy incentives — it hinders the most realistic path to meeting exploding electricity demand.
After leveraging hundreds of billions in clean energy investments, 80% flowing to Republican districts, every GOP House member who promised to protect these programs voted to eliminate them anyway.
“Who wants this?” asked Costa Samaras, former White House energy advisor and current director of Carnegie Mellon’s Scott Institute for Energy Innovation. “Who wants to have more expensive energy and less manufacturing in the United States?”
This week, Samaras joins Open Circuit to talk about the potential impact of the legislation, lessons learned from the IRA, and whether the abundance framework offers a viable alternative for scaling the clean energy economy.
As the country faces 150 gigawatts of new electricity demand by 2030, the reconciliation bill would make deploying and manufacturing a wide range of clean resources more expensive — likely forcing investment overseas.
This sets up a direct collision with the “abundance agenda,” which argues that America has become too good at stopping things and not good enough at building them. The abundance solution: make it easier to build infrastructure, accept some messiness in exchange for progress, and focus relentlessly on outputs rather than process.
But can abundance thinking survive an era of deep political instability? We explore what an “IRA 2.0” might look like — one that pays for performance, builds government capacity, and creates durable coalitions for getting big things done.
Credits: Co-hosted by Stephen Lacey, Jigar Shah, and Katherine Hamilton. Produced and edited by Stephen Lacey. Original music and engineering by Sean Marquand.
Get tickets for Transition-AI: Boston to see Open Circuit live, with Google’s Caroline Golin.
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Transcript
Stephen Lacey: Costa, you’re killing it on Bluesky these days.
Costa Samaras: Me and my 12 friends who use that website.
Katherine Hamilton: I’m one of them.
Costa Samaras: Oh, my gosh.
Stephen Lacey: You talk like the kids.
Costa Samaras: I’m an embodiment of the Steve Buscemi meme of the guy holding the skateboard saying like, “How do you do, fellow kids?” My actual children make fun of me all day long.
Jigar Shah: You’re so sus.
Costa Samaras: I probably am.
Stephen Lacey: From Latitude Media, this is Open Circuit. This week, a collision of two competing visions for America. House Republicans just passed a sprawling tax and spending bill that would dismantle the Inflation Reduction Act, potentially wiping out hundreds of billions of dollars in local investments in their own districts while creating, what some are calling, a debt bomb. We’ll look at the path ahead for the bill and what kind of investment framework it creates for the next four years.
Then we’ll use the moment to ask a bigger question. Does America know how to finish what it starts? We’ll look at lessons from the IRA and examine whether the abundance agenda, a new framework for strengthening America’s muscles for building, can gain traction in an era of deep political instability. I’m Stephen Lacey, I’m the executive editor at Latitude Media. Welcome. Katherine Hamilton is the co-founder and chair of the public policy firm 38 North Solutions. Hey, Katherine.
Katherine Hamilton: Hello. Glad to be here.
Stephen Lacey: Just a chill week in Washington for you?
Katherine Hamilton: Oh, geez. Well, I’m actually living in the Shenandoahs right now and just commuting when I need to. And this morning a metaphor of my life occurred, which is we found a nest of dead mice and the printer broke. And it’s like, that’s kind of where we are right now.
Stephen Lacey: Indeed. Jigar Shah is a clean energy investor. He’s the former director of the DOE’s Loan Programs Office. And you are home.
Jigar Shah: I am. For the first time in a few weeks. Thank goodness.
Stephen Lacey: So, today we’re going to cover both the practical and the aspirational. We’re watching an extraordinary policy reversal in real time right now. After the IRA leveraged hundreds of billions of dollars in new manufacturing and energy infrastructure investments around the country, the bulk in Republican-led states, the House passed a massive tax and spending bill last week that would virtually ensure that investment slows radically. And the depth of the repeal stunned a lot of people. In the lead up to the bill, 21 Republicans signed a letter warning against gutting the IRA’s clean energy incentives, worrying about job losses in their districts. But when the actual vote came last week, every single one of them voted to gut those credits anyway.
So, to kick off the show we’re going to walk through all the changes and what the pathways for this so-called Big Beautiful Bill look like. And then we’re going to step back and look at the possible impacts. What signals are Republicans sending about where to invest. With the so-called backdoor repeal on the table it’s a good time to reflect on what did and didn’t work in executing the IRA. And to do that we’re going to draw on another set of policy ideas around abundance. This framework that’s gained traction on the left for remaking government toward building infrastructure faster and bolder.
So, we’re watching two largely incompatible visions for America smack into each other in real time. Which one is going to win? And there’s no better person to tackle that with than Costa Samaras. Costa is the director of the Carnegie Mellon University Scott Institute for Energy Innovation. He served as a chief advisor for the clean energy transition in the Biden White House, and he is a civil and environmental engineer who’s worked on several multi-billion dollar infrastructure projects. Costa, so good to have you here.
Costa Samaras: I’ve been a huge fan of this show for my entire life, and great to be on with these three luminaries.
Stephen Lacey: So, you focused on a lot of different things at the White House, from tech innovation to national security. How would you summarize your focus there in the administration?
Costa Samaras: So, I was in the White House Office of Science and Technology Policy. Where we thought about science, technology, and innovation, and really how do we get those systems in place to help the United States achieve its biggest ambitions. And so, what does that mean for climate and clean energy? It was a focus on the future. How do we set up game-changing technologies and innovation systems to get us to zero emissions faster, to make energy cheaper, to make our infrastructure systems more resilient.
And so, we designed systems and investments to make sure that we had the type of technologies that we’re going to need from the 2030s to the 2050s. Things like advanced transmission, net-zero radiation fuels, advanced nuclear, even working into fusion. And the other thing that we did was I led part of the executive order on artificial intelligence that dealt with energy and climate. And to make sure that we had the types of investments in artificial intelligence that helped our energy system and helped our climate rather than made it worse.
And then finally, my team led the part of the invest.gov website that mapped all the new clean energy investments that were happening all over the country. And it really was an exciting moment every month when we saw all these new technologies pop into the system and say this is reducing energy cost and making the air cleaner for people all over the country.
Stephen Lacey: What do we know about whether that capacity still exists in the White House right now?
Costa Samaras: There’s an old saying in Washington that I think is very true. “Personnel are policy.” You can decipher the policy priorities of administration by the types of topics that people are working on. Both in the White House and in the agencies. And for the Biden-Harris administration climate and clean energy was a big focus. And I was very grateful to be a part of it.
Jigar Shah: I think you can safely say that the companies that are trying to reach out to that special purpose person in the White House for the Department of Energy is still looking.
A deep dive into the “Big Beautiful Bill”
Stephen Lacey: All right. So, that sets us up for the reconciliation bill. Let’s start with what is happening right now. Katherine, set the scene for us. What did the House pass last week and how much of a departure is it from the scalpel approach to the IRA that leaders originally claimed they would take?
Katherine Hamilton: Yeah, if you consider a scalpel a death by a thousand cuts, maybe. So, I’m going to divide this into two pieces. One being the policy itself and the other being the politics. Because I think you can think of them separately. So, reconciliation for those who don’t quite understand, reconciliation sounds like everybody’s getting together and getting along with each other. That is not what it is. It is a budgetary process by which you can pass a bill with only 50 votes in the Senate. So, you don’t need the 60 filibuster-proof margin. So, this is how the Inflation Reduction Act was passed to begin with, it was through reconciliation.
And they’ve done this many, many times in many different administrations and different Congresses where you pass something that only requires 50% of the vote in the Senate. You need 51 votes. And it could be fifty-fifty and then the vice president weighs in and breaks the tie. But whatever it is, it has to be 51 votes. So, this is why they’re using this process because they know, the Republicans in Congress know, that they will not get any Democratic votes. So, just to let you know, the Democrats are completely out of the picture. They’re only screaming the silent scream. They can’t do anything else right now. It’s just the Republicans that are driving this.
And a bill passed, the One Big Beautiful Bill Act, passed in the House last week. And it had one goal. And the one goal was to give President Trump his permanent… The Tax Cuts and Jobs Act of 2017, that expires this year, was to make it permanent. What this bill does not do, to be clear, is it does not lower the deficit. The Congressional Budget Office says it’ll add probably 3.8 trillion to the debt over 10 years. The Committee for a Responsible Federal Budget says it’s going to be closer to like 5.1 trillion increase of the debt. So, it does not lower the deficit.
It does not increase jobs and manufacturing. In fact, because of the policies, SIA is saying there will be 300,000 jobs lost, 300 factories shut, 86,000 jobs from those factories. It does not increase affordability. So, because it guts energy efficiency programs, it guts all of the programs that are meant to drive down the cost, including the tax credits, the cost for normal residents and people, it does not make it more affordable. It does not increase resilience or reliability. It does not increase abundance or dominance. Whichever word, depending on how masculine you’re feeling that day. It doesn’t increase that at all because it doesn’t allow those projects to go forward. And of course, all of this, it does not increase our international competitiveness. In fact, it cedes that.
So, just a few things that are in it that I think are really important for folks to know. It does repeal key incentives of the tax code. So, it repeals all vehicle and vehicle charging credits, except for companies that have sold under 200,000 vehicles, it keeps it going for a little bit longer. It completely guts and stops after this year the residential solar tax credit, all of the home tax credits, heat pumps, all of those. And clean hydrogen credit sunsets after this year. And then on renewables, the technology neutral credit, it requires two things. One thing it requires is that projects have to be started within 60 days after the bill passage. 60 days. And then they also have to be placed in service before 2028, December 2028.
And if you think about having to develop and build any kind of project, this is solar, wind, storage, geothermal, hydropower, nuclear got a tiny piece of a cut out, but this is any clean energy technology, you then have to also have your interconnection lined up in order to be placed in service. It also cuts back on transferability, which has been really a crucial tool that allows companies that don’t have tax equity, or can’t afford to use that mechanism, to be able to use transferability. It really helps new entrants to the market and smaller entrants to the market. So, that was also mismatched with the phase out.
It also creates this whole new foreign entity of concern piece that prevents Chinese money, equipment, partnerships, components, all of these, to be ineligible in any piece of it for any part of the credits. And the drafting is confusing, unworkable, but also if you think about something that is this complex trying to be put through guidance. So, Treasury has to write guidance for then the IRS to implement in any tax credit. It will take years for Treasury to write guidance and try to suss this out. So, on the whole, this is really, really bad for clean energy. It also goes after programs. So, it rescinds any funding that hasn’t been spent from all of the Inflation Reduction Act programs that created clean energy programs. So, there’s Loan Programs Office, any of the manufacturing programs, also EPA’s Greenhouse Gas Reduction Fund, anything that’s unobligated. Now, most of that we think is obligated. But that is essentially what the policy does.
And now quickly to the politics. Why did this pass? How did this pass? It passed because remember there was the one goal, and that was to extend and make permanent the Trump tax bill. And so, there were many, many letters that members of Congress wrote. In fact, 14 House members last week said, “We will not vote for this bill unless there’s substantive improvements to the Inflation Reduction Act provisions.” All of them voted for this bill. Every single one of them except for one who slept through it. That was their excuse. Otherwise, the only people who didn’t vote for the bill were people who were fiscal conservatives. So, that’s how the House ended up… The House basically said, we care about these things but not enough.
And remember, there’s a lot of other stuff in the bill. There’s gun silencers, and Medicaid… All kinds of other things that you could hate in the bill. But the Inflation Reduction Act provisions, all of these members that stepped up repeatedly writing letters saying they needed these provisions in, they gave up and they said, “Fine, we will vote for this in the hope that the Senate will fix it.” Which to me tells me they’re not really doing their jobs representing their constituents.
But now, quickly we turn to the Senate because the Senate right now we’re on recess. But the Senate then has to take up the bill. And there have been a few senators that have said, “Oh, we really hate the House Bill.” Now, for the Senate, that is what you’re supposed to say about any House Bill is that we hate the House Bill. But there are about eight senators that have said, “We don’t agree with, for a number of reasons, any of these provisions.” Senator Murkowski has been one of the loudest and one of the consistent voices. She’s an all of the above person. I mean, Alaska is complicated. The renewables and oil and gas industry are very, very tied together.
Thom Tillis from North Carolina, he has 34 projects in his state, $20 billion of investments, and 17,000 jobs. And these are in EV batteries, chargers, transformers, all kinds of things are happening in North Carolina. He says, “We can’t have this stay the way it is.” Senator Collins from Maine has spoken out. Senator Moran from Kansas. Cramer and Hoeven from North Dakota. Remember North Dakota is full of wind. Capito from West Virginia, who’s the chair of Environmental Public Works. She doesn’t like other people to take her job from her. So, I can understand why she wouldn’t want to push back. Husted from Ohio, who has 35 clean energy jobs. And then there are other ones like Josh Hawley who is screaming about Medicaid cuts. He’s from Missouri. And Ron Johnson from Wisconsin who would like more cuts. Rand Paul would like more cuts.
So, there’s some that are not agreeing with all of this. What will happen in the Senate? They will not take the House Bill. Speaker Johnson has said, “Please, please, please don’t make many changes. It took me a long time to get everybody to approve this.” And the Senate’s like, “Yeah, we’re going to do what we need to do.” So, what will happen is right now they’re drafting the bill. Whatever is drafted and presented, I think it is going to be pretty close to what they pass. I don’t think that majority leader Thune is going to put a bill out on the floor that he doesn’t think he can win. So, he may allow a couple of people to vote against it. They can only lose three to four votes. So, they don’t have that much of a margin either, just like they didn’t have… They only won in the House by a vote.
But the key point here is that right now everybody has to be getting to senators to say, let’s make sure that the bill that you write, the bill that you draft, is way better than the House Bill. Okay, let’s shorten the credits by a little bit, but don’t make them unworkable. Don’t cut all of these industries off at the knees, not just solar and wind. I mean, they hate wind more than they hate anything in the world. But don’t make everybody else lose out too. So, that’s where we are right now.
Stephen Lacey: I think you missed a few details. Can you just do that whole thing over again? Jigar, I thought we were in an affordability crisis and an energy emergency, what is this telling us about America’s priorities right now?
Jigar Shah: I mean, one of the things I think is really important to focus on is that 10 million people under this bill would lose Medicaid. And it has a huge impact on SNAP benefits, which are food stamps. And so, my sense is, as Katherine I think suggested, that the 21 House Republicans that signed that letter, who said they were going to stand their ground and make sure that this stuff didn’t happen, basically just punted to the Senate. Because they were like, well, this is a little too hard for us and so we’re going to let the Senate deal with it. My sources in the Senate have told me that the bill was so terrible that it’s completely unworkable, that they actually just have to start over. And they hadn’t done any work since January. So, it’s not like they have language that they’ve been crafting in parallel. So, I just feel for all the staffers who are going to be pulling all-nighters every single day between now and July 4th just to write all of this new text.
I think it’s important to recognize why this matters. Because I think for a lot of people this feels very cultural war type thing. But when you think about the fact that AI load growth, and EVs, and heat pumps, et cetera, are going to add 150 gigawatts of new capacity that we need to add to the grid by 2030. And the American Gas Association has said that even if every single thing goes right for them, they don’t see a way to get more than 50 gigawatts of new natural gas online by 2030. And there’s no way that new nuclear, or new geothermal, or updated hydro or whatever is going to be a material amount of additional megawatts by 2030.
All of it comes from solar and battery storage, not even wind. Wind is going to be a little bit but not much. And so, this is really not about hurting solar. This is about making sure that it’s more expensive. Because we’re going to have to build it either way. There’s actually no way to accommodate EV load growth, or heat pump load growth, or AI, or whatever, without building it. Right? I mean, 81% of everything we added to the grid last year was solar and batteries. It’s the only thing we know how to do. It’s 70% of what’s in the interconnection cues, et cetera. So, I just think it’s important for everyone to recognize that this is not hurting solar and battery storage, it’s hurting affordability. Right? What’ll happen is we’ll build it anyway, it’ll just be way more expensive. Otherwise, you move all the AI data centers to Saudi Arabia, which maybe was the plan all along.
Stephen Lacey: Costa, what’s your reaction? Do you consider this a backdoor repeal of the IRA?
Costa Samaras: Well, my professional policy analysis of this bill is, it stinks. I mean, what Katherine just went through was all of the things that make clean energy cheaper, that make the air we breathe cleaner, that make the jobs we have better, and that invest in the future of the United States of America. And I look at this bill and I’m like, the one that they passed, “Who wants this?” Who wants to have more expensive energy and less manufacturing in the United States of these advanced industries.
Our nuclear industry, our carbon management industry, our hydrogen industry, our electric vehicle manufacturing industry, our battery industry, our solar industry, all of the things that are good for our energy security, our costs, our jobs, are being traded away in this reconciliation bill. And I really looked at it, I was like, “For what? What do we get?” And I don’t think the answer is much. And I think that when people really start to think about what the vision of the future is in the United States of America, we will regret having traded away all these opportunities, really for nothing.
Jigar Shah: Well, and the thing that I think… We talked a little bit about the deployment of electricity generation, but the other piece of this is what happened when people were asleep at the switch, mostly during the Obama administration, but also the first Trump administration, is that all of those technologies that we let fail during that period of time made its way to China. Right? That’s how you got CATL and BYD and all these other companies. It’s not because they invented new stuff in China, they got those technologies. And remember A123 batteries, when they went bankrupt, that CFIUS case was approved by the first Trump administration to transfer that technology to China. Right?
And so, that’s what will happen again. Right? If we can’t commercialize technology here in the United States, these companies will try maybe to go to the UK, or the EU, or Canada, or Australia, or other places to commercialize. But if they can’t find a home there, they will go bankrupt. And those technologies more often than not end up in Chinese hands. Right? And so, then they will have another generation of technology that they’ll be scaling up there and that we’ll be importing into our country.
Katherine Hamilton: And the people who have the power to change this have a job to do, and they’re not doing their job. I mentioned this before, but my neighbor, I was thinking about him because of Memorial Day and he’s a vet, of course he didn’t pass away in a war, but the military takes exactly the same oath as members of Congress. And he said, “When I was in Iraq and I had to cross the wire hundreds of times, there was never a point where I said I will obey my oath except I’m too scared to today.”
And members of Congress are right now behaving like they are scared. They’re scared of the president. And I’m hopeful that the Senate will be different and they’ll say, okay, let’s get you what you want. We will get you abundance, we will get you energy, resilience and reliability, and international competitiveness. But that doesn’t mean cutting us off at the knees to do so. And you have to have courage and you have to actually live by what you promised when you took the oath of office.
Costa Samaras: I think it’s just every future increase in the price of gasoline, in the price of electricity, in the price of energy, can be traced back to the passing of this bill if it were to become law. Right? It’s just a huge political liability for folks who are voting for this in the future, if the Senate bill were to pass the same as the House. It’s just, why did you make my electricity more expensive? Why did you make my EV tax credit go away and now a car that I wanted to buy is out of my affordability range? Because other people aren’t buying EVs, the gasoline demand is higher, and so my gasoline prices are higher.
So, there’s a way that all of these provisions, and seriously the things that Katherine went through really are the tip of the iceberg for the little thumbtacks on the road to a clean energy future. It’s like the transferability provision gets pulled away, the different foreign entities of concern pieces that are being lobbed into here, they’re just larding up the process to try to deploy clean energy. Those things make, if they don’t fully repeal it, they make deploying clean energy here in the United States much, much harder. And really what that does at the end is just raise everybody’s bills.
Stephen Lacey: I’m not convinced there will be accountability though. I mean, it feels like the political structures are in place, the tribalism is so deep that people’s perception of the economy is shaped by which party they belong to. And so, I’m not convinced that people will actually hold these lawmakers accountable.
Katherine Hamilton: It won’t take many. It would not take much to flip the House. Remember in Waxman-Markey, there were people who took a really hard vote to try to cut emissions, and some of them decided they would vote even knowing, Rick Boucher, southwestern Virginia, knew he’d lose his seat. And he voted anyway. I mean, that’s courage.
Costa Samaras: We tend to focus on the energy and the climate aspects here, but Jigar, you mentioned it from the outset, is the bill cuts Medicaid, the bill cuts food assistance. It really meaningfully degrades the health and viability of some breathing room in the United States of America. And I think that is going to be the most immediate impact and effect of folks that are looking at what this does is just removes any opportunity for folks that are struggling to get ahead. And that to me, I’m a simple country engineer, that seems like a giant political liability to me.
Jigar Shah: Well, and I think you’re in a place right now where we’re entering into a period of fragility. Right? I think when you look at what happened with MISO South and Entergy’s territory this last week where they had rolling blackouts because I think a nuclear plant tripped off. Those are things that could have easily been made more resilient by the deploying of a lot more batteries and solar. Which solar, wind, and battery storage don’t really exist in MISO South and Louisiana. Right?
Katherine Hamilton: Oh, and aggregation is illegal.
Jigar Shah: Oh, exactly. Right? And so, I think one of the things that I think you’re going to see is that the NERC and now the FERC, the Federal Energy Regulatory Commission, has their resource adequacy conference coming up next week, and they are going to discuss how much of a mess we’re in in 10 states that they have already deemed to be close to rolling blackouts. Right? And so, if you want to solve that problem, waiting until 2030 to build two CCGTs isn’t going to solve it. Right?
The way to solve it is to build a bunch of solar and battery storage this year into those sites that we’re ready to deploy. Right? And so, if those projects get delayed even by six months, then that means that a 10-day spell of hot weather, or a 10-day spell of very cold weather, puts people’s lives at risk. Right? And so, I understand what you’re saying, Stephen, and maybe it’s true that most people don’t care about the American Society of Civil Engineers and their infrastructure report card and the D minuses, but after the Biden administration finished its four years, it was the first time ever that we had no D minuses on that report card. All 18 sectors actually had improvements.
And when infrastructure starts to degrade, people lose their lives. But also, life just sucks a little bit more. Right? You’ve got to go around the long way. You’ve got to figure out how to sit in traffic longer. All of these things that the Biden administration was trying to solve is stuff that the Trump administration said that they wanted to solve in their first term when it was infrastructure week every week. Right? And so, I do think that having people believe that their government, and at all levels, the state, local, et cetera, are incompetent, does have consequences.
Costa Samaras: For the record, Jigar, I believe in the American Society of Civil Engineers infrastructure report card.
Stephen Lacey: We all do.
Costa Samaras: Yes. Very big fan.
Katherine Hamilton: Yeah. Props to the engineers.
Costa Samaras: The point you’re making, Jigar, is also lost on the larger energy world that we think about the clean energy parts of the Inflation Reduction Act and the Bipartisan Infrastructure Law. But both of them were also giant climate resilience programs that are also being swept away. And so, basically what the new reconciliation bill is like a… They’re looking for unobligated money that they can claw back from the Inflation Reduction Act. And a lot of those things are getting clawed back, like investments in coastal community resilience, and power sector resilience, and water sector resilience. All the things that the civil engineers report card for decades said, “Hey, you all, we should fix these things that are broken because if we don’t and there’s increasing stresses from climate and other events, it’s going to really put people at risk.” What the IRA and the Bipartisan Infrastructure Law started to do was slowly bandaged up these decades old infrastructure systems and get them ready for climate change. And now we’re just stopping all that.
Katherine Hamilton: Yes. And I would add to that, Costa, that all of these projects required outside private sector co-investment. And what you’re doing now is you’re pushing out the private sector. So, not only are you cutting government funded, taxpayer funded programs, but you’re also pushing out industry as your partner.
Stephen Lacey: So, it’s important to separate some of these. So, clearly fudging around with the manufacturing tax credit and transferability is going to hurt the expansion of manufacturing in this country. But I can also hear some listeners saying, “Hey, you guys have been talking for years and years about how cheap solar and batteries are. Why do they need these tax credits?” So, sure, maybe some of these credits should stay, but a lot of these just are not needed for deploying these technologies. Particularly solar and batteries.
Katherine Hamilton: Yeah. So, remember, Stephen, these are all part of a technology neutral tax credit. So, it’s not just solar, wind, but it’s storage, it’s geothermal, it’s hydropower, it’s nuclear. Everybody is part of… Carbon capture. These are all technology neutral interconnection. All of these are part of a credit. So, you’d have to peel out… So, if you decided you thought solar and wind had had it for too long, you’d have to peel them out and rewrite the tax code so that you give the earlier stage or the more capital intensive projects more of a runway than you would wind and solar. But that’s changing the tax code. And it was written in a way that we’re trying to help everybody, raise everybody up. All of the above clean energy sector.
Costa Samaras: I want to add to what Katherine said and be even more forceful in that we subsidize things in the tax code that we want more of. We subsidize home ownership, we subsidize education-
Jigar Shah: Sugar.
Costa Samaras: Well, maybe we don’t want sugar at those levels. But we want more clean energy and more emissions reductions than the market is providing. And we basically want them until we have zero emissions. And so, there is an economic case to be made that we need to be over-investing in clean energy, especially with the rise of artificial intelligence and electrification, in ways that we are preparing our future grid to handle a lot more demand. And so, it’s bigger than the solar tax credit, this wind tax credit, this battery credit. This is what do we want our infrastructure system to look like in the United States for the next 30 years? And what the Inflation Reduction Act did was provide some policy certainty for a decade so that the private sector could come in and make those investments without worrying that the government was going to pull the rug out from under them. And now the House Bill has got their hands on the rug.
Jigar Shah: Yeah. I mean, just to put it on the table. I mean, I certainly have been pushing to phase out the solar and wind tax credit since 2012. Right? So, that’s something that I’ve talked about a lot, mostly just because I feel like paying $1.8 billion a year to middlemen to structure all these tax equity deals, et cetera, create oligopolies, of which I’m a part. But I think it would be good to democratize a lot of the access to finance and other things in our sector. I do think that there’s an intelligent way to do a phase out. And I think if we did an intelligent phase out you would get all of the rapid deployment that you want to meet the AI load growth requirements. And you would get a sensible transition that folks would reprice PPAs for 2030 delivery. They would do all of the things that they need to do to actually move their businesses in that direction.
But as Costa suggested, pulling the rug out from underneath people is just a recipe for chaos. And it means we’re going to be short power. And that I think is unconscionable because we are in a moment of extraordinary history right now. When you think about what AI really will do, I mean, even for Latitude Media, you have subscriptions for all of your employees on AI. But I think that number is going to 10 X in the next few years. Right? People will be paying $500 a month per employee for AI tools. Right? The same thing is true with Waymo and their self-driving cars. Right? And how many cities that they’re in. We want to win all of those battles. That means we need electricity abundance, then that means that we need solar and battery storage. There’s actually no way to achieve that abundance with natural gas right now. And you’re not going to build a new coal plant.
Stephen Lacey: I just have one more question on this piece of legislation, and Katherine, I’ll direct this to you first and then I want you to all maybe answer this. Matthew Zeitlin of Heatmap wrote this great piece about how the political theory of the IRA broke down. And that theory, in very simple terms, is that the economic benefit to red districts would be so high it would be really politically difficult to repeal the law. But GOP supporters of the IRA made a calculation that they would rather face the economic consequences and political consequences of crushing the IRA than take heat from Trump or touch other programs. So, what was the theory and why was it proven wrong?
Katherine Hamilton: Yeah. It’s interesting because 80% of the investment is going to red states and districts. And so, the members of Congress voted against their own constituents’ interests who had all of these projects and factories and jobs in their states and districts. So, the only rationale that I can offer is that they wanted to make sure that they lined up with their political party and the president. I mean, they did not vote. And that’s not even counting what we’ve been talking about with Medicaid, and with SNAP, and everything else that’s in the bill that can hurt their constituents, that will hurt their constituents right away. They just decided they were not going to serve their constituents.
Now, there were a few folks in New York, in states that have the state and local tax deduction, it’s called SALT. It’s for people who make over a certain amount of money. And they said, if we can get the SALT… SALT was their fine line. If we can get the SALT stuff then we’re good. We can vote for the bill. And a lot of those have clean energy projects in their districts too. And they were given a little bit on SALT and they voted for it. So, they can go home and say, look, I got this for you. Even though the Senate doesn’t care because all those states have blue senators who are not going to vote for the bill. So, SALT is going to go out the window anyway. But those reps can go back and say, I did something for you. I took a really hard vote for you. Some of the other ones, I don’t know, like Indiana, 9,000 jobs in solar, why’d you vote against them? Doesn’t make any sense.
Costa Samaras: So, I enjoyed Matthew’s piece and the broader discussion around this that’s been bubbling up on the internet for a while. I think it gets one thing wrong. And I think that the political theory of the IRA was how do you join clean energy, clean economy, clean manufacturing and industrial strategy in a way that creates a long-term durable coalition to get big things done in the United States? And so, it wasn’t how do we put solar and batteries and manufacturing in red districts? Those things happened because largely that’s where some of the solar and wind resources are. But also where, in rural areas, where manufacturing plants started to pop up. Those are largely represented by Republicans.
And so, there wasn’t this… I think it’s important for us to correct the record around the political theory of the IRA. It wasn’t make Republicans happy so that hopefully they will vote for it. It was how do you make clean energy cheap and make it in America? And the theory was, if it’s good for every district, it’s going to be good for the country. I still believe that to be true. The politics, is what Katherine was alluding to, seem to be insurmountable no matter what the amount of investment is in an individual district because a representative has other incentives besides doing good things for their constituents and the workers in their area.
So, I think it’s important that we celebrate that there was all this investment all around the country. Nearly a trillion dollars of announced investment in factory construction. Actual factory construction doubled throughout the Biden-Harris administration. And it’s worth decoupling that from the red versus blue and really thinking about it what it means for the country. Structurally that theory worked, politically it didn’t.
Jigar Shah: To expect a House Republican member to vote against extending the Trump tax cuts was always dumb. Right? Now the question becomes how do they justify a $5 trillion deficit increase? Well, the only way to do that is to say that they’re going to claw back the Green New Scam or whatever it is that Trump says. Right? I think that was always obvious. The reason why the Senate is different than the House is because the vast majority of senators outlast the president. Right? Their ability to think about their political lives in 20-year timeframes versus two-year timeframes is vastly different. And so, we’ll see if everyone caves in the Senate, but this game was always about the Senate.
Costa Samaras: I think that this is part of the broader vibes based assessment of the Inflation Reduction Act. Which happened the entire time after it passed was is it not good enough? Absolutely. We absolutely needed more. But a lot of the stuff was you should have done electric buses. It’s there. It’s in Bipartisan Infrastructure Law. You should have done stuff for nuclear. You should have had technical tax credit. A lot of even climate adjacent world really didn’t grok the comprehensiveness of both the IRA and the Bipartisan Infrastructure Law. And that’s a comms problem. Right? That was a communications problem from the top to the bottom of how does this affect people’s lives and what do we need to do? But a lot of it was people grafting their own prior opinions about how things work onto what the IRA did was change the game in the way that we did clean energy and finance clean energy in the country.
And so, what I think is important, and why I’m stuck on this is that we need to have the permission structure for future folks to take good lessons from the IRA and go bigger. If we take the lessons from the IRA it’s like, we should never invest in bipartisan districts. That’s a terrible lesson. Right? And so, what we need to understand is not how do we make the IRA more partisan, it’s how do we make the type of climate action bigger, bolder, broader to bring everybody along. If that’s even possible regarding what Jigar said about tax cuts.
What investment framework does the bill create?
Stephen Lacey: Yeah. That really sets us up nicely for the second half of the conversation. But I want to pull back one step from the immediate political fight to this deeper question about what technologies and business models might thrive over the next handful of years out of this legislation, depending on what happens.
So, Jigar, you’ve argued that this era is going to favor distributed generation and virtual power plants. Certainly nuclear might see some benefit from the continuation of tax credits and a series of executive orders speeding nuclear development. We’ll see. Despite the administration dismantling DOE. Right? Meanwhile, these frontier technologies like hydrogen and carbon removal face an uncertain future. So, I just want to help our listeners understand what areas might still continue under this new framework that we’re talking about. Jigar, what do you think? What are the clearest signals right now for areas of growth?
Jigar Shah: So, one of the things that we didn’t talk about in the House Bill was just how favorable it was to 45Z, the sustainable aviation fuel credit. Right? I just think that the sectors that require a deep partnership with the public sector are going to be problematic. Right? Because you need a competent counterpart in the government to help you get that done. Right? It’s not enough to just put out an executive order. That executive order then has to be taken by the secretary of whoever and actually implemented. Right?
And so, when you look at today’s Loan Programs Office for instance, we had six, I think, sustainable aviation fuel applications. Montana Renewables got through, Gevo got a conditional commitment. There are no conditional commitments that I know of that have actually been closed by this administration. Right? And so, the question becomes, even with the 45Z credit, are you going to get more loans that get through the Loan Programs Office? And I don’t see a sustainable aviation fuel plant being built without a loan from the Loan Programs Office. Right? That’s where the debt from sustainable aviation fuel projects come from.
Then you go to nuclear and you say, great, we’re going to make it easier to get through the Nuclear Regulatory Commission. We’re going to make it easier to get through all these places. You’re going to use land from the U.S. Military, or the U.S. National Laboratories to be able to curtail some of the timelines because you have a different set of rules if you use government land to do this work. Okay, great. But someone still has to put out $200 billion of loans from the Loan Programs Office to facilitate those projects. Right? Remember the executive order from the president says 10 AP1000s. 10. Right? That’s a lot. Right? And standing next to him during that signing ceremony was Oklo. Right? So, those are like micro-reactors. Right? And so, then those needed money. Right?
I just think that even geothermal, which I think we all agree can largely be supported by the success of the fracking industry, still needs debt from the Loan Programs Office. I don’t see how you get to $35 billion of deployment, which is what the liftoff report for geothermal said we need to achieve to really get the cost downs. And Fervo has said that they’re not going to hit $35 billion by themselves. Right? So, you need to figure out how to help Sage and all these other companies. Right? And so, part of my challenge and the reason I’m so bullish on DERs and virtual power plants and grid enhancing technologies, those are bilateral deals that can just be done with a homeowner, or a commercial building owner. Right? Or a rural electric co-op. Right? With Zach Dell’s new company Base Power. And so, you’re in this weird spot where you have to bet on the federal government not being a good partner if you’re an investor in this moment right now. And that is so sad.
Stephen Lacey: Mm. Katherine, what do you think?
Katherine Hamilton: Yeah. I was thinking back on the previous four years and the Bipartisan Infrastructure Law and a program that I was working quite closely with, which was the GRIP program, the Grid Resilience Infrastructure Program. And what that did was it brought utilities to the table that are super risk averse and allowed them to start partnering with innovators and drove down the risk, brought them to the table. And I think that will have long-term consequences. I think a lot of those projects that have been deployed or in the process of being deploying and will continue to move forward will build on each other.
So, a GETS company, for example, Jigar, they’ll continue to be able to partner with other utilities because this drove down the risk and utilities can see the credibility and validation from Department of Energy. So, I don’t think that even if you rescind all the unobligated funds from a lot of these programs, that all of these initiatives and projects and innovation just stop because there’s already been an effect on the entire market and the grid system in that one. And I believe that’s true in all of the IIJA programs.
Jigar Shah: Yeah. Some of the companies have gotten through the bridge to bankability. And they’ve gotten to the other side where we’ve achieved market acceptance.
Costa Samaras: I’m glad Katherine mentioned the Grid Resilience Innovation Partnership program, the GRIP program. It’s 10 billion plus dollars. 10 B, billion plus dollars in grid resilience. That’s the annual budget of the EPA. Right? And so, any one of these little provisions is a giant long-term structural change in how we have better infrastructure in the country. And I think that that gets sometimes lost on this broader conversation. That there was these pockets of billions that were improving rural, and tribal, and suburban, and ex-urban power systems in a way that was going to lower cost and increase climate resilience.
But outside of that, it’s the necessary partnership between the private sector and the government to get advanced technologies scaled, deployed, and used. And that’s what really is at risk in the conversation that we’re having is that you can’t all have supply push or all demand pull in policy. It has to be a little bit of both, an appropriate level of both, for the technologies that we’re talking about. It doesn’t make any sense to try to say we’re going to build lots of new nuclear reactors and then pull the neutral tax credit away. Or pull the opportunity for advanced workforce development. Or pull the opportunity for electric vehicles and home electrification that is going to be driving a lot of that demand growth. Without a robust and resilient federal partnership and investment a lot of the important things that the Republicans say that they want, advanced nuclear power, fusion, geothermal, transmission, grid reliability and affordability, those things are going to be becoming increasingly out of reach.
Katherine Hamilton: Another thing, Costa, to build on this issue of Department of Energy. Right now the department is reviewing all of these applications, all of these awards to see if they’re cost-effective and if there is a return on investment. And the issue here with that thinking is that that’s not really the job of the government. Right? The job of the government is to spend taxpayer dollars wisely, but also to do things that the private sector won’t do.
So, if you were able to make something work out cost effectively, you would do that out in the private sector. But what these programs were able to do was actually be able to do the first of the kind, to be able to do those early deployments. And they do this throughout all of the programs at DOE. Everything from ARPA-EE to the LPO, all of these have some place along that line to make sure that the government is doing what the government should be doing. And that’s what I fear is being lost right now by looking at only is this going to be cost-effective rather than is this something for the public good that I think we should continue?
Costa Samaras: A lot of government investments don’t need to make money. Right? They need to drive learning, they need to drive innovation, they need to drive capabilities, they need to make people’s lives better. And we won’t get the advanced tech that we want in nuclear, and fusion, and geothermal without a strong investment and a relentless focus on innovation and driving costs down. And a lot of that will come from private sector deployment, but we won’t get to, as Jigar likes to say, the bridge to bankability before we tackle a lot of experimentation and failure.
We have to be very comfortable with failure in the sense that we’re learning what goes right, what goes wrong, where are the things that are cost pain points, how do we get those down as quickly and as comprehensively as possible? And that’s some of what we’ve been talking about, as I’ve talked about as a missing middle in energy innovation, is we need to be doing stuff at public-private partnership scale that allows the private sector to experiment without the need that at the end of it they’re going to have a viable cost of electricity.
The cost of solar panels in the 1960s when we put them on satellites was literally in outer space. It was a hundred thousand times what it is today. And the reason that we put them up there is we had a capability that we needed solar panels in space to power our satellites. We weren’t necessarily focused on how do we drive LCOE in space. Right? We were focused on capabilities and learning. And we could do the same for a lot of our advanced technologies here on earth to drive the type of innovation and scientific progress that we’ll need, not just in the 2020s, but in the 2030s and ’40s and later.
The Abundance agenda: can America build again?
Stephen Lacey: That is the perfect place to bring us into our conversation on what an ideal policy framework should look like. And there is one that has risen to the top recently, abundance. And so, I’ll explain abundance very quickly for our listeners because it’s central to this conversation. The basic idea, championed by Ezra Klein and Derek Thompson, is that America has become too good at stopping things, not good enough at building things. We’ve created so many veto points, environmental reviews, lawsuits, community input processes, that we’ve made it nearly impossible to build anything.
And the abundance solution is to make it easier to build, to choose action over paralysis and the policymaking process and accept some messiness in exchange for progress. This is not an entirely new agenda. It echoes a lot of what we’ve been saying for a dozen years on this podcast that we’d lost our ability to build. And there were trade-offs, particularly around cutting regulation, that people needed to make. And folks like Jigar and Costa who’ve worked on large infrastructure projects in their own right have echoed this in your own unique ways.
But Ezra and Derek have packaged this into a new book and a clear thesis, and it’s gotten a ton of traction. And one of their critiques is that the IRA, which they say was too tied up in everything bagel politics, was bogged down in implementation. And I want to just explore this concept and whether it could get any traction at this moment when it’s virtually impossible to have durable policy. So, let’s draw from some of the themes that we’ve been talking about thus far. Costa, let’s start with you. How do you interpret the abundance agenda and does it feel any different from the political philosophy that guided the IRA?
Costa Samaras: I think that the core of the abundance argument is that we will get to net-zero emissions faster and we’ll stay there longer if we’re in a world that is full of abundance rather than full of scarcity. And what that means is that we are building and deploying enough of the things that we need, clean energy, housing, transportation, and infrastructure, so that there’s not a fight over scraps. That there is a world where there is enough. And that there’s a world where there’s sufficient opportunities for everybody to live their lives.
And so, I think that the abundance agenda and the abundance personalities have taken a lot of heat, sometimes from the left. And I think it’s worth really interrogating the core arguments of their book. And then stepping back and saying what is needed and what we might disagree with, but how do we get to a place where it’s easy to build clean energy for everybody in the United States is a important and worthy policy goal.
Stephen Lacey: Mm-hmm. Katherine, this feels like an extension of a long policy conversation we’ve had around whether to focus on stopping fossil fuels, limiting consumption, or whether we build our way out of the problem. And I think that they’ve put a nice sheen on it and really described very well what a building agenda could look like. What was your reaction to abundance generally?
Katherine Hamilton: Yeah. It made me think back. It’s super interesting and I agree with a lot of what’s in it. One of the things I think back about is my parents were Nader Raiders. So, they were very much the Unsafe at Any Speed, which was the book that Nader wrote to push seat belts and other car safety measures. And so, part of what a lot of public citizen and other groups did was try to make sure that our rivers weren’t catching on fire, that people weren’t choking when they walked outside, that we had clean air, clean water, safe work conditions, safe automobiles. And all of that created really, really important regulatory constructs. Over time those have been built upon, and built upon, and built upon in such a way that sometimes it becomes sclerotic in that it’s hard to get things done quickly and efficiently.
And I think what the administration right now is doing is removing regulation. I was looking at Department of Energy. They have 47 deregulatory actions, a bunch of which are just removing appliance standards, which actually make things more affordable, and make us internationally competitive, and manufacturers already agreed to. So, things that aren’t the sclerosis but are actually progress. When what we really need is a functional… We need something that functions quickly and at capacity. And sometimes that means you have to build capacity, you have to add people. You can, yes, look at regulation that is duplicative, but you also need to add people to make sure everything is functioning better and more efficiently. So, this is something that’s a system… It’s a systems way of thinking about things rather than just piecemeal. Because I think piecemeal has gotten us where we are today.
Jigar Shah: So, I think Derek Thompson actually is way more articulate about this than Ezra Klein is, interestingly enough. Right? So, when you actually take what Katherine said, which I think is exactly the right diagnosis, and you move it to let’s say the state level or the local level, the reason a lot of these government functions were put in place was for a very good reason a long time ago. And what happens with these types of entities is not unlike biology. They tend to get more and more and more power over time. And so, what ends up happening is, for instance, let’s use residential solar as an example. If you believe that Anya Schoolman and Solar United Neighbors can negotiate a good deal for you in Texas to put solar in for, I think it’s $1.90 a watt now. It is a dollar a watt more expensive to do that same deal in Massachusetts.
Why? Because Massachusetts lords over the state regulations through local regulations. And there’s a lot of people locally who just say, we need to have our take. And we don’t think that you’re doing enough to check for fire safety standards and check for this standard and that standard, and we need to have our inspectors go out and physically inspect this thing. And so, as a result, it’s a dollar a watt more expensive to do residential in Massachusetts. Do I think the systems are better in Massachusetts than Texas? No. Do I think they’re safer? No. Do I think that Bill McKibben’s force of people are going to go into Massachusetts and fix it? Maybe. We’ll see. But that’s what comes out of the abundance agenda. Right?
What comes out of the abundance agenda is that you have to pit the technology forward people within the Democratic Party against the government is protecting poor people and the most vulnerable people within the Democratic Party. And you need to get people to say, this is overreach from this local government agency. They need to pull back. They need to put in solar app. They need to figure out a way to streamline their policies. They need to use this software. They need to do whatever it is that they need to do to make this abundance agenda, that Costa was talking about, happen.
I’ll give you one more example. If you use manufactured homes, right? Manufactured homes are amazing. And today you can get net-zero manufactured homes because of the California auxiliary dwelling unit model. And you can just have them shipped to your land and you can interconnect it right away and get it done. What holds it back is that there’s a lot of local regulations that say that the local inspector needs to inspect that house. Why? It’s already been standardized and locally inspected at the manufacturing facility. Why do you need someone who’s never seen one before in your local town to do that inspection? And so, as a result it costs 30% more to put that thing in because the inspector doesn’t have the training necessary to do the inspection. Right?
These are all things that were put in place for good reason 40 years ago. And there’s a lot of pieces of the Democratic Party who wants to keep that in place because they were there to protect poor people or whatever it was. Right? And then there’s people on the other side of the Democratic Party who are on the technology forward side of things that are like, wait a second, those all need to be reformed if we’re going to achieve abundance. Right? Particularly in the state of California where there’s four distinct democratic parties.
Costa Samaras: Look, Jigar, what if, a crazy idea here, what if we could do technology-forward and also protect people?
Jigar Shah: Of course you can do both. Of course you can do both.
Stephen Lacey: That’s great point Costa. And actually that’s why you’re such an important person to be having this conversation with because you have worked on large infrastructure projects, you’ve worked on massive policy implementation, and you’ve done a lot on energy equity. And one of the arguments in Abundance is that we might focus in the policymaking and implementation too much on getting input from everybody before we put the policy in place. And that was one of the criticisms of the IRA. And so, you have seen the importance of thinking about the impact on communities and people, but also the need to put in process to deploy projects faster. So, how do you think about the conflict between those two things?
Costa Samaras: Yeah. It’s important to acknowledge that there are trade-offs that governments have to wrestle with. That’s the role of leadership. But that doesn’t mean that we have to throw communities that have been burdened historically with pollution, under the bus in the name of faster deployment. I know that’s not what Jigar is saying. But that’s kind of what the vibe of the broader abundance agenda is. Even in the book, Ezra and Derek were kind of saying… Really kind of taking swipes at the American for Disabilities Act. Or things that are super important. I know that that wasn’t their intention, but it was kind of like why do we need these things that help people when we really need more clean energy, more housing? We need to help people and we have to have more clean energy and housing.
And the one starting place is you won’t have an abundance agenda without competent and resilient capacity in the federal, state, and local government to get things done quickly. And so, you mentioned the beginning part of my career. I worked on big infrastructure projects in New York City. And the first project, one of my very first big projects when I just started out was rebuilding the subway underneath the World Trade Center after September 11th, 2001. And the way that that project got done on time, it was basically the only thing that got done in that area for many years, was that we paid for performance. We had a contractor that was able to do multiple shifts, that was able to do things super quickly, and that we said we want it open before the one-year anniversary.
And so, Ezra and Derek do talk about pay for performance and metrics in the book. That was one of the more important policy aspects is we don’t need to just put money out, we actually have to measure the stuff that we’re getting on the other side and be accountable to it. And I will say this was one of the things that I and others were pushing forward in the administration, and had a lot of support at all levels of leadership for this. Which was how fast are we doing stuff? What is the monthly amount of things that we’re installing? What do we need to be installing if we want to reach 500,000 EV chargers at the end of the decade? How many do we have to install per month? How many miles of transmission line do we have to do this year? Those simple questions are very much at the core of my expertise, division and multiplication. Right? I mean, that is my comfort zone.
Those questions need to be asked in a way that we’re driving forward in an abundance agenda is we need a bunch of stuff, we need a bunch of things to make people’s lives better. How fast do we need… And if we really want to sell 15 million electric vehicles per year in 10 years, which is what we would need to do to get on a track to get zero emissions in the transportation sector. It’s like we got to add a million new EVs a year, every year, from now until then. And that is supply chain, it’s workforce, it’s factories, it’s material, it’s land use, and then it’s demand side.
And so, structuring… I think what the best part of the abundance piece is is structuring for outputs and then having accountability for those outputs. Where I differ is the role of making sure that we have a robust workforce that is able to unionize if they want to, and the ability to have communities not get rolled over. Not to have infinite veto points, and you know where veto points are going to accumulate. It’s not going to be the disadvantaged communities, it’s going to be communities that have the wealth and power to do that. But saying that we have this vision for something better in the United States and together we’re going to do that, and here are the trade-offs, and here’s how we’re going to make decisions around those trade-offs, and do it fast, I think is how I would pull the best parts of the abundance agenda out and start to operationalize it.
Katherine Hamilton: Yeah. If I were to just go back to your question, Stephen, of the Inflation Reduction Act. From the outside and working with companies trying to navigate everything as it was being implemented and as the infrastructure bill… There was a lot going on at once. Right? So, the infrastructure bill, the CHIPS act, it was all happening at the same time. It just took so long to get things awarded and out the door. And I would give an example, a very stark example of my business partner and I worked with a microgrid company to get a microgrid tax credit put into the Inflation Reduction Act. The final guidance was never issued by Treasury for this tax credit before it expired.
And so, there were zero microgrids built as a result of this tax credit. It was other tax credits that these companies had to use. It just took so long to get things done. And I’m sure the people at Treasury were working night and day because they had a ton of other things to do as well. But just the length of time to get things done, and then in all of these grant proposals, it just took so long. And I realized they needed staffing to be able to do it, but it just felt from the outside like things were going very slowly. And Jigar, don’t even get me started how long it takes to get a loan through LBO. Years to get one [inaudible 01:05:09].
Jigar Shah: Well, no, it definitely takes a long time.
Stephen Lacey: But you could argue in the Loan Programs Office you could accept a higher failure rate. Right? You guys took so long to issue loans.
Jigar Shah: We got $108 billion out the door. I don’t know what anyone’s smoking. And the average loan was $2 billion. We were faster than JPMorgan or Citibank would be for the same amount of money. I just think people are smoking really heavy hashish if they think they’re going to get a billion dollar loan in a month. But Costa, I’d love your take on it. Because I definitely think that the reason those tax credits didn’t get done was not because we had a problem with staffing at the Treasury department. It’s because people didn’t want them to get done.
I mean, it was very obvious that there were a lot of people who never wanted 45V to see the light of day. Right? There are a lot of people who didn’t want to see the microgrid deals get done because most of the microgrids would have natural gas in them. And so, they just were like, we’re going to run out the clock on purpose. That was not something that was a lack of staffing. It was because you clearly had differing points of view among the coalition.
Costa Samaras: Yeah. I don’t know if I saw any strategic delay like that.
Jigar Shah: 45V was certainly a strategic delay. Are you kidding me?
Costa Samaras: Well, there was important perspectives on all the different aspects of 45V. I will say-
Jigar Shah: I will take that as a yes.
Costa Samaras: I mean, in reality though I think that that is a perfect example. The government was going to spend a lot of money on hydrogen. Which by the way is completely repealed in the reconciliation bill. Right? So, the government was going to spend a lot of money on clean hydrogen. And I think a lot of the voices was, what do we get for this and how do we make it optimized? That for sure is something that would delay a implementation. The feeling was that there was sufficient… It was such a big investment from the United States of America that it had to be done right.
And so, that is really where I think where the tension of the abundance book in the abundance agenda is, is how much tolerance, both small P political tolerance, and also long-term durability coalition tolerance is there for things that don’t go well, things that fail, things that have a problem. And the risk tolerance to me seems way too low. And I think that you can have a strategic failure in a way that says, we did this quickly and everybody’s safe, but it cost too much. We did this quickly, everybody’s safe, but we didn’t have four competitive bids, we had two. Right?
Jigar Shah: But I think it’s important to note that none of those regulations got better with time. They could have all been solved like six months in. We sort of knew what everybody’s issues were. There just needed to be tough decisions made. People just didn’t want to make tough decisions. They didn’t want the blowback so they decided to put it out on January 17th right before they left office.
Costa Samaras: I think that there’s a lot of grafting onto abundance, since it’s a larger point, that it’s the permitting or the environmental fault for things going slow. We definitely have to permit stuff super fast in the ways that help everybody and get stuff built quickly. But there’s a much larger story about how do we do big things in ways that bring everybody along, that abundance starts but doesn’t end as a conversation, as a policy prescription. Those policy prescriptions are wide open right now.
Stephen Lacey: So, to round this discussion out, given what we know about the current political climate, lessons learned from the IRA, and in thinking about what our country’s actual needs are, how would you guys design an IRA 2? Costa, you’ve been thinking a lot about this. What should an IRA 2 look like?
Costa Samaras: I think an IRA 2, one, has to pay for performance. And really structure a way that gets more things than we need and faster than we think we need them. And I think that’s a different way of looking at climate policy. We right now look at climate policy as what’s the optimal that 10 miracles line up and we make it to 2050? Whereas in infrastructure we say, you want the subway open in a year, let’s plan to open it in eight months. And let’s make sure that we have a contingency, some buffer on this. And the way that we’re going to do this is be relentless about cost and schedule.
And so, an IRA 2 really has to say, if we are going to get to zero emissions by the middle of the century, we need a whole lot of stuff. And a whole bunch of things have to fall into place. What are the federal, state, local capacity that we have to build? What is the public investment that we have to put in? And then how do we create the private sector incentives to deliver that on time and on budget? And if we think a little bit like a mega project, mega projects can go horribly wrong. But the way that we think about mega projects that go right is they have a relentless focus on cost, schedule, and budget. In a way that we hadn’t done in IRA 1 because it was reconciliation bill, it was a put out demand tax credits and hopefully the market will show up. We still need those, but we have to think about one level deeper of ensuring that we have all the systems in place to deliver what we want when we want it.
Stephen Lacey: Katherine, what does your IRA 2 look like?
Katherine Hamilton: Yeah. So, some stuff fell out of the first one, like a transmission tax credit that was really important for merchant builders of transmission. We need more of that. And we need it based on really results oriented, performance oriented, as Costa’s talked about. More industrial policy and distributed energy. And that’s tricky because of course a lot of that is regulated at the state level. But we definitely need to bring consumers into this mix and allow them to be much more a part of the solution. To do that you’re going to need a lot of trust. Because in the end you want to make sure that you are bringing people along, and the more you mess with them, the less trust you have. So, I think that’s got to be underpinning all of this. It doesn’t mean it has to go slowly, it can still move quickly. But I also think you need to have both sides, both the development side and the consumer side involved.
Stephen Lacey: Mm-hmm. Jigar, what would Jigar Shah’s IRA 2 look like?
Jigar Shah: I thought IRA 1 was great. And so, I think like… I mean, to Costa’s point, I think that there’s a lot of money that’s required to be able to speed up permitting, put in software, getting things right on large projects. Right? So, the number one rule of mega projects is you have to spend 10% of the entire budget up front before you put a shovel in the ground. And so, there’s a lot of stuff like that that I think could have been implemented differently frankly. I don’t think that’s a legislation issue. I think it’s more of an executive branch implementation, bring in more experts. I mean, the bill had the same problem. Right? They had a lot of mega projects problems that they needed to bring in experts from the outside to help with building bridges in a more intelligent way, et cetera. So, I think that part’s fine.
The other thing I would say though, and that’s just maybe because I’m a little more conservative, is that I don’t think we should have given incentives to mature technologies. I think we should have actually planned for phasing out the solar and wind tax credits and the battery storage tax credits. I think when you’re 81% of everything that gets added to the grid every year, you’re mature. As far as I’m concerned, when you have access to the lowest possible cost of capital it’s time to wean you off of the government dime. And I think that would’ve done more to preserve the commercialization efforts that we needed to do for these technologies that are needed in the 2030s, the 2040s, and the 2050s. And so, I think that is a better place for public dollars is in the commercialization side of things and less in the funneling money to mature technology side of things.
Stephen Lacey: Whoo. What a tour de force. Costa Samaras is the director of the Carnegie Mellon University Scott Institute for Energy Innovation. Costa, thank you so much.
Costa Samaras: Such a great pleasure to be with all of you all.
Stephen Lacey: That’s going to do it for the show. Open Circuit is produced by Latitude Media. Jigar Shah and Katherine Hamilton are my co-hosts. The show is edited by me. Sean Marquand is our technical director. Anne Bailey is our senior podcast editor. We’ve got a ton more at Latitude Media. We are covering everything related to the current policy environment and all the impacts out in the market. So, you can subscribe to our daily, weekly, or AI-Energy Nexus newsletter on our homepage. Just hit the subscribe button.
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