Title: The Capacity Crunch, Part Two
Speakers: Josh Combs and Charlie Suessmith
Josh Combs (00:08):
Charlie, great to see you today. Look forward to chatting today about the Inflation Reduction Act and the impacts that it’s had at the state level.
Charlie Suessmith (00:15):
Thanks, Josh. Yeah, looking forward to it. Always a pleasure. Let’s talk IRA and utilities.
Josh Combs (00:20):
Yeah. So, as you know, we often collaborate with regulated utilities. It’s a big part of our client base and the state public utility commissions that regulate many of our clients were some of the first to engage with and kind of determine how the IRA was going to impact utility resource planning and project development. And one of the things that we saw immediately, which you may see this as well with some of the developers that you work with, was just kind of identifying how the IRA would provide funding opportunities and provide dollars for certain projects and technologies that utilities wanted to develop. And so I think that it was this kind of monumental legislation that everyone was looking forward to, but the initial kind of phase that we worked with clients on is, okay, how can we take these provisions and maximize the benefits for customers and drive down costs for renewable resources?
Charlie Suessmith (01:24):
Sure. Yeah. And it also has a lot of different effects on different types of generation. New benefits for batteries, hydro, it kind of runs the board, so.
Josh Combs (01:36):
Absolutely. And that’s a good point because I think that with battery storage, that’s one example where the ITC provisions, the tax provisions that were part of the IRA really kind of unlocked energy storage as a resource for many utilities. Previously before the IRA, storage as a standalone storage was not eligible for a tax credit. And so there was this kind of new carrot that was available for utilities. And so many utilities immediately refiled plans or immediately developed plans on how can we start to deploy this storage, which previously may have been cost prohibitive? And I think that now, given the ITC provisions and the way that that helps bring down those costs, utilities are able to add storage to its kind of overall above, all of the above strategy for providing and ensuring reliability during the transition.
Charlie Suessmith (02:36):
Yeah. And that’s what I wanted to ask you about. So do you think that the new benefits from the IRA for battery storage in particular have kind of legitimized battery storage in the eyes of the commission, state commissions?
Josh Combs (02:50):
Yeah, I think that that’s a good question. And I think that what it really did is allow the utilities to develop the projects at scale to help legitimize further, right? I think before, there was a lot of research and development and demonstration projects, but the commissions are really excited now to actually deploy the projects at different, whether it’s a two hour, four hour and standalone projects to see, okay, we have a project at scale, here’s the cost that customers are paying for it, and we’ll really be able to evaluate the benefits that customers are receiving for those costs. And so we’ll be excited to see how utility commissions come out, but I think even getting over that first step was difficult before some of these provisions in the IRA were available.
And another point, I think that I mentioned earlier that state commissions were kind of the first to engage with the statute, an example is, like, in Florida, right? Part of the provisions in the IRA allow for solar, for certain solar projects that utilities can choose between the ITC and the PTC. And so it was just a few months after the legislation passed that in Florida, there were already utilities that were filing requests with the commission to — they had determined this is the most beneficial option for customers. And so that’s just an example where before there was no option, you get this one tax credit, but now utilities and the entire community and marketplace are able to kind of evaluate, see what works best for whatever project and, from our client’s perspective, ensure that customers are really getting the bang for their buck.
Charlie Suessmith (04:37):
So we’re already seeing pretty significant ripple effects, even in the short period after the passage.
Josh Combs (04:42):
Yeah. And I’d be interested to know from you, right, and I know that you work with a lot of developers and independent power producers, pre-IRA, right? At the state level and for utilities, we’ve seen this kind of immediate impact, but I guess were you already seeing kind of storage and some of these cleaner technologies being deployed at a rapid pace? Or how has the IRA impacted that?
Charlie Suessmith (05:06):
Sure. And with storage in particular, that was already kind of a surging industry, and I feel like the IRA has really just supercharged that. Pre-IRA, storage was already viewed as being important in the eyes of many for the clean renewable transition, renewable energy transition, just because it pairs so nicely with these solar, wind, intermittent renewable resources. So I think with the IRA, now you’re going to see, with utilities really stepping into the game more, we’ve already started to see a bit of a supply chain crunch for battery storage equipment. So I think it’s just going to, it’s already a hot industry and it seems like it’s just going to continue that way.
Josh Combs (05:50):
Yeah. And it’s funny because now that utilities kind of have the option of developing and in addition to obtaining it from private developers, we really say that it’s kind of like a Swiss army knife storage because it really can serve many purposes and utilities are able to use storage when they need it and how they need it depending on whatever kind of issues the grid or the system is facing at that time. Charlie, I’ve enjoyed talking to you today and picking your brain about the IRA. I think that we’ve talked about some of the initial impacts and there’s still probably a lot more that we will see as these provisions play out and maybe we can come back again and I can pick your brain further on that.
Charlie Suessmith (06:33):
Yeah, it’s certainly still developing. It’s gonna be exciting to see how things play out. So, yeah. Absolutely. It’s been a pleasure.
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