The United States’ landmark Inflation Reduction Act (IRA) came into force over a year ago with attractive financial incentives for the clean energy industry. This has made the country one of the largest investment destinations, not just for renewable energy development but also for setting up manufacturing facilities, and has given a boost to the e-mobility and green hydrogen sectors. In an exclusive interview on the sidelines of the recently held Berlin Energy Transition Dialogue, Laura Lochman, Principal Deputy Assistant Secretary at the U.S. Department of State’s Bureau of Energy Resources, spoke to Khushboo Goyal, Associate Director, Renewable Watch. The topics of discussion included the IRA provisions, just energy transition and energy security.
What have been the key learnings from the implementation of the IRA over the past one year or so?
We are now 18 months into the implementation of the IRA. We are able to assess it with more granularity now and observe how it is actually being implemented. Approximately 210,000 jobs have been created as a result of the IRA and the activities associated with it. We have also seen the announcement of investments exceeding $220 billion.
Further, communities have started to experience the benefits of the IRA provisions, which also strengthens political support for the continuation of such efforts. The IRA is a historic legislation within the US and globally, in terms of the huge push for renewables and low-carbon solutions. We also hope that it has a significant global impact, in terms of making funding available for more such innovations, growing them to scale and making them more affordable and available in other parts of the world.
Supply chain is a big issue for renewables globally and in the US as well. How is that being addressed in the solar, wind or battery space, especially in view of the IRA provIsions?
The IRA incentivises many technologies, including solar, wind, batteries, geothermal, hydrogen, carbon capture and sequestration, carbon abatement and energy management technologies. Having said that, there have been supply chain issues that were quite exacerbated by the Covid pandemic. Subsequently, everyone is trying to get those supply chains flowing again. Further, many countries have experienced some inflation related to energy costs and other factors.
“True energy security comes from localised energy sources and lower-emission energy sources.”
In the US, for example, we have had a couple of offshore wind projects that have experienced some challenges and I believe they will be addressed soon. We are again seeing those supply chain issues here, along with inflation impacting project economics as the contracts for these projects were initially negotiated under different circumstances. Therefore, these contracts do not reflect current realities, and some of them will have to be renegotiated to make them reflective of current conditions. Meanwhile, there are several projects that are still moving ahead, for example, in the northeast part of the US and California.
As critical minerals are going to be very important, especially with the country’s battery and solar manufacturing aims, what is the US planning in terms of securing supplies of these minerals?
There cannot be an energy transition without critical mineral inputs, and thus, it is a point of focus for us and for our partners and allies as well. We are planning to diversify the supply chains for clean energy technologies and critical minerals.
The US Department of State has launched a project called the Mineral Security Partnership (MSP). There are now 15 partners involved in this initiative, primarily comprising purchasing countries. We have recently added another element called the MSP Forum, which includes producing countries into that dialogue. Additionally, there is a private sector angle to it, called the Minerals Investment Network for Vital Energy Security and Transition.
Thus, we are working to bring everybody together, and the focus is on specific projects related to the minerals that are priority inputs for wind and solar, as well as other technologies. Currently, the minerals market is dominated by China, right from mining to processing and finished products. This dominance of a single country over the supply of minerals is not good for any nation. For instance, we have seen with Russia’s weaponisation of energy that nations always benefit from the diversification of supply.
This is the objective of the MSP, alongside other efforts through organisations such as the G7, International Energy Agency and International Renewable Energy Agency to develop alternatives for mining, recycling and processing. We have identified and prioritised certain critical minerals, creating a flexible list reflective of what we either know or predict are the central inputs that will be required.
There are growing global concerns around the availability of adequate land for renewable energy projects. Is the US government exploring floating solar projects?
Floating solar has not been a focus in the US due to the large available land compared to other countries. Instead, we have concentrated our efforts on onshore solar power development. However, floating solar is definitely a part of the plan. There are certain areas that are more populated than others, with limited available land, and in such a scenario, floating solar becomes a viable option.
“This administration absolutely believes that nuclear must be a part of the mix to get us to our net zero goals by 2050.”
Which are the most important focus areas right now for the US in terms of clean energy technologies?
I can speak from our work on the diplomatic side. While the Department of Energy focuses on the country’s domestic energy mix, our diplomatic efforts concentrate on various aspects of energy security. True energy security comes from localised energy sources and lower emission energy sources.
We are exploring various technologies to reach that goal, and this includes solar, wind, hydrogen, geothermal and nuclear. This administration absolutely believes that nuclear power should be part of the mix to help us achieve our net-zero goals by 2050. Our bureau specifically focuses on small modular reactors (SMRs). For instance, various branches of the US government and other entities are supporting Romanian agencies in deploying an SMR there, which will be a demonstration project. We are also actively working in the areas of electricity interconnectors as well as gas interconnectors. During the past couple of years, we have witnessed the need for greater integration of power and gas networks, and it remains a key focus area.
What is being done in terms of ensuring adequate representation of women and marginalised communities in the overall energy transition?
Globally, significant challenges exist in the energy sector to increase energy security and lessen the impact of those activities on the global environment. Thus, there is an absolute need to involve all stakeholders in finding solutions. If we exclude 50 per cent or more of the population, we will not be able to come up with the best solutions and outcomes, and this absolutely applies to the representation of women in the energy transition.
It also applies to underrepresented groups because we need everyone’s expertise, thoughts, ideas and innovations. Regarding marginalised communities, one domestic example is that there are additional incentives under certain IRA provisions for working in communities that are on the lower income scale or are underrepresented.
Regarding women’s representation, the US State Department’s Bureau of Energy Resources has a programme called Women in Energy. This has been launched in Southeast Asia, and we are taking it to other countries in Africa as well as Latin America. In some countries, there are still laws that prohibit the participation of women, which is unacceptable. In other situations, girls are not necessarily encouraged to pursue STEM (science, technology, engineering and mathematics) subjects, or they do not have access to the same level of education. First of all, it is important to instil the understanding that these careers are possible for women. The next step is to encourage participation in the fields of study that will enhance their participation in this sector, and then create networks and mentor women to enter these fields and rise in the energy space. It is a global imperative to undertake these efforts.
