It was the last of three landmark legislative packages to pass Congress and be signed by President Joe Biden, in August 2022. But the Inflation Reduction Act, with its goal of directing $400 billion in federal funding to clean energy, is a central part of the administration’s strategy to revitalize American industry.
Taken together with the Infrastructure Investment and Jobs Act of November 2021 and the CHIPS and Science Act of July 2022, the three laws amount to more than $2 trillion in federal investment for enhancing — and dramatically reshaping — the physical and industrial capacity of America’s $25 trillion economy.
Broadband infrastructure is a crucial part of this investment, as are the semiconductor manufacturing efforts by the CHIPS Act. (Broadband Breakfast will review “middle mile” broadband investment in May 2023, and the CHIPS and Science Act in June 2023, in exclusive reports for Breakfast Club members.)
But make no mistake: The Biden administration’s vision for the new American economy is one that is determinedly green and high-tech. It has a goal of substantial lowering the nation’s carbon emissions by the end of the 2020s.
For green energy to really take root, smart grids and better broadband are necessary.
The Inflation Reduction Act’s funds are delivered through a mix of tax incentives, grants and loan guarantees. Clean electricity and transmission command the biggest slice, followed by clean transportation, including electric-vehicle incentives.
The majority of $394 billion in energy and climate funding comes the form of tax credits designed to catalyze private investment in clean energy, transport and manufacturing. And one specific new area is $12 billion in the Energy Department’s program to expand existing loan authority tenfold and create a $250 billion program to upgrade, repurpose or replace energy infrastructure.
These investments, the administration believes, will work to limit carbon emissions and other pollutants and introduce tax credits for deployment of solar, wind, nuclear, clean hydrogen and more.
This report will focus on the infrastructure that support cleaner energy, as well as the program’s connections to expanding smart grids and enhancing broadband networks.
The Biden Administration hopes that the Act will spur America on its way to becoming a clean energy superpower by reducing harmful greenhouse gas emissions by 50 percent below levels measured in 2005 by 2030. The Department of Energy expects that the country’s net economy-wide emissions will be reduced by 40 percent from 2005 to 2030.
Electric vehicle charging stations represent a major investment from the Inflation Reduction Act and have important implications for broadband providers. The Act implements a federal tax credit on charging equipment through 2032 for both individual and commercial uses, particularly in rural and low-income communities.
An EV charging station is a specialized electrical socket for a car to plug into. Without an internet signal, commercial EV charging stations cannot set schedules, track usage data or charge the user for electricity use. While it is possible to charge an electric vehicle without a broadband connection, that connectivity is essential for monitoring charging stations for problems, balancing loads during peak demand and other key tasks, according to a report by the Institute of Electrical and Electronics Engineers.
With EV charging stations reliant on internet connection, will the Inflation Reduction Act’s investments in clean energy flounder on the lack of infrastructure deployment?
An important aspect of the Inflation Reduction Act extends federal tax credits on electric vehicle charging equipment in low income and non-urban areas through 2032. Individual tax credits remain at 30 percent of the cost of hardware and installation, up to $1,000. Commercial tax credit remains at 6 percent of the deployment cost, up to $100,000.
The legislation further allocates $3 billion for electrifying United States Postal Service vehicles and $1 billion for states to replace heavy-duty vehicles with EVs. States may use the funds to cover the costs of vehicles, infrastructure, training and technical activities to support electrification efforts.
The electrification of the USPS fleet and the tax incentives for the electrification of other heavy-duty vehicles are in line with the administration’s goal of reducing dependency on fossil fuels and lowering harmful greenhouse gas emissions by 50 percent from 2005 by 2030. As electrification continues to expand across the country, the charging infrastructure being deployed now needs to cater to foreseeable future network requirements.
Futureproofing charging infrastructure will require the operation of smart grids that work on broadband connection, said a study conducted by ALSTOM Research and Technology Center. Advanced charging systems will require a smart grid which would measure electric usage in real-time and communicate it to the utility via broadband connection.
For ideal control of EV charging, the stations need the capability to communicate between all parts. “Bi-directional data exchange between the vehicle and the grid will thus be required to take full advantage of the possibilities that such an intelligent asset will offer,” the researchers wrote.
No standardized solution currently exists for communication between the EV supply equipment and the operator. That will be necessary to ensure optimal charging operations for the EV as well as installation of charging equipment.
“EVs are seen as one of the smartest loads in the future smart grid infrastructure,” read the report, explaining the necessity of connecting to broadband to enable bi-directional communication. Smart loads represent a portion of an electrical circuit that consumes power and is simultaneously energy-efficient, controllable and enables real-time access to usage data.
Current price incentives and local charging control may suffice to ensure network stability with modest penetration of electric vehicles, but in the event of the more saturated market envisioned for EVs, complex communication structures will be necessary to enable advanced control of EV charging and advanced EV participation in ancillary services.
Indeed, federal agencies are anticipating an increased demand on internet service providers due to the IRA. The National Electric Vehicle Infrastructure formula program, a federal program under the U.S. Department of Transportation that funds states to strategically deploy EV charging stations and establish an interconnected network, required in its original guidance that state agencies deploying EVSE have a connected charger network to facilitate data connection, accessibility and reliability. NEVI funds used for acquisition, installation, network connection, operation and management of EV charging stations are to be deployed by 2026.
A study by the Energy Transitions Commission, a global nonprofit focused on achieving net-zero emissions by 2050, determined that $1.1 trillion must be invested on the smart grid every year up to 2050 if the world is to reach its net-zero emission goal.
Beyond commercial use of EV charging equipment, residential charging will require that each address be equipped with a smart meter for successful widespread adoption. Smart meters measure and record energy consumption data and send information to utilities via a wireless network.
Furthermore, a study conducted by Communication Networks Institute at Dortmund University found that conductive charging of EVs “requires additional digital communication for grid compatibility” beyond the currently used power line communication, which utilizes electric power lines to connect to broadband.
The clean energy initiatives were originally designed to travel in parallel with the Infrastructure Investment and Jobs Act, a bipartisan $1.75 trillion measure investing $1.2 trillion in infrastructure — including $65 billion for broadband infrastructure.
IIJA passed the Senate in August 2021 on a bipartisan 69-30 vote. It was also popular in the House. But then-Speaker Nancy Pelosi, D-Calif., insisted on pairing IIJA and broader Democratic Party priorities, delaying a vote on infrastructure for nearly three months.
Meanwhile, the clean energy initiatives that were part of the administration’s push among progressives foundered amid opposition from Sen. Joe Manchin, D-W.V. The broader “Build Back Better” measure would have spent $3.5 trillion on funding for health care, childcare, family leave and public education as well as clean energy. Electoral defeats for Democrats in Virginia and New Jersey during off-year elections broke the logjam on infrastructure. Pelosi let the IIJA pass in a stand-alone fashion on Nov. 6, 2021.
Manchin, who had said he was concerned that spending $3.5 trillion would further accelerate inflation, nonetheless continued negotiations with the administration on a scaled-back version of Build Back Better. In a nod to Manchin’s concerns, the “inflation reduction” moniker was slapped on the clean energy bill’s stated goals to lower inflation by reducing the federal deficit while simultaneously promoting clean energy investments.
Signed on Aug. 16, 2022, the law as passed built on provisions in the Infrastructure Investment and Jobs Act that provided money to electric vehicles and clean transit.
The majority of the law’s $394 billion in energy and climate funding comes in the form of tax credits. Corporations will receive an estimated $216 billion in tax credits, which are structured to accelerate private investment in clean energy, transport and manufacturing.
But consumers also receive incentives through $43 billion in tax credits aimed at lowering emissions by making EVs, energy-efficient appliances, rooftop solar panels, geothermal heating and home batteries more affordable. Starting in 2023, qualifying EVs will be eligible for a tax credit of up to $7,500 and $4,000 for new and used vehicles, respectively.
Early linkages between the IIJA and the IRA highlight the role of broadband policy in electric vehicle and electric distribution transmission. IIJA set aside $7.5 billion for electric vehicle charging infrastructure. The IRA allocates $5 million to the Energy Department’s NEVI charging program, which in turn opens up $2.5 billion to support the competitive Charging and Fueling Infrastructure Grant.
The program provides states with funds to install publicly accessible charging infrastructure. Furthermore, the law requires that the Transportation Department set aside 10 percent of funds for grants to states to fill gaps in the national network.
The law’s programs prioritize charging infrastructure along the National Alternative Fuels Corridor, a set of highways nominated by states for priority access to public charging stations. It also requires that states provide 20 percent of project costs. Lawmakers hoped that passing the act would help meet the administration’s goal of having 500,000 chargers installed and having EVs make up 50 percent of all new car sales by 2030.
When Congress passed the IIJA, California Democratic Reps. Doris Matsui and Anna Eshoo released a joint statement urging officials to coordinate broadband and EV charging infrastructure efforts in a collaborative effort.
“In light of the national electric vehicle charging network’s connectivity requirements, the persistent digital divide, and EV charging infrastructure disparities across the nation, we encourage you to coordinate IIJA broadband and EV charging infrastructure efforts to encourage co-location of EVSE with telecommunications infrastructure when and where appropriate,” they wrote in a letter to the Commerce Department’s National Telecommunications and Information Administration.
According to a Pew Research Center report, access to both EV charging and high-speed broadband is lacking in rural, low-income communities, as well as among racial minorities. Thus, the Congresswomen urged providers of both infrastructures to work together to bridge the gap. “This approach can address multiple national priorities simultaneously and avoid duplicative efforts,” they wrote.
This push builds on a bill Eshoo introduced to the House Committee on Transportation and Infrastructure in 2020 called the Nationwide Dig Once Act. That bill, which has not yet been passed, aims to reduce the cost and accelerate the deployment of broadband by requiring that states employ a broadband provider to install infrastructure as part of any road construction project.
Furthermore, a Brookings Institution report outlined the economic consequences of the combined investment in transportation, energy and broadband through the IRA and the IIJA. Internet and energy providers are facing a “significant” price inflation in construction, the growing cost of debt as interest rates increase and an ever-shrinking workforce.
Broadband providers in particular are facing significant workforce threats, which was flagged as a key area of concern by agency and government officials, including Commerce Secretary Gina Raimondo. In January, the Telecommunications Workforce Interagency Group issued a report urging Congress to strengthen recruitment processes, improve coordination between federal programs and increase the safety of telecommunications workers.
According to a report by advocacy group Climate Power, 100,000 new jobs were announced in 31 states after the passage of the IRA, the majority of which were in clean-energy projects.
And a report from consulting firm Dgtl Infra estimated that rising costs of goods will push costs of each new mile of fiber upward an additional $4,814. The two laws were passed during one of the most unusual economic environments in recent history, with historically low unemployment and high inflation.
Inflation means that federal funds have less spending power than anticipated. Therefore, infrastructure investment is more expensive. But inflation costs have decreased since its high point in June of 2022.
Mike Wendy of the Wireless Internet Service Providers Association told Broadband Breakfast that the mix of supply shock, inflation and the lack of skilled labor have “created a perfect storm to tighten and make more expensive access to necessary inputs for small players.”
A bright spot for wireless ISPs in IRA was the inclusion of language that avoided what might have been a large tax increase for spectrum licenses required for 5G networks. According to a statement from the wireless association CTIA, the legislation prevented the write-off of wireless companies’ expenditures at the Federal Communication Commission’s spectrum auctions.
The Inflation Reduction Act may have other future consequences for the broadband industry. Infrastructure operated to provide broadband uses electricity, which releases carbon into the atmosphere. Some of the equipment used to deploy this infrastructure, such as heavy-duty vehicles, also release these emissions.
“Telecom operators already account for an estimated 3 percent or more of the total global energy demand just for fixed fiber and wireless broadband communications, while data center operations probably require double that energy,” said Berge Ayvazian, senior analyst and consultant at Wireless 2020, in a press release.
“All broadband service providers require a variety of energy assets, such as batteries, generators, the grid, and renewable energy sources such as solar,” explained David LeClaire, executive vice president of North America at Galooli Ltd.
The IRA may set into motion a series of laws that prioritize electric vehicles for broadband providers, as well as for other industries.
Taken together, the IIJA, the IRA and the CHIPS Act make up one of the most ambitious attempts to restructure the American industrial base in decades, if not generations. The combination of the green energy provisions, semiconductor promotion through the CHIPS and Science Act and broadband infrastructure funding can be seen as the Biden Administration’s Made in America initiative.
The idea behind it, in the words of the Economist, “is that with government action, America can reindustrialize itself, bolster national security, revive left-behind places, cheer up blue-collar workers and dramatically reduce its carbon emissions all at the same time.”
New infrastructure — both broadband and electric — is central to this American industrial transformation.