A Mixed Bag: How the IRA Helps and Could Hinder the Energy Transition

Last Friday, the House of Representatives passed the Inflation Reduction Act of 2022, putting it in the hands of President Biden, who signed it into action the following Tuesday. The IRA contains both provisions with positive implications for the energy transition, but also elements that may undermine competition in our electricity markets and needlessly increase consumer costs.

The IRA’s support for developing technologies like carbon capture and sequestration, as well as hydrogen, is a positive step towards securing reliability as policymakers seek lower carbon energy sources. EPSA member companies – America's competitive power suppliers – are eager to invest in these resources as they continue to develop renewable power solutions, battery storage systems, and increasingly efficient natural gas plants. Federal funding is best directed toward emerging solutions that cannot yet compete in the market.

However, we question the need for the excess federal funding toward already mature technologies, such as established nuclear power plants, which independent analyses show are able to recover their costs in the market. These unnecessary subsidies may put the market further at risk, and put an unnecessary cost burden on taxpayers and consumers.

Competitive power markets have driven innovation and efficiency – through private investment – that has led the development of lower- and zero- emission electricity solutions and spurred carbon reductions. This progress has occurred in tandem with delivering some of the lowest wholesale power prices in history.

EPSA advocates for market-based approaches to energy policy – including decarbonization efforts – because we know they are the most efficient and cost-effective path. We will continue collaborating with policymakers, grid operators, and our member companies to prioritize both competition and reliability, and work towards a balanced, affordable, and efficient energy market for all.

For more, read my statement in EPSA’s press release.