Power sector impacts of the Inflation Reduction Act of 2022

Abstract

The Inflation Reduction Act (IRA) is regarded as the most prominent piece of federal climate legislation in the U.S. thus far. This paper investigates potential impacts of IRA on the power sector, which is the focus of many core IRA provisions. We summarize a multi-model comparison of IRA to identify robust findings and variation in power sector investments, emissions, and costs across 11 models of the U.S. energy system and electricity sector. Our results project that IRA incentives accelerate the deployment of low-emitting capacity, increasing average annual additions by up to 3.2 times current levels through 2035. CO _2 emissions reductions from electricity generation across models range from 47%–83% below 2005 in 2030 (68% average) and 66%–87% in 2035 (78% average). Our higher clean electricity deployment and lower emissions under IRA, compared with earlier U.S. modeling, change the baseline for future policymaking and analysis. IRA helps to bring projected U.S. power sector and economy-wide emissions closer to near-term climate targets; however, no models indicate that these targets will be met with IRA alone, which suggests that additional policies, incentives, and private sector actions are needed.

Keywords

• Inflation Reduction Act
• model intercomparison
• power sector economics
• decarbonization
• climate policy