Elemental Insights

Climate Tech Entrepreneurs React to the Inflation Reduction Act

August 12, 2022

· 17 min read
The Elemental Team

It’s not often that we have a chance to savor a history-making win on the climate change front. The $370B in climate provisions in the Inflation Reduction Act — the biggest climate bill ever passed — provides such a moment. Not to mention President Biden also signed the CHIPS and Science Act of 2022, putting about $67 billion toward zero-carbon industries and climate research.

“The Inflation Reduction Act is the infusion of funding we need to push the U.S. into the fast lane of climate tech deployment and expedite the work of climate investors and entrepreneurs globally,” said our CEO Dawn Lippert. “We’re encouraged to see that in addition to accelerating technology, this funding will be directed to local government and community-based organizations that are key to unlocking deployment.”

In addition to celebrating the bill’s clean energy cost-cutting measures and job-creating potential, we are providing a few additional considerations and themes that are relevant to our portfolio and systems change work. We’re also flagging a few provisions that either were left out or have been punted to future negotiations that we will be keeping our eye on.

Finally, more than a dozen entrepreneurs from our portfolio provide insight on how the bill will impact their businesses and shape climate tech innovation.

Against a backdrop of devastating climate disasters in the US — record-breaking drought in the Colorado River Basin, massive wildfires in the Western US, and deadly flooding in Kentucky — this legislation could not come at a more urgent time. –Allison Wolff, CEO of Vibrant Planet

On the Fast Track, but Not All the Way There

This is the largest climate funding package Congress has ever passed. If the funds are spent as intended, the IRA plus previous IIJA funding gets us in range of 2030 targets, an essential leap forward in this decade of action.

Analysis firm Rhodium Group estimates that it will reduce CO2 emissions by 31–44% below 2005 levels in 2030, as compared to 24–35% under current policy. While this gets us close, it doesn’t get us all the way to our target of 50% emissions reduction by 2030. State and local ambition on policy and private sector action will remain crucial to reach our goals.

The #1 thing keeping infrastructure investment dollars on the sidelines is uncertainty. The Inflation Reduction Act finally addresses this issue. –Ari Raivetz, CEO of Transcend

Below, you can find insights from entrepreneurs in Elemental’s portfolio about how this funding will help unlock a new era of climate innovation. Here are a few highlights:

  • Electrifying aircraft and ensuring that 5,000 U.S. airports can accommodate electrified aviation. (Ampaire)
  • Drought response investments that can help advance technologies that can replenish water without generating carbon emissions. (SOURCE)
  • Funding the use of low-carbon materials in the built environment and in public infrastructure projects. (CarbonCure)
  • Bolstering domestic critical mineral supply chains by incentivizing car and battery manufacturers to adopt cleaner recycling and refining technologies in North American and allied nations. (Nth Cycle)
  • Boosting shared solar installations through the 10-year extension of the 30% Investment Tax Credit, which is now technology neutral and covers energy storage, clean hydrogen, and more. (Allume Energy, Transcend)
  • Treating forests as climate solutions that scrub carbon from the air. (Vibrant Planet)

What We Love: Building Community Capacity

With its $60B investment in communities and projects that advance environmental justice — ranging from reducing air pollution and cleaning up ports to mitigating risks from heat islands and helping schools address environmental issues — the bill can help ensure the energy transition is as equitable as it is swift.

What is especially inspiring is specific programs for Tribal, Native Hawaiian, low-income, and other frontline communities. –Forest Frizzell, CEO of Shifted Energy

This funding includes direct investments in technology, infrastructure, and other needs of communities that have been striving for better health, resilience, and access. It also includes capacity-building funding to help communities engage on permitting, siting, and much more.

The Act also includes hundreds of millions of dollars in investments in Native communities, including the Native Hawaiian community and Tribes, and a ten-fold increase to $20B in loan guarantees for Tribal energy development.

Based on the Justice40 equity criteria driving investments from key agencies like Department of Energy and Department of Transportation, this funding could create a competitive advantage for climate startups that know how to partner with community-based organizations to deploy technology. Elemental’s portfolio companies and others using our Square Partnerships framework are uniquely positioned to develop thoughtful community action plans in their applications for federal funding. This funding could support deeper engagement, research, and planning between companies and community groups to advance climate tech deployment.

Where It Falls Short

The big thing that got left on the chopping block was a Clean Electricity Performance Program (CEPP). This would have set clean electricity generation targets for all utilities in the U.S., with rewards for meeting those targets early and penalties for failing to meet them. States and cities can continue to raise ambition and fill this void, but we need a national north star of climate and equity targets to ensure major funding packages like this drive toward impact over time.

The bill signals a shift away from incremental improvements or expansion of existing systems and technologies, which will fall far short of what’s needed to stave off the worst of the climate crisis. –Neil Grimmer, Brand President at SOURCE Global

Updated permitting and siting rules — which have big implications for our companies and communities — were not included in the Inflation Reduction Act. While faster permitting and siting can make a big difference to many of our startups, many environmental justice groups have voiced that it can’t come at the expense of meaningfully engaging communities in an equitable and transparent process. Speed and scale can’t come without trust and investments that make it easier for startups and community partners to engage in the process.

Additionally, while we are excited about the electric vehicle subsidies, there is more to be done to incentivize mode shift away from cars and towards public and pedestrian forms of transportation.

Finally, as Axios described, the Inflation Reduction Act approaches climate action entirely through incentives rather than strict mandates or regulations. While we can achieve the same carbon emissions reduction with incentives, it is not a guarantee and can result in a much greater variability. The ultimate impact of this package will ultimately be dictated by how quickly and on what projects the funds in this package get spent.

•     •     •

Insights from Climate Tech Entrepreneurs

We asked entrepreneurs from across our portfolio to weigh in on what the bill means for their business and climate tech adoption more broadly. Here’s what they had to say:

⚡️ On decarbonizing energy and industry 

Allume, Executive Account Manager, Mel Bergsneider: “The Investment Tax Credit (ITC) boost in the Inflation Reduction Act is fantastic news for the solar industry! Being the most significant incentive driving the U.S. solar growth, a 30% ITC for ten years will bring record-breaking expansion. Solar has historically primarily benefited homeowners, creating disparities in access to clean energy for apartment renters and low-income families. We see a vital need to ensure the growth of solar extends to these communities, as well. We at Allume are committed to bringing solar’s financial and environmental benefits to the ~140M apartment units in the U.S. Allume’s behind-the-meter hardware solution, the SolShare, is an award-winning technology that enables apartment renters to consume onsite rooftop solar directly. The additional support for solar to low-income families outlined in the Act creates a tremendous opportunity for us to broaden our solar reach and create better clean energy options for all.”

Blue Planet Energy, Director of Market Development, Matt Roberts: “The Inflation Reduction Act will create significant new market opportunities for energy storage systems and domestic battery manufacturing, adding even more momentum to the rapid growth of Blue Planet Energy. This is the most significant action ever taken to confront the climate crisis in the United States, and the added federal might makes concrete progress more attainable at every level of government. This will have a transformative effect on our country and implements new tools that a generation of climate advocates and innovators will use to build a more equitable and sustainable future.”

CarbonCure, CEO, Rob Niven: “This historic policy package includes major funding for programs, tools and innovations needed to accelerate our energy transition, decarbonize concrete and other hard-to-abate sectors and prevent the worst impacts of climate change.

“The bill’s extension and modification of the 45Q tax credit will make its benefits applicable to a much broader range of carbon removal and storage and carbon utilization pathways, helping to catalyze innovation and grow the voluntary carbon market’s supply of high-quality carbon removal credits.

“The legislation also includes major investments to encourage low-carbon buildings and construction, including significant funding for low-embodied carbon materials for federal buildings and transportation projects as well as environmental product declarations assistance. This important congressional action leverages the massive purchasing power of the federal government to accelerate industry’s transition to sustainable building materials and construction practices.

“With our carbon mineralization systems installed from coast to coast, operating in hundreds of concrete plants across the U.S., we look forward to collaborating with our many partners to utilize the full range of benefits of the Inflation Reduction Act and contribute to our global climate solution.”

Nth Cycle, CTO & Co-founder, Chad Vecitis: “The Inflation Reduction Act is a decisive step towards acknowledging and acting on the need for a domestic critical mineral supply chain. The IRA only grants tax credits for electric vehicles that leverage critical minerals recycled, mined or refined in North America or allied nations. This important provision incentivizes refiners, battery manufacturers and car manufacturers to adopt cleaner, more efficient critical mineral recycling and refining technologies like ours that can be deployed across North America today. While we’ve always been confident in our ability to succeed through private market support alone, this bill allows us to make bigger moves faster to enable our country to meet the aggressive greenhouse gas reduction goals targeted by the current administration. Nth Cycle is looking forward to some major announcements coming later this year and in early 2023 that will be catalyzed by the Inflation Reduction Act.”

Shifted Energy, Co-Founder & CEO, Forest Frizzell: “We are really excited to see so much emphasis on the electrification of residential and commercial buildings. What is especially inspiring is specific programs for Tribal, Native Hawaiian, low-income, and other frontline communities. It doesn’t stop there, I have read other parts of the bill are inclusive of and specifically focused on rural communities and putting resources towards environmental justice through block grants and other funding mechanisms. To make this transition just, we have to be inclusive and this bill as it is written now makes large strides in getting there.”

 

🚌 On decarbonizing transportation

Ampaire, CEO, Kevin Noertker: “Ampaire strongly supports the Inflation Reduction Act. This is a huge opportunity to fund initiatives that offset the significant recent rise in transport costs for both goods and people by electrifying aircraft and airports across the nation and dramatically reducing the use of fossil fuels. Doing so will preserve US leadership in aviation, create new green jobs in the aviation sector, and make the 5000 airports capable of commercial use across the U.S. assets to the communities in which they are located, including many disadvantaged communities.”

FreeWire Technologies, CEO, Arcady Sosinov: “The clean energy provisions in this legislation represent momentous action towards cutting carbon emissions and bolstering the ascendant electric vehicle (EV) industry here in the United States. This legislation will further incentivize the deployment of EV charging infrastructure and energy storage, both cornerstones in accelerating EV adoption and a carbon-free economy in an equitable and resilient manner. Importantly, these expanded credits will enable fuelers, retailers, and fleet operators to embrace the new electric vehicle economy which will boost investment in clean energy technologies and create millions of new, good-paying jobs.

“Challenges remain to ensure that electric vehicle drivers are guaranteed fast, affordable, and reliable charging, and that our electric grid is able to meet this demand. For nearly a decade, FreeWire Technologies has been building solutions to overcome these challenges through innovations in EV charging technology and transforming the traditional fueling station. We must continue to deploy EV charging everywhere drivers go as soon as possible to realize these important economic and environmental benefits.”

Rally, CEO, Numaan Akram: “Rally is addressing middle-mile transportation challenges so we’re excited to see up to $1B allocated for new buses, which will accelerate our dispatching the next generation of hydrogen-powered intercity transportation.”

Xos, CEO, Dakota Semler: “The Inflation Reduction Act is a step in the right direction in the fight against climate change. With the goal of reducing carbon emissions by 40 percent by 2030, this bill is the push we need to help the trucking and commercial transportation industries transition quickly from internal combustion engines to battery-electric vehicles. Beyond that, lower energy costs and an increase in cleaner power and vehicles such as Xos fleet vehicles in the U.S. will help our country to more aggressively address climate change, ultimately helping create a more sustainable world for all.”

 

💧 On water infrastructure 

SOURCE Global, Brand President, Neil Grimmer: “The bill signals a shift away from incremental improvements or expansion of existing systems and technologies, which will fall far short of what’s needed to stave off the worst of the climate crisis. Upgrading the nation’s deteriorating water systems, for example, will cost approximately $1 trillion over the next 20 years. So we were encouraged to see allocations for research, but — beyond that — for tax credits and funding that can help commercialize innovative climate tech. SOURCE is well capitalized by our investors, but we believe a mix of public/private funding is important to accelerate the pace of growth across the sector. 

“The inclusion of drought response investments in the climate resilience plan is an important step in the right direction. Water is fundamental to life, and it’s clear that we’re well past the point where conservation and recycling alone can solve the problem. To address the crisis in a meaningful way, we need technologies that can actually replenish our precious water resources and do so without generating more carbon emissions or leaving waste behind. Our investors recognize that need, as evidenced by the $130 million Series D round we recently announced. 

“We also were thrilled to see environmental justice earmarked in the bill. U.S. drinking water systems that consistently violate the law are 40 percent more likely to serve people of color and Tribal water systems average 60 percent more water-quality violations than other public water systems in America. We need to fix that with distributed, sustainable solutions that can be rapidly and easily deployed, even in remote and impoverished areas.”

Transcend, Founder & CEO, Ari Raivetz: “Transcend lives in the capital planning phases of a project, as our generative design software is used by utilities/asset owners, engineering firms, and technology suppliers to evaluate more options with less time and resources than the status quo.  We have seen consistently that the #1 thing keeping infrastructure investment dollars on the sidelines is uncertainty. The Inflation Reduction Act finally addresses this issue, giving investors 10+ years of visibility into tax credits, offering flexibility in how the credits are paid out, and broadening the types of technologies that are covered to include storage, hydrogen, and more.  We expect passage to rapidly increase the number of renewable energy and water recycling projects being evaluated at the capital planning stage, driving further growth in users of Transcend’s software. We also expect that our new offering focused on generative design of vertical assets needed to ensure a green power grid will be rapidly adopted, as grid operators must quickly gear up to handle all the new and varied power generation that will come online as a result of this bill.”

 

🌳 On protecting nature

Vibrant Planet, CEO, Allison Wolff: “The Inflation Reduction Act of 2022 is an unprecedented opportunity to invest in a safe climate future. Against a backdrop of devastating climate disasters in the US — record-breaking drought in the Colorado River Basin, massive wildfires in the Western US, and deadly flooding in Kentucky —  this legislation could not come at a more urgent time.

“According to the Western Environmental Law Center, the package includes critical provisions that will help communities adapt to climate change by restoring forest resilience to wildfires, investing in climate-smart forest management on federal and non-federal lands, and supporting underserved forest landowners. It also includes substantial funding for environmental review and mature and old-growth forest protection. 

“For Vibrant Planet, this legislation will provide a host of new opportunities for collaboration with the federal government to significantly accelerate and scale-up our efforts to protect and restore western forests. Specifically, the provisions on fuels reduction on national forest lands located in the wildland-urban interface, watershed protection and restoration, private landowner climate-smart forestry conservation, and the Forest Legacy Program all provide our company with meaningful opportunities for engagement — translating into tangible benefits for our communities and the atmosphere. These programs will allow us to do our work faster, better and more interconnectedly — and will encourage the growth of the technology that can make this work even faster and more effective, sparking a virtuous cycle of forest protection and resilience.”

 

🌏 On what it means for the climate tech sector as a whole

Mitra Chem (from Earthshot portfolio), CEO, Vivas Kumar: “The IRA is the most direct acknowledgement by our nation’s leaders that our future, economic and otherwise, is inextricably tied to solving climate change. Climate change continues its ravaging path regardless of the seasonal fluctuations of the financial markets. This bill from the government recognizes that even though we are in an interesting economic time, climate solutions must continue to be prioritized. Companies solving these problems must keep building their ever-critical solutions. The implications are clear: there has never been a better time to build a company focused on a climate solution. There has never been this much support at every level of government and society.”

Solstice, CEO, Steph Speirs: “We are thrilled to celebrate today’s passage of the Inflation Reduction Act, and even more eager to see its impacts ripple through communities across America. What we do today will determine what kind of world we live in tomorrow, and today, Congress has provided critical support for a more sustainable and just tomorrow. We at Solstice can’t wait to accelerate our work to bring accessible clean energy to more households and organizations, especially those in underserved communities, for an inclusive clean energy transition.”

Swiftly, CEO, Jonny Simkin:  “The Inflation Reduction Act is a huge win for climate tech and innovation. It’s imperative that we get our country back on track to meet the Paris Climate Accords, and this is a major step in the right direction.”

UtilityAPI, CEO, Devin Hampton: “With the passing of the Inflation Reduction Act, we are at the jumping off point our movement has been working so hard to get to. America is retaking its leadership position on the energy transition with real investments in our people and technologies. At UtilityAPI, we are excited to continue to enable our entire sector by providing the data infrastructure that is foundational to an equitable and sustainable energy future.”