The Affordable Energy Future We All Need Is Closer than Ever

The solutions and resources that will help our nation weather the years ahead are right in front of us; how fast we realize them is up to us.

With the cost of living on everyone’s mind, keeping things affordable has never been more relevant. And with 1 in 7 families living in energy poverty, affordability includes keeping energy costs in check. Even for families not experiencing energy poverty, higher bills are squeezing households. Fortunately, we have impressive examples of progress to make energy more affordable and ease the power pinch on American households.

One striking example is Dairyland Power Cooperative, which serves rural communities in Minnesota, Wisconsin, Iowa, and Illinois and was recently awarded New ERA funding as part of the Inflation Reduction Act (IRA). This funding, along with other tax incentives that the co-op can only access due to innovations in the IRA, will lower its rates by 42 percent over 10 years compared with what it was facing previously. This represents a 45 percent increase in the co-op’s power supply derived from renewable energy. Having their power rate cut nearly in half over the next ten years was not something most people would have imagined two years ago, but embracing clean energy solutions can make this a reality for communities across America.

Clean energy is affordable now

While the price of clean energy has been dropping for years, the Inflation Reduction Act — the largest investment in clean energy in US history — has improved the affordability and accessibility of clean energy and is helping to make the energy system safer and more resilient. By providing incentives that lower costs — such as rebates for home weatherization that can make homes more efficient and lower electricity bills — and directing clean energy to low-income communities, it’s easing burdens for households.

And while immediate, direct cost savings are crucial, the clean energy buildout also has important long-term benefits that will make our energy systems more reliable and affordable for years to come: clean energy is safer and more resilient than a system built on fossil fuels, it’s flexible and future-proof to economic shock, and it supports a massive growth of quality jobs.

IRA incentives are directly lowering energy costs

The IRA has been instrumental in making clean energy more affordable and accessible, as it was designed to specifically benefit low-income and disadvantaged communities who have been disproportionately harmed by past energy systems or are at risk of being left behind by clean energy solutions.

One way we’re seeing this is through the Low-Income Communities Bonus Credit Program, also known as the low-income adder, a 10–20 percent additional incentive on top of the 30 percent base tax credits for clean energy projects that are built in low-income or Tribal communities or benefit low-income individuals. The program approved more than 49,000 applications in its first year, totaling almost 1.5 gigawatts of energy capacity and approximately $3.5 billion of public and private investment into communities.

Stipulations in the low-income adder program require that projects are not only built in these communities, but to get the highest incentive they must directly benefit these communities too, such as sharing the financial benefits of a project through reducing utility bill costs for low-income households.

OE Solar in New Mexico has seen firsthand the impacts the low-income adder can have on communities as well as project developers. To win a bid for a community solar project involving solar farms located in rural areas across the state, the company went above requirements and committed to reserving 50 percent of the solar capacity for low- and middle-income households AND giving them a 27 percent discount on their utility bills.

The low-income adder incentive they received not only made the project feasible for the company, but it also allowed them to commit these additional benefits to communities. And in addition to monthly savings from lower bills, the projects are bringing economic development and jobs to these areas. Adam Harper, principal and founder of OE Solar, says he’s seen solar become much more accessible in communities across the state thanks to IRA incentives.

Smarter investments can deliver billions in savings for American families 

The IRA also offers incentives for utilities that can enhance the electricity grid, leading to an energy system that’s more affordable and resilient for US households over the long term. RMI analysis has shown that the IRA has accelerated the planned additions of wind and solar as well as grid-scale battery storage. These resources have now become less expensive than more than 90 percent of proposed new gas generators. This makes the continued buildout of fossil fuel infrastructure — recently proposed by some utilities as we see projections in energy demand rise — risky, costly investments that could be more effective as investments that enhance the grid we've already built and unlock avenues to add less expensive resources at scale.

Increased electricity load is a feature, not a glitch, in an economy pivoting toward a future powered by clean electricity. In fact, nearly 78 percent of additional projected electricity demand by 2030 can be met with clean energy solutions that are deployable in the next two to three years and that save our communities billions. So while more than two terawatts of new electricity generation (95 percent of which is zero-carbon) — or nearly double the total electricity generation resources operational in the United States today — are waiting to connect to the grid, “grid efficiency” solutions abound that make the most of the grid we’ve already built. If fully leveraged, these solutions will make our grid more resilient and unlock avenues for significant clean energy deployment at the speed we need it.

Reliability solutions called virtual power plants (VPPs) are a perfect poster child for grid efficiency. By simply orchestrating the distributed energy resources like electric vehicles, smart thermostats, and batteries that are already expected to be installed in the next five years, VPPs eliminate some of the need for new gas capacity and save utilities money. We found that an example utility in the Mountain West could save its customers 20 percent and deliver annual average savings to households of $140. When we quantified the national potential, we found that, if fully realized, these coordinated resources could fill 60 percent of the electricity demand gap by 2030, eliminating the need to build new resources, and could be deployed much faster than a conventional gas plant.

In addition, integrating solar-plus-storage microgrids into VPPs can save customers and utility systems money and provide critical electricity resources during disasters or times when the larger system is down. Other examples of grid efficiency are technologies that have been common in the rest of the world for decades or techniques that utility systems across the nation are already leveraging to rapidly deploy clean energy.

Grid-enhancing technologies (GETs) are hardware and software solutions that utility systems can install to increase grid capacity, flexibility, and efficiency. Think of them like tech that makes our grid smarter, allowing us to manage the resources that we have more effectively so that we can free up additional space for new clean additions. In PJM, a wholesale electricity market in the Mid-Atlantic, we found that simply installing 95 GET projects would result in approximately $1 billion in production cost savings annually and open space on the grid to deploy an additional 6.6 GW of new clean energy resources. Nationally, their deployment along with advanced conductors (another affordable way to open up grid capacity) could meet 20 GW of additional peak electricity demand by 2030.

And, finally, by simply using the interconnection points at the power plants we’ve already built, we can deploy new, inexpensive clean energy resources using a strategy we call “clean repowering.” In most of the United States, this strategy can help utilities deploy clean energy resources much faster than the more conventional process, in some cases in a year or less, to save customers $12.7 billion annually starting in 2025. These projects are at the location of either current or retiring fossil generation facilities; and targeting investments at these locations has the potential to support the workforce that already exists at the site and improve the health outcomes of local communities.

To achieve these savings for utility customers, planners must first factor in resources from the IRA like the Energy Infrastructure Reinvestment program and do so in the next year before the program expires in 2026. Additional investments to the US grid are going to be required to fully realize the transformative potential of this historic law. But while those longer-term solutions roll out, we can invest in our grids and our communities in ways that offer them relief for their electricity bills and that keep them safer in a more extreme climate.

Savings, applied

In the United States, the work of the rest of this pivotal decade will be to guide all 50 states down the learning curves that support widespread deployment of these solutions and help our communities access these resources. There are things we can do to accelerate these learning curves (like making sure utilities are incentivized to want these changes in the first place), but the benefits to our energy bills and our safety are too clear to even consider looking back.

We’ve only just begun.