Credit schemes provided by the 2022 Inflation Reduction Act (IRA) are causing solar projects to pop up across America. While the United States plans to phase out coal use in favor of renewable energy over the next couple of decades, the transition to clean energy will have a major impact on employees within the coal mining and coal-fired power plant segment.
U.S. jobs in the coal mining industry have been decreasing for some time and went down by 59% in the East and 38% in the West from 2008 to 2021, indicating a general decline in the profitability of coal. Biden’s Inflation Reduction Act has two bonus credit schemes designed to redistribute renewable energy deployment to communities that will be impacted most by the closure of coal-fired power plants or coal mines as well as low-income communities.
A lot of the pushback against electric cars and renewable energy is due to the fact that their deployment could cost thousands of Americans across the country their livelihoods, something that happened to people living in Detroit when automakers such as Ford, which had been in the city for more than a decade, left the market.
The majority of green-energy developers and investors are now prioritizing areas that have been impacted by coal mining and coal power plant closures “to some extent,” a recent poll by the American Council on Renewable Energy (ACORE) shows. Building renewable energy projects in these regions will go a long way in preserving jobs in the energy sector and could even reduce public pushback to the rollout of electric cars and green-energy infrastructure because it won’t have negative effects on local economies in energy-producing communities.
Through the Energy Community Tax Credit Bonus program, the federal government provides solar and energy-storage projects with an extra 10% in tax credits as well as 30% investment tax credits. The administration will also offer a variety of credits to qualifying regions through a Low-Income Communities Bonus Credit Program. To be eligible for tax credits, these energy projects have to be located in areas with a high employment rate in the fossil fuel industry and an unemployment rate that’s higher than the average national unemployment rate.
Coal communities that were disproportionately impacted by closures in ways that don’t involve employment will also be eligible for the credits.
Lightsource BP’s senior vice president of Government Relations and Environmental Affairs Alyssa Edwards said that regions with retired coal-fired plants will be most suitable for the scheme as they are already connected to nearby grids.
The writing is on the wall regarding the long-term future of coal energy. Major coal extraction companies such as Peabody Energy Corporation (NYSE: BTU) are probably revising their strategic plans in order to plan for a future without coal as their main tradable commodity.
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