September 6, 2022

Inflation Reduction Act: Energy Community

The Inflation Reduction Act is massive for the clean energy industry and at Paces we have been excitedly working through its implications.

The Inflation Reduction Act is massive for the clean energy industry and at Paces we have been excitedly working through its implications. We have also spoken to Democratic staffers and policy experts to translate the language of the bill directly into actionable data and are please to announce that Energy Communities are now live in Paces!

Below is a summary of how you can use Paces to filter project sites based on one key aspect of the bill, an Energy Community.

Energy Community

What is an Inflation Reduction Act Energy Community? The specific text of the bill is as follows:

ENERGY COMMUNITY.—For purposes of this paragraph, the term ‘energy community’ means—

A brownfield site (as defined in subparagraphs (A), (B), and (D)(ii)(III) of section 101(39) of the Comprehensive Environmental Response, Compensation, and Li22 ability Act of 1980 (42 U.S.C. 9601(39))) 1.
A metropolitan statistical area or non-metropolitan statistical area which
1. has (or, at any time during the period beginning after December 31, 2009, had) 0.17 percent or greater direct employment or 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas (as determined by the Secretary), and
2. (II) has an unemployment rate at or above the national average unemployment rate for the previous year (as determined by the Secretary), or
A census tract
1. in which:
  1. after December 31, 1999, a coal mine has closed, or
  2. after December 31, 2009, a coal-fired electric generating unit has been retired,or
2. which is directly adjoining to any census tract described in subclause (a.)

A complicated set of definitions! At Paces we have gone through each of these and created our own naming convention for each type of Inflation Reduction Act Energy Community:

Brownfield
Energy Employment
Fossil Retirement

We also welcome SEIA’s announcement of their own Energy Community mapping analysis as it helps prove the success of our approach!

Brownfield Energy Community

Brownfields are places defined by the EPA as “a property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” The specific law referenced in the IRA is CERCLA, the law most commonly known by the term Super Fund. We have identified a number of EPA based data sources and integrated this data into Paces. As there is some flexibility in terms of the distance a parcel needs to be from a brownfield in order to count for the additional incentives, we allow users to specify their preferred distance when selecting parcels.

Brownfields are even more interesting to renewable developers when coupled with the Bipartisan Infrastructure Law passed in 2021. Within this law there is $1.2 Billion in Project Grants for Brownfield cleanup and while for-profit companies cannot avail of these grants directly, there is a an amazing opportunity to work with grantee organizations.

Energy Employment Energy Community

The Energy Employment section of the bill is about identifying communities that are negatively effected by the shift from fossil to renewable energy. This part of the bill is also the most complex from a data point of view. To find these parcels we:

Identified all metropolitan and non-metropolitan statistical areas in the country
Found via an array of federal and state sources the amount of employment and tax receipts involved in the fossil fuel industry
Found the MSA unemployment rate and compared it to the national average unemployment rate for the previous year

This allows us to define all metropolitan and non-metropolitan statistical areas in the country as either being an Energy Community or not. There are some subtleties in interpreting this data though and so we have done secondary checks to compare state produced and federally produced numbers.

Fossil Retirement Energy Community

“Fossil Retirement” is the final type of Energy Community and is also focused on identifying communities that have experienced economic hardship as part of the shift away from fossil fuels. These Energy communities include those where there is a retiring coal mining or coal power plant in the last couple of decades. Interestingly, this part of the bill works off of census tracts rather than MSAs. There are over 80,000 census tracts in the USA and so our approach is to first find all the relevant retired coal mines and power plants and then cross reference with those census tracts. We can then point to all relevant parcels within a given census tract as part of a valid Fossil Retirement Energy Community.

A Land Grab?

Speaking to our renewable developer customers, there is a definite sense that the passing of the IRA will result in a 24-month flurry of activity as developers seek site control on properties that maximize IRA credits. Paces incorporates data very rapidly and can identify parcels in minutes; this means we can help developers identify the best sites first.

Paces also plans to incorporate other aspects of the IRA into our software soon, including identifying the best sites to maximize Hydrogen credits as well as including geographic prevailing wage data. For example, clean energy credits are 2-5 times more valuable if the project is built with prevailing wages; however, prevailing wages can vary by up to 25% depending on the county.

If interested in a demo of Paces, email us at team@paces.ai