How the IRA could shape the renewable energy workforce
The Cut Inflation Act is set to accelerate the energy transition in the United States, which will also lead to a rapid transition of the workforce.
According to an analysis by the Blue Green Alliance.
But figuring out who gets those jobs and how to support workers in industries like coal or oil and gas can get complicated quickly.
“How do you transition from coal miners to renewable energy or to battery production or something like that? A big concern of labor was making sure you would have those commitments up front to honor their union contracts,” Alí Bustamante, deputy director of education, jobs, and worker power at the Roosevelt Institute, told Emerging Tech Brew. “Essentially I’m just transitioning to do something else, but really with the same pay and kind of union protection that they had in the past.”
Companies looking to take advantage of all the IRA tax incentives are in a wait-and-see mode. The open comment period for labor requirements in the IRA ended on Friday, and federal agencies will now consolidate what will be required of employers when it comes to maximizing tax credits potential through salaries and apprenticeships.
What’s in the IRA
To maximize IRA tax credits for producing technology such as batteries and solar panels, companies will need to pay workers a prevailing wage (e.g. at least the average wage for labor in the region local) and employ apprentices through the Ministry of Labour. Apprenticeship program or equivalent program at the state level.
Meeting these requirements typically translates to around 5 times the amount of most incentives, Nicole Elliot, tax attorney at Holland & Knight, told us. This means that a credit of 0.3 cents per kWh available to a renewable energy producer, for example, would increase to 1.5 cents per kWh if a given company complies with the labor rules.
“It’s not like an all or nothing,” she said. “It’s not mandatory, but it’s so sweet that most [employers] will aim to achieve this.
Labor provisions linked to IRA credits are unusual as they are administered through the tax code, but they draw on long-standing legislation that sets prevailing wage requirements for works projects federally funded public funds, Timothy Taylor, employment and litigation attorney at Holland & Knight, told us.
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“That, to some extent, levels the playing field between union and non-union workers,” he said. “I think part of the practical functional effect is trying to displace union workers and union members in those industries.”
In Bustamante’s view, the IRA measures do not include enough mechanisms to compel companies to “verify that these practices are as inclusive and fair as possible”. And because of the way the legislation has been crafted, the IRA is not as explicit in its focus as the bipartisan Infrastructure Act on workers and development in deprived areas which have historically had a high concentration of jobs in the fossil fuel industry, Bustamante said.
“They have these governance structures in place, not only to issue grants and contracts, but also to make sure that there is accountability upstream, having strong reporting on the results of the workforce work and ensuring that there will be a lot of community involvement. and priority in marginalized communities,” he said. “When you work on the tax code, like the Cut Inflation Act does, you really lose control of a lot of that.”
Look forward: The IRS and the US Treasury Department will provide more compliance information soon, likely by the end of the year, Elliot said. Experts expect this guidance to outline the type of documentation companies wishing to claim IRA tax credits will need to keep.
“I have a lot of clients in this space, and they’re all aiming to make sure they meet those requirements. So that’s my barometer,” Elliot said. Treasury and IRS boards.”
Depending on the results of midterm reviews, lawmakers could redouble their efforts to change working conditions or accountability structures, Bustamante said.
“So far we have seen a lot of declarations of commitments to increase production or to increase the construction of renewable projects,” he said. “What we don’t have is really any indication from the companies that these investments are going to prioritize any kind of disadvantaged communities or focus on equity or inclusion.