A lot is at stake for President Joe Biden – and the US energy transition – at the US midterm elections on 8 November. A best-case scenario would see the Democrats maintain control of the House of Representatives and slightly expand their wafer-thin control of the Senate. A worst-case scenario for Biden would see Republicans win back full control of Congress and the next two years consumed by legislative inertia.
Biden has been plagued by consistently low approval ratings, but the truth is, the last two years have seen more progress on a legislative front than any presidential administration has achieved for decades. The ‘Chips Plus’ Act, the largest investment in US research and science in decades, represents the first meaningful federal industrial policy response to the rise of China. Meanwhile, the November 2021 Bipartisan Infrastructure Law and the August 2022 Inflation Reduction Act (IRA) together represent the first serious legislative response to the climate crisis from the federal government – a far bigger achievement than anything presidents Bill Clinton or Barack Obama achieved on the climate front.
To mark the US midterm elections and midway point in Biden’s presidency, Energy Monitor analyses what has been achieved so far in the US energy transition, both during Biden’s presidency and since the year 2000. In addition, we look at how the transition is set to be turbocharged as the IRA comes into effect.
Progress in power
The electricity sector in the US has been rapidly decarbonising over the past decade: in 2000, coal generated more than 50% of US electricity, whereas now it is around 20%. Renewables now collectively generate more electricity than coal, with low-carbon sources including nuclear now producing more than 40% of US electricity.
The first year of the Biden presidency saw a new record in renewable deployment, with 39GW of new wind and solar power brought online in 2021, shows data from the American Council on Renewable Energy (ACORE) that was shared with Energy Monitor.
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Dan Bakal, senior program director of climate and energy at the think tank Ceres, adds that in 2022, some 75% of all new electric capacity additions are projected to be from wind, solar and storage.
Project pipeline data from GlobalData, Energy Monitor’s parent company, shows these positive trends are set to continue, even before the impacts of the IRA come into force in the coming years. Some 155GW of solar power capacity is in the pipeline across the country, while a combined 114GW of onshore and offshore wind power capacity is also planned in all parts of the country other than the Republican-controlled south, where lower wind speeds make wind projects less economical.
These solar and wind pipelines compare favourably with 46GW of upcoming hydropower capacity and 47GW of upcoming natural gas capacity, which are the next biggest electricity pipelines, according to GlobalData.
Booming oil and gas
However, just as clean energy needs to be propagated, so too do fossil fuel industries need to be wound down, and – unfortunately for the planet – US progress in this latter area is somewhat wanting.
The shale boom in the Permian Basin has seen the US overtake both Russia and Saudi Arabia to become the world’s biggest producer of oil and gas. The country also retains a significant pipeline of new oil and gas fields that are set to be issued licences for extraction, despite the fact the International Energy Agency said in its net-zero 2050 pathway, published in 2021, that no new oil and gas fields are needed if the world is to limit warming to 1.5°C.
Russia’s war in Ukraine, and the subsequent squeeze on the global gas market, has led to a surge in demand for liquefied natural gas (LNG) around the world. “Even as global gas demand falters, LNG's share of the pie is poised to grow,” says TJ Conway, principal at the think tank RMI.
The US is seeking to make the most of this boom with seven LNG liquefaction terminals, and a further 25 in the pipeline, shows data from GlobalData. If all these projects are realised, they would give the country more LNG export capacity than anywhere else in the world.
The US energy transition after the midterm elections
All the aforementioned trends are largely the result of market forces. This is as true of oil and gas companies profiting from the global fossil fuel market as it is of the electricity market, where renewables like solar and wind now provide the cheapest power available. “We are incredibly fortunate the economics of renewable energy technologies improved so dramatically over the past decade,” says ACORE’s Gregory Wetstone.
These market conditions mean that in the power sector, the impact of the clean energy tax incentives in the IRA is set to be momentous. “We project that investments in renewable generation and enabling technologies will accelerate from the current $50–60bn annually to $90–100bn annually, which is more in line with our national climate goals,” says Wetstone.
“The IRA pushes the US economy over a beneficial tipping point, propelling us from today’s slower growth business as usual path to a trajectory that promises both sustained expansion for clean energy and lower energy costs economy-wide,” says John Coequyt, director of US government affairs at RMI. “It accelerates the electrification of everything from cars and buses to space and water heaters.”
Projections from the US Solar Energy Industries Association demonstrate the bill’s potential. Over the next ten years, the IRA will lead to 69% more solar deployed than would otherwise be expected under a no-IRA scenario. By 2032, the country should have installed 682GW of total solar capacity, more than five times the amount installed today, and will produce more power than coal does today. Meanwhile, solar industry employment is set to more than double from 255,000 today to 538,000 by 2032.
Energy Innovation: Policy & Technology LLC, a California-based policy company, has separately found that the IRA is the most significant federal clean energy legislation in US history, and should cut greenhouse gas emissions by 37–43% below 2005 levels by 2030. Additional executive and state actions mean the US has a shot of meeting the Biden administration’s target of a 50–52% cut by the same year.
It is not all good news, though: the oil and gas sector is set to continue booming irrespective of the IRA, until a point when falling demand will bring it crashing down to earth. The bill raises costs for operators by imposing a methane fee and increasing royalties to be paid to the US Treasury, but the impact of this on oil barrel break-even margins will be small at less than $3, according to analysis from S&P Platts. More significantly, the IRA reinstates a major oil drilling lease sale in the Gulf of Mexico issued in November 2021 but subsequently cancelled by a federal judge out of climate concerns. It also requires that three further offshore lease sales take place, which were supposed to occur in 2022 but were cancelled by the Interior Department.
In the electricity sector, ACORE’s Wetstone adds that there now needs to be a greater policy focus on high-voltage transmission lines to accommodate the renewables growth anticipated under the IRA. Ceres’ Bakal adds that concerns remain over the “continued overreliance on natural gas”, as well as utilities that continue to keep coal plants online due to their reluctance to take asset write-downs.
Nevertheless, massive change is coming, thanks to the legislative and policy achievements of the first two years of the Biden administration. The current global energy crisis, which has led to sky-high prices and a weakening world economy, is set to only increase the attractiveness of renewables going forward. That will bolster the US energy transition, regardless of the outcome of the midterm elections.