Biden’s Inflation Act To Destabilize Electric Grid

The so-called Inflation Reduction Act contains new, very favorable incentives to attract additional investments in wind and solar power of over $270 billion in the next eight years for 155 gigawatts of new wind and solar capacity. The new law is expected to trigger 85 gigawatts of new onshore wind capacity by 2030, with total onshore wind capacity reaching nearly 280 gigawatts by the end of the decade from about 140 gigawatts expected by the end of this year. The additional investment in onshore wind capacity is $160 billion. (Under previous incentives, onshore wind capacity in 2030 was expected to total 193 gigawatts.) The new law is expected to trigger 70 gigawatts of utility-scale solar installations by 2030, with projected total capacity reaching 270 gigawatts in that year. The new solar capacity will result in investments of about $110 billion. However, it will take until 2024 for the solar industry to begin to ramp up and take advantage of the new law because some of the benefits are based on domestic content requirements.

Source: Rystad Energy

The forecaster, Rystad Energy, believes that offshore wind developments, while also incentivized under the law, are unlikely to see significant capacity growth beyond existing forecasts until the 2030s mainly because of the limited supply of wind turbine installation vessels.

Another forecaster, Energy Innovation, expects new investment in wind and solar power to reach $180 billion—about a third less than Rystad’s prediction. According to that forecast, the tax credits contained in the bill should double the capacity of installed wind and solar by 2030.

Both predictions, however, are uncertain due to supply chain problems that are hampering the production of electric vehicles, economic downturns, problems in building transmission infrastructure to move renewable electricity to demand centers and resistance from local communities to new wind and solar developments.

Rystad Assumptions

The Inflation Reduction Act allows utility-scale developers to choose between the 30 percent Investment Tax Credit (ITC) or a per kilowatt-hour Production Tax Credit (PTC). The PTC starts at 3/10th of a cent per kilowatt hour, however, if prevailing wage is used, that rate quintuples to 1.5 cents per kilowatt hour. That rate should increase going forward, based on inflation. The PTC incentive is provided for ten years. Rystad modeled that a 250-megawatt solar project would benefit more from the PTC versus the ITC until high-interest rates – 7.5 percent discount rate – result, due to the heavy up-front costs.

U.S. Electricity Mix

In 2021, non-hydroelectric renewable energy accounted for about 10.1 percent of total U.S. energy consumption and 13.8 percent of electricity generation. About 60 percent of generation last year was supplied by coal and natural gas, which President Biden wants to be replaced with primarily wind and solar power. He also wants wind and solar power to cover increased demand including that which arises from his electric vehicle goals. Elon Musk said electricity generation in the United States must double to power electric vehicles.

The Situation in California

Wind and solar power, Biden’s preferred choices, are both intermittent sources of power and as such need to be backed up by either natural gas or coal power or very expensive batteries, increasing electricity prices in California, which are the second highest in the nation. Residential electricity prices in California are already 81 percent higher than the national average.

The recent heat wave indicates how the reliability of California’s power grid suffers due to insufficient dispatchable power. The heat wave greatly increased electricity demand and initiated an energy crisis, mainly due to the state electric grid’s overreliance on unreliable renewable energy during record energy demand. During the heat wave, California’s system operator begged consumers to use less electricity during the early evening when people return home from work, turn up their air conditioners and begin charging their electric vehicles.  The system operator had to administer rolling blackouts and thousands of customers had their power temporarily shut off.  California governor Gavin Newsom proclaimed a state of emergency and temporarily reactivated five natural gas plants that are brought on-line when the state’s grid fails.

California has been repeatedly forced to shut down solar and wind power since at least 2016 because renewable-energy sources have been damaging the power grid and causing blackouts. Because of their unreliability, grid operators must keep excess reserves running, which places extra stress on the grid, leading to brownouts or blackouts.

Governor Newsom has now decided to keep the Diablo Canyon nuclear plant–—the state’s last remaining nuclear plant—on-line for at least an additional 5 years. Things could get worse as the state seeks to go all-electric in the next decade, with the elimination of gasoline and diesel powered cars by 2035. There seems to be little consideration for how California will be able to satisfy the rising demand for the electricity that electric vehicles require. California imports over 30 percent of its energy from outside the state, and it is by far the nation’s largest net electrical-importing state.

A U.S. Federal Energy Regulatory Commission (FERC) investigation found that there is a “significant risk” of electricity in the United States becoming unreliable because wind and solar are intermittent. Power grids require demand to match supply, which is a major problem for variable wind and solar power working part-time. Conventional power plants, such as nuclear, natural gas and coal plants, can adjust output accordingly, because they put out a steady and predictable supply of electricity.

Germany’s Experience

Germany has been building solar and wind power over the past two decades while closing nuclear reactors and coal plants, and yet its carbon dioxide emissions increased 5 percent last year. Further, Germany’s subsidies and support for renewable energy increased residential power prices to three times those of the United States even before the Russian invasion of Ukraine. Moreover, wind and solar have damaged Germany’s power grid. Germany paid wind farms $548 million in 2016 to switch off production in order to prevent damage to the country’s electric grid. As a result, Germany has been forced to recommission coal-power plants to keep the lights on and the power grid reliable. Russia’s invasion of Ukraine is making matters substantially worse as shortages of natural gas have caused German industry to shutter. The country is unsure whether it will have sufficient energy this winter and has been taking steps to raise temperatures in buildings during summer months and decrease them from normal levels in winter, along with other conservation measures.


Biden’s climate/tax bill will greatly incentivize wind and solar power with a projected 155 gigawatts coming on-line over the next 8 years. Many Americans will be duped into thinking that it is a good thing because there is no fuel component to their price. However, the intermittent nature of their operation will mean that the nation’s grid will require back-up power to keep the lights on, which is not included in the costs that are quoted for wind and solar power. These costs are enormous and are showing up in ratepayers’ bills. California’s renewable energy folly is becoming clear as rolling blackouts affect the state during heat waves. Further, its move to ban gasoline and diesel vehicles is putting added pressure on the grid as electric vehicle adoption continues. It is unclear how the state expects to ensure reliable power in the future as demand increases.

Jennifer Granholm, Biden’s energy secretary, said recently that “California is in the lead” on energy and “can show the rest of the nation how it is done.” President Biden has similar goals as California, which if implemented throughout this country will certainly force the nation into expensive electricity production to pay for the batteries needed as back-up. Power will come sporadic when the wind doesn’t blow and the sun doesn’t shine, putting the United States in the situation of third-world countries.

*This article was adapted from content originally published by the Institute for Energy Research.

Speak Your Mind


Anonymous says:
Your email has been received. Thank you for signing up.