The Inflation Reduction Act, the historic measure to fight climate change signed into law earlier this month by President Biden, is projected to invest $1.5 billion in clean power generation and storage to Arkansas over the next eight years. The bill — which provides tax credits for solar power and other incentives — is being lauded as good both for the state’s environment and economy.
The bill covers a wide range of incentives targeted at bettering energy efficiency, reducing carbon emissions and investing in environmental justice. (The latter includes projects such as making affordable housing energy-efficient.) Clean energy tax credits have been expanded for consumer and business applications alike. Homeowners can get tax credits for investing in home energy efficiency, including rooftop solar installations.
The demand in Arkansas for solar energy has been steadily increasing in the last few years. Longtime environmental advocate Glen Hooks, Arkansas policy manager at Audubon Delta, who has witnessed the growth of green energy in Arkansas firsthand, noted some of those changes: According to Hooks, at the turn of the century, the state was powered by coal and had few, if any, green jobs. In 2021, there were 19,965 Arkansas workers employed in clean energy jobs. The state’s two largest coal plants are on the path to retirement, there are now two electric vehicle manufacturing plants, investments in wind power are on the rise and the solar industry in Arkansas is thriving.
According to the U.S. Energy Information Administration, solar still accounts for a small percentage of the state’s renewable electricity generation, but the solar power generated in 2021 was 18 times greater than in 2016.
Arkansas cities are primed for a switch to solar to power government buildings, water plants and more. In 2020, Clarksville, in partnership with Scenic Hill Solar, was the first city in Arkansas to power all government operations with solar power. Scenic Hill is also working with Hot Springs to transform its municipal operations to solar power; Fayetteville, Rogers, Greenwood, Harrison, Cabot and other towns are also turning to solar to power operations. The Batesville School District made national headlines after installing a solar array and using its energy savings to give teacher raises.
“Arkansas is in a great position to help lead our nation’s transition to a clean energy economy,” Katie Niebaum, president at Delta Solar, an Arkansas company that provides solar technology to agricultural, commercial and industrial customers. “We are geographically well situated to generate solar energy, and we have really strong state policy.”
Though Arkansas offers no direct tax incentives, state policy is friendly toward solar power. In 2019, the Arkansas legislature passed the Solar Access Act, which allows third-party financing of solar projects. That opened the market for tax-exempt entities, like school districts and cities. State law also permits net-metering, when customers can receive credit for excess electricity sent back to the power grid. The act projects that more than 150,000 Arkansas households will install rooftop solar panels.
“On all fronts, both the certainty and the flexibility, the comprehensive nature of the incentives as well as the incentives to move production back to the United States, each of those individually is helpful, but collectively they are very powerful,” former Lt. Gov. Bill Halter, CEO of Scenic Hill Solar, said.
Halter said the incentives will be important in bringing back domestic production and related jobs. He also highlighted the significance of provisions for battery storage.
“There is a dramatic improvement with respect to the economic incentives for battery storage and that is very important for utilizing wind and solar and other forms of renewable energy on the grid because the batteries can address the problem of intermittency of the availability of that generation,” Halter said.
“The good news with solar is that it is providing both economic and environmental benefits, so it’s a win-win for both priorities,” Niebaum said.
Voting for the Inflation Reduction Act was split firmly along party lines: no Republicans voted yes. U.S. Sen. John Boozman said he did not support the bill because he did not believe it would help the economy, and feared it would undermine existing agricultural policy.
But Hooks said he believes the law’s $20 billion reserved for agricultural conservation and the $5 billion for forestry will be a positive for Arkansans.
“The biggest anti-environmental talking point you see is people trying to force you into that false claim between having a healthy economy and a healthy environment. I think what we’re going to be able to see in the next several years is that we can have both,” Hooks said.
The Inflation Reduction Act is much scaled down from the $555 billion proposed in last year’s Build Back Better framework, and it includes concessions to the fossil fuel industry, specifically allowances for offshore drilling. President Biden’s initial goal of a 50% reduction in greenhouse gas emissions by the end of the decade is still looking unlikely. Still, research firm Rhodium estimates that with this legislation the U.S. can hit around a 40% reduction of 2005 level emissions by 2030.
“From top to bottom, this is a positive bill not only for the country, but also for the state. I think it’s going to mean good things for Arkansas,” Hooks said.
The law’s reforms in how the U.S. pays for prescription drugs, restoration of the Internal Revenue Service workforce levels to increase oversight and implementation of corporate taxes are projected to balance the cost of the tax credits.