One of President Trump’s first-day executive orders seemed as if it could doom billions of dollars of grants, loans, and tax credits from the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL). However, CFOs pursuing subsidies for green energy and infrastructure projects shouldn’t abandon hope. The broadly written order could still allow many of the subsidies, an energy industry expert told CFO Brew.
“There’s bipartisan support for renewables,” Earl Simpkins, a PwC board member who leads its energy strategy team, told CFO Brew, and enough Republicans want green energy funding for their states that it could be protected. “While there may be a temporary suspension” of some funding—the order includes a 90-day review period—“there are [renewable energy] jobs in states” like Texas, which gets 40% of its energy from renewable sources.
“It’s not like that’s just going to get cut off right away,” he said.
At a minimum, money will stop flowing, at least temporarily, for some incentives in the IRA and the BIL, which is also referred to as the Infrastructure Investment and Jobs Act (IIJA). Agencies that administer “grants, loans, contracts, or any other financial disbursements” paid for by either law have 90 days to report money going toward things that violate the new administration’s energy policy, such as subsidies for electric vehicles, according to Trump’s executive order.
Unclear skies. Of course, there’s a difference between funding with some built-in political protection and the government continuing to provide it.
“It’s not 100% clear which specific incentives are threatened,” Simpkins said. However, the Biden administration acted to preempt clawbacks of most IRA grants by ensuring that contracts were signed for 84% of the allotted funds.
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With uncertainty over the future of the incentives not yet awarded and potentially those already awarded, businesses should be watching what happens with the new administration regardless of whether they’ve already gotten funding or are applying for money, Simpkins said.
“Companies have established war rooms to make sure that they’re up to speed on the status of the executive orders and what’s happening each day,” he said.
Big picture. For businesses pursuing IRA or BIL incentives, it might be tough not to focus on the executive order’s potential to cut them off. But a broader reading of the executive order shows that the Trump administration is leaving room for developing renewable energy. The order is not so much a series of specific things the president wants done as an outline of the approach he wants his government to take, Simpkins said.
That approach is led by developing fossil fuels, but it also “says they want a balanced energy mix.” That includes renewable energy, he said, even if the order doesn’t mention the words “solar” or “wind.”
…and a bag of Chips? Amid the uncertainty over funding for IRA and BIL incentives, grants under the Chips Act—a law signed by Biden that incentivizes building semiconductor chip factories in the US with grants, loans, and tax credits—seem safe. Biden’s Commerce Secretary, Gina Raimondo, was told by her potential successor, Trump nominee Howard Lutnick, “that he’s committed to the initiative” in a meeting the week before Trump’s inauguration, according to Bloomberg.