Republicans to Control House, How Much Risk of Inflation Reduction Act Repeal?

Renewable energy advocates entered the 2022 election season with unprecedented optimism. The Inflation Reduction Act promised to end the cyclical swings in renewable energy demand caused by expiring tax credits and bring long-term stability to wind and solar development.

However, during the midterm elections, some candidates vowed to repeal this "latest price hike bill" from the Democrats. After it passed without a single Republican vote, it has been portrayed in campaign rhetoric as the "latest threat" to the American way of life.

This scene feels familiar. When the Affordable Care Act became law in early 2010, it quickly sparked sharp partisan opposition: supporters praised it as a transformation of American healthcare, while opponents vowed to swiftly end this "infringement" on personal freedom. What followed was years of political battles, with healthcare access for approximately 8 to 10 million Americans hanging in the balance each election cycle.

The renewable energy industry is well accustomed to this political rollercoaster. For those who thought the Inflation Reduction Act was too good to be true, a prolonged political struggle seemed inevitable. Legal and policy experts—including some who lived through the Affordable Care Act battles—say that outright repeal of the Inflation Reduction Act is unlikely. But they note that this won't stop the law from remaining a focal point of political rhetoric for years to come, even as renewable energy advocates again call for policy stability.

Lessons from the past

According to Michael Strazzella, a lawyer who studied the Affordable Care Act case and now leads federal government relations at Buchanan Ingersoll & Rooney, the Inflation Reduction Act's scale, significance, and partisan nature closely mirror the Affordable Care Act. This similarity means stakeholders—and politicians on Capitol Hill—can learn from the Republicans' unsuccessful efforts to overturn the healthcare law.

Strazzella believes Republicans will scrutinize and attack the Inflation Reduction Act over the next two years. But he thinks they are unlikely to fully overturn the law. Like the Affordable Care Act, certain provisions of the Inflation Reduction Act are popular among the Republican base, and as manufacturing expansion and job growth land in conservative communities, these provisions may become even more popular with local residents. This will make repealing the law politically tricky.

Furthermore, Strazzella said the Inflation Reduction Act may have short-term political value for Republicans. Republicans hoping to rally support for their next presidential candidate before the 2024 election may not want to see such a polarizing, costly, Democrat-backed law removed before the vote.

"(The Inflation Reduction Act) is a ready-made slogan because of its cost, the way it was passed, and its proponents," Strazzella said. So we can expect more calls for oversight or even repeal, but don't be surprised if these protests fade after 2024 with little substantive action against the law.

"For those who want to take back the House, it's easy to say the Inflation Reduction Act was too hasty, too aggressive. But replacing such a massive bill is difficult," he said, again pointing to the similarity with Republican attempts to "repeal and replace" the Affordable Care Act: "It's one thing to propose how to get people insured; it's another to say we're going to take away coverage from these people and offer an alternative model."

Political playbook

Strazzella said how this election- and message-driven strategy toward the Inflation Reduction Act unfolds will largely depend on the balance of power in Washington. Alex McDonough, a partner at Pioneer Public Affairs who lobbied for the Inflation Reduction Act's passage, believes Republicans would be much less likely to attempt repealing the law if they control only one chamber.

Instead, House Republicans may fully leverage oversight procedures to draw attention to the Inflation Reduction Act before the 2024 election, said Luke Bolar, chief external affairs officer at ClearPath, a nonpartisan think tank opposed to the Inflation Reduction Act. Bolar has not heard any member of Congress say they will overturn the clean energy tax credits in the bill, "but they've signaled a lot of oversight."

As the House majority, Republicans will have the power to schedule hearings and control the committee agenda. Bolar said House Republicans are likely to summon heads of federal agencies responsible for implementing the Inflation Reduction Act to answer questions about how funds are being used. He said these activities may not end in votes or new laws but will ensure the Biden administration is held accountable.

The strategy of heightened oversight aligns with signals Republicans have already sent about their plans for the next two years. McDonough noted another tactic Republicans might try is delaying the implementation of the Inflation Reduction Act. The longer the delay, the more they can claim the law has failed. But just as the Affordable Care Act was built on Republican healthcare proposals, the Inflation Reduction Act includes many Republican provisions, such as expanded tax credits for carbon capture, nuclear power, and other generation technologies. Republicans will be reluctant to harm progress on projects they support, which could create divisions within the party.

"The Affordable Care Act... was easier to make a single, clear target," he said. "The difference here is that you have broadly appealing and very different programs and incentives. There are incentives for large-scale wind and solar development; carbon capture and storage; hydrogen, which is a major priority for many industries; nuclear reactor tax credits; hydropower incentives—and that's just on the energy side... The list goes on. I think this will help protect the bill from a targeted attack because many people are ready to defend it."

McDonough added that even if Republicans decide to use delaying tactics to block the Inflation Reduction Act, their options are limited.

"I think procedurally, they have no chance to delay it because, unlike most legislation... this law doesn't require future appropriations," McDonough said. "Funding was completed at the time of enactment, so everything in the bill is ready for the administration to implement."

Real-world complexities

Regardless of political threats, the Inflation Reduction Act may still face threats from the market. Supply chain imbalances remain a problem for the renewable energy industry. If the number of announced wind and solar projects grows faster than the industry's ability to build, demand could keep renewable energy prices rising or directly lead to project cancellations.

"As we've seen in the past, there will be people who try to take one or two failed projects or underperforming programs and project that onto everything else," McDonough said. "I think that needs to be pushed back against, which is why... groundwork needs to be laid to talk about success stories."

The ultimate fate of the Inflation Reduction Act may depend on timing. Concerns that losing health insurance coverage could trigger voter backlash solidified the Affordable Care Act's status as an untouchable American law. Insurance exchanges were operational in less than four years.

In contrast, building new manufacturing capacity to support the domestic supply chain envisioned by the Inflation Reduction Act could take decades.

"I think when you talk about bills like this in purely economic terms, it's different," Strazzella said. "Until people actually pay less (on their electricity bills), it's still conceptual."

McDonough said that over time, as more jobs depend on the Inflation Reduction Act, bipartisan support will grow. But in the meantime, he said clean energy advocates must work to educate the public, promote the law's successes, and ensure the Inflation Reduction Act doesn't "die by a thousand cuts."

"That's why there's so much focus now on implementation, getting these projects, especially new ones, developed, integrated, and implemented—and getting the money out the door," McDonough said.

The energy transition continues

Meanwhile, the industry is moving forward based on the assumption that the projects and incentives created by the Inflation Reduction Act will be available for at least 10 years, according to Brendan Bell, chief operating officer at Aligned Climate Capital. Bell said renewable energy companies generally believe that Republican attacks on the Inflation Reduction Act's clean energy provisions are unlikely—and even if they happen, overturning its clean energy tax credits would be difficult.

"To stop people from enjoying tax credits, they'd have to stop people from filing taxes," Bell said. "The reality is these are real projects, and the program has existed for years... Investors and companies are very familiar with these projects because they are the foundational ones that have driven the clean energy transition over the past decade. So investors and companies feel very reassured. Projects are moving forward."

Bell said that even if the Inflation Reduction Act faces political attacks, the industry is now mature enough that the loss, delay, or reduction of tax credits seems unlikely to completely halt renewable energy development. Tax credits are no longer the sole driver for new solar and wind projects. "Coal plants are being shut down by utilities and replaced with wind and solar because they're cheaper," Bell said.

Nevertheless, Bell said renewable energy companies have shown interest in getting new projects online as quickly as possible. Like previous tax credits, the Inflation Reduction Act's tax credits create a sense of urgency that pushes companies to rapidly ramp up production to build arguments against attacks on the law.

"I think even if those attacks and repeal efforts come, supporters will be well prepared," McDonough said. "I think there will be plenty of examples and opportunities for people working on these projects to show that clean energy investment is here... and needs to continue."

ClearPath's Bolar said political anxiety around the Inflation Reduction Act could also have a positive impact on the renewable energy industry. He said that despite the law's numerous tax credits and incentives, it does little to address the permitting and interconnection backlogs that have hindered renewable energy deployment in recent years.

Bolar said if administrative delays ultimately pose a threat that Republicans could use to argue the Inflation Reduction Act is ineffective, it might push Democrats to change positions they have historically been reluctant to discuss.