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We're in the Money: Electrical contractors can benefit from the recent alphabet soup of energy legislation

By Chuck Ross | Jan 15, 2024
STOCK.ADOBE.COM / DGIM STUDIO / STOCKAKIA
The construction industry is just starting to feel the effect of several pieces of bipartisan legislation passed during the first two years of the current administration. The 2021 Infrastructure Investment and Jobs Act (IIJA) and 2022’s CHIPS and Science Act and Inflation Reduction Act (IRA) are now beginning to have an influence

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The construction industry is just starting to feel the effect of several pieces of bipartisan legislation passed during the first two years of the current administration. The 2021 Infrastructure Investment and Jobs Act (IIJA) and 2022’s CHIPS and Science Act and Inflation Reduction Act (IRA) are now beginning to have an influence, in terms of shovels in the ground (and solar panels on roofs), with incentives for a range of technologies from home energy storage to billion-dollar semiconductor factories.

We’ve learned from readers that electrical contractors are following these developments and are interested to learn exactly what’s in these expansive programs for them as related projects gear up. So, let’s break down the specifics of the closely related laws and the opportunities they might offer ECs. In some cases, especially where tax credits are concerned, the connections might be easy to draw.

Much of the money, however, will be allocated in competitive grant programs over the course of the laws’ defined terms, so those opportunities will be most significant for electrical contractors located in regions where grants are awarded. Knowing the kinds of projects up for incentives could help you accurately target business development efforts.

IIJA’s wide reach

President Biden signed the IIJA, also called the Bipartisan Infrastructure Law, on Nov. 15, 2021. It dedicates $1.2 trillion in spending, $550 billion of which is new funding, to be allocated over the succeeding five years. Some money is going to obvious electrical-focused development—such as the $80 billion for power and grid-related improvements. Other funding categories could also include significant electrical work behind the scenes. (If your company bids on IIJA-related projects, be aware of related Made in America requirements with which your product specifications will need to comply.)

  • Roads, bridges and major projects ($110 billion). The funding here is evenly split between increased contract authority for the Highway Trust Fund and supplemental appropriations for specific projects as they arise. This category’s title might bring to mind concrete and asphalt, but lighting, signaling and underground line-laying all could be important electrical roles in these efforts.
  • Power and grid ($80 billion). This funding category incorporates a range of project types, from grid infrastructure and reliability to clean-energy supply chains (think battery processing, manufacturing and recycling, for one). The supply chain category will likely bring more funding to the Midwest and Southeast, where battery makers are investing heavily.
  • Passenger and freight rail ($66 billion), airports ($25 billion), ports and waterways ($17 billion). The nation’s rail system is garnering the lion’s share of these transportation efforts, with special attention for the Northeast Corridor between Washington, D.C., and Boston, which sees the highest passenger rail traffic. (For more on these developments, see “Northeast Railway Corridor Rebuild Plan Announced” on page 14.) But airport terminals also are gaining funds for upgrades, as are Army Corps of Engineers port and waterway construction and maintenance efforts.
  • Broadband ($65 billion). The biggest chunk of these funds will fund local broadband deployment, especially in currently hard-to-reach rural areas, through grants to states and tribal authorities.
  • Public transit ($39 billion) and electric vehicles and buses ($15 billion). Electrifying transportation is a key goal of this legislation and the IRA, and this funding supports that goal, helping to fund no- and low-emission public transit vehicle purchases and the charging infrastructure they require.
  • Water infrastructure ($48 billion). Much of this appropriation will be going to lead pipe remediation, along with efforts to improve stressed water infrastructure in the drought-prone West.
  • Resiliency ($47 billion). Much of this money is for issues related to extreme weather events, including flood mitigation, drought and wildfire management. However, cybersecurity and building resiliency could offer opportunities for ECs.

STOCK.ADOBE.COM / DGIM STUDIO / STOCKAKIA

Chipping away at the semiconductor backlog

President Biden signed the CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act on Aug. 9, 2022. This act directs $280 billion over 10 years toward research, commercialization and production of semiconductor chips. The largest portion—$200 billion—is going toward basic technology research and development, along with workforce training. However, a sizable $50 billion is going toward expanding domestic semiconductor manufacturing.

The legislation was developed to address the semiconductor shortage that cost the U.S. economy $250 billion in 2021, according to the U.S. Department of Commerce. A dependence on overseas producers (Taiwan, South Korea and Japan currently lead the industry) as shipping logistics collapsed during the pandemic left automotive and electronics manufacturers here high and dry. Though supplies have normalized again, Congress decided more production needed to return to U.S. shores. In the 1990s, 37% of worldwide production was located here, but that figure has since dropped to 12%.

Data Source: Dodge Construction Network / The White House ; SHUTTERSTOCK / NET VECTOR

 

Leading industry players are already ramping up U.S. expansion efforts, with a number of new plants announced or under construction. This construction boom is aided by a 25% advanced manufacturing investment tax credit available until Jan. 1, 2027. Called “fabs,” semiconductor fabrication plants can cost upward of $10 billion each to construct, so they offer plenty of opportunities for qualifying ECs. However, these jobs aren’t spread evenly across the country because chip-making has become highly regional. The following states are particular hot spots:

  • Arizona. This state has been a hub for fab development since Intel Corp., Santa Clara, Calif., built its first facility here in 1980. The company started two new plants in 2021, expected to total $20 billion and to be up and running sometime in 2024. Global leader Taiwan Semiconductor Manufacturing Co. completed initial construction of its $40 billion Arizona fab in 2022, but it won’t open until 2025 due to difficulties finding enough qualified workers to install its highly sophisticated equipment.
  • Texas. Samsung, Ridgefield Park, N.J., is midconstruction for its Taylor, Texas, plant, which has jumped in cost to $25 billion from an initially announced $17 billion. The company is hoping to start up operations there by 2025 and has said it will be only the first of up to 10 fabs there by the early 2040s. Texas Instruments Inc., Dallas, began constructing its new Sherman, Texas, fab in 2022, with completion planned by 2025. The $30 billion investment is being called the largest economic venture in the state’s history.
  • Ohio. Intel is also investing heavily in the Buckeye State, with two fabs under construction outside Columbus in Licking County. Also planned for a 2025 startup, the $20 billion plants could be just the first two of eight fabs the company wants to construct on the 1,000-acre “megasite.”
  • New York. Several smaller players have big plans focused on New York State, including Micron Technology Inc., Boise, Idaho. The company is planning what it calls the “largest semiconductor facility in the history of the United States” in Clay, N.Y., with construction scheduled to start in 2024 and end in “the latter half of the decade,” according to Micron press releases. In May, GlobalFoundries, Malta, N.Y., closed on the purchase of 800 acres adjacent to its existing $15 billion facility in Malta to accommodate a $1 billion expansion. And Wolfspeed Inc., Durham, N.C., is continuing to ramp up production at its Marcy, N.Y., fab, completed in 2022. Full production capacity is expected by this year.
  • Idaho. Micron began construction in October 2023 on a $15 billion fab co-­located with its Boise headquarters. Completion is expected in 2025 and the company says it will incorporate the single largest U.S. cleanroom.
  • Florida. In July 2023, Rogue Valley Microdevices, Medford, Ore., announced its plans for a Palm Bay, Fla., plant scheduled for 2025. In fab economics, this project is fairly small, with a projected price tag of $30 million.

Boost renewables and cut inflation

The $750 billion IRA was signed into law in August 2022, and its omnibus provisions stretch from healthcare to the Internal Revenue Service. Electrical contractors will see expanded opportunities in the bill’s clean energy offerings, which establish a clear timeline for renewable energy tax credits that had been the subject of political gamesmanship for the last decade. Now, developers of utility-scale solar and wind projects will have access to tax incentives through 2032. Specific provisions of particular interest to ECs include:

Utility/commercial-scale renewables

Production tax credits, which provide a base-level incentive for every kilowatt generated, have been expanded from wind projects to all renewable generating sources (storage not included). Multipliers can be applied to projects that meet prevailing wage and apprenticeship targets and Made in America guidelines. Additionally, investment tax credits are also available across clean energy technologies, including storage, at a starting level of 6% of project cost. Multipliers can boost this total up to 30% for projects that meet wage, apprenticeship and U.S. materials targets.

Residential solar

The homeowners’ solar tax credit has gone back up to 30% (it had begun a phase-out period and dropped to 26% in 2022), and batteries are now fully included, even on a standalone basis. The latter point is timely, given some utilities are beginning to roll out their incentives for battery systems on their own.

Home efficiency

The bill includes $4.5 billion in grants to states to provide rebates for new efficient electric appliances. The rebates will vary by state, but could total up to $800 for a new electric range—and tax credits could be available, by state, to upgrade home electrical panels to accommodate these new appliances.

Electric vehicles

Tax credits that ran out on Dec. 31, 2021, have been reinstated at $7,500 through 2032 for EVs assembled in North America (this includes most components of those vehicles’ batteries, too). However, used EVs can qualify for up to $4,000 or 30% of the sale price, regardless of where they were made. And home charging equipment also can earn a 30% tax credit of up to $1,000. Commercial charger incentive limits have risen from $30,000 per charger to $100,000.

stock.adobe.com / DGIM studio / stockakia; shutterstock / Net Vector

About The Author

ROSS has covered building and energy technologies and electric-utility business issues for more than 25 years. Contact him at [email protected].

 

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