What Does the Inflation Reduction Act Mean for Energy Buyers in Healthcare?

Updated on October 5, 2022
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The Inflation Reduction Act (IRA) is one of the most important pieces of legislation to affect the energy industry. It is the single largest pro-climate piece of legislation ever passed, ten times bigger than anything similar and is currently being implemented under the leadership of President Biden. Many articles have already been written describing the legislation in great detail. Still the question remains – what kind of an impact does the Inflation Reduction Act have on energy buyers and their choices?

Several elements in the IRA relating to the renewable energy industry affect these choices and assist in affordably securing renewable energy including: 

  • Production tax credits assisting U.S. manufacturers so they can ramp up production of solar panels, wind turbines, batteries, and process key minerals
  • $10 billion investment tax credit for new manufacturing facilities that make clean tech like EVs, wind turbines and solar panels
  • $500 million for manufacturing of items such as electric appliances and heat pumps
  • Consumer incentives to shift to renewables rather than fossil fuel energy sources

Stakeholders often demand action from healthcare organizations to meet sustainability pledges as the expectation in many of these organizations is working toward a carbon-free future. The IRA potentially helps with those long-term goals. Similarly, the act is designed to drive both supply and demand, while encouraging a transition to an economy based upon the production of renewable energy sources. 

What are Some Current Methods for Securing Renewable Energy Solutions in Healthcare?

A few energy buyers at large healthcare organizations secure Power Purchase Agreements or PPAs. However, traditional PPA structures tend to pass significant risks to buyers. Now, newer risk-averse models are beginning to emerge in the renewable energy market. In these newer contract models, a PPA is not needed, and the buyer does not have to commit to an entire windfarm or solar asset. In these innovative new models based on standard retail energy contracts, the risk stays with the energy asset owner or developer and is not passed to the renewable energy customer (i.e., the healthcare organizations). Avoiding this inherent risk is a huge benefit, and allows a healthcare organization that wants a shorter contract, say 5-7 years, a better option than a PPA which may require a term of 15-20 years. 

Cutting edge 24/7 Carbon-Free Energy (CFE) hourly load-matching contracts will also continue to grow in popularity as a way to demonstrate leadership and commitment in driving sustainability objectives. These 24/7 CFE plans are based on evaluation of the current energy needs (energy load) of an organization. Leveraging sophisticated analytics that consider everything that could impact a renewable energy asset’s production such as weather conditions, outages, and forecasted production curves, experts can project hourly energy output from wind, solar and low impact hydro facilities. Similar analytics project customer usage. Combining the data creates a plan to ensure only green energy is used for the organization 100% of the time, 24 hours a day. These solutions have been successfully deployed, even for customers with smaller or dispersed usage across multiple facilities, and many healthcare organizations have it on their radar as an important business/ESG goal. 24/7 CFE is an increasingly important objective as we all work toward a healthier planet with less reliance on carbon producing energy sources.

In addition to the large-scaled solutions and contracts for sizable organizations, many renewable energy brokers assist small to medium sized companies in implementing innovative energy solutions. With the help of the energy professionals, smaller healthcare facilities may often receive energy sourced from a local renewable asset such as hydro, wind or solar power.

What Should the Healthcare Energy Buyer Expect in the Near Future?

The IRA’s energy related provisions are a long-term investment in reshaping the energy grid and how we think about energy supply and demand. With both new generation and significantly increased demand for renewable power, we can expect to see ongoing volatility in energy prices as the market ebbs and flows between supply and demand balance.

New solutions for new renewable generation will continue to evolve over time and most of the IRA driven new generation will take years to deploy. Fortunately, the savings realized from incentives will potentially be passed down to hospitals and clinics in their energy budgets for years to come. The good news is that options exist today, and more options will flow from the impact of the IRA. Overall, being proactive in aligning your facility with expert support and resources will deliver the best choices for meeting both near term and long-term energy sustainability goals.

About the Author:

Eric Alam is CEO at RPD Energy. Eric has managed various retail and wholesale energy businesses over the last 30 years, and has a proven track record across sales, operations, structuring, M&A, and strategy. Prior to RPD Energy, Eric worked at Viridity, World Energy, Commerce Energy, Pennzoil, and Enron. Throughout his career, Eric has gravitated toward leading early-stage and turnaround businesses, and has particular expertise in helping customers identify innovative solutions to meet their energy-related objectives.

About RPD Energy:

RPD Energy facilitates the sourcing, contracting and delivery of green energy solutions for
U.S Businesses. RPD Energy offers directly sourced, variable term, right-sized contracts for green energy and RECs from utility-scale wind and solar facilities without the complexity of traditional PPA/VPPAs. Fortune 500 energy buyers have chosen RPD Energy to work with their suppliers to provide green energy contracts for their data centers, production facilities and corporate headquarters in several regions across the US. RPD Energy is headquartered in Houston, Texas. For more information, please visit: www.rpdenergy.com.

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