How will the Inflation Reduction Act affect indoor agriculture businesses?

Business Exclusives from Urban Ag News

By Sam Milton

For business owners and operators in the indoor agriculture or controlled environment agriculture (CEA) space, whether you grow leafy greens, strawberries, or cannabis, or those  support these businesses, the main questions about the Inflation Reduction Act of 2022 are most likely going to be: 

What is the Inflation Reduction Act? 

How will the Inflation Reduction Act help CEA businesses be greener?

Will the Inflation Reduction Act help CEA businesses earn more revenue?

What are the next steps for interested businesses?

So what is the Inflation Reduction Act of 2022? 

There are two core elements of the Act: 

1) to advance the adoption of clean energy technologies and,  

2) to promote the use of climate-friendly agricultural techniques and products

It was signed into law by President Joe Biden on August 16, 2022, based on the ambitious but scuttled Build Back Better Act

The Act is slated to activate over $1 trillion in spending on energy and climate change, making it the largest investment into addressing climate change in United States history. 

According to several independent analyses, the law is projected to reduce 2030 U.S. greenhouse gas emissions to 40% below 2005 levels

It also supports:

  • broader deficit reduction efforts, 
  • provides Affordable Care Act subsidies, 
  • re-invigorates prescription drug reforms, and 
  • reforming elements of the tax code. 

Businesses that purchase large quantities of energy and/or produce agricultural goods will want to stay tuned for developments related to the IRA. 

How will the Inflation Reduction Act help CEA businesses be greener?

Three aspects of the Act should help indoor farmers reduce the energy and environmental footprint of their operations: reduced cost for grid-based and onsite clean energy, and additional funding for a key clean energy U.S. Department of Agriculture (USDA) program.

Reduced costs of grid-based clean energy

The Act incentivizes the creation of utility-scale renewable energy generation in the U.S. One of the primary benefits that indoor farmers – and all power users for that matter – will see is steadily lowering costs for that clean power. Clean energy will likely become even more competitive against fossil fuel-based electricity, making the promise of a net-zero carbon indoor farm more attainable.  Especially as CEA operators will feel increased pressure to operate their businesses with a lower carbon footprint, buying clean power from the grid will become an increasingly attractive option to do so.

Reduced costs of on-site clean energy technology

The Act extends the Investment Tax Credit for some technologies that may be directly installed in an indoor farm. For example, Combined Heat and Power, waste energy recovery systems, energy storage, biogas digesters, microgrid technology, geothermal heat pumps, and other clean energy technology will benefit, and as a result, the cost of adopting these technologies will likely drop. Customers who install and operate these technologies at facilities in brownfield sites, in certain low-income communities, or on tribal land will see additional benefits.

Reduced costs of clean vehicles

For farms wishing to operate a clean fuel vehicle fleet, the Act will reduce the upfront cost of new or pre-owned electric vehicles by extending and expanding a popular federal tax credit.

Strengthened USDA programs

The USDA will be a recipient of billions of dollars from the Act. If an indoor farm benefits from a USDA program, it will likely see some of the Act funds. For example, the USDA Rural Energy for America Program (REAP) will receive $2 billion through 2031 for competitive grants and loan guarantees to farms – including to urban indoor farms – for renewable energy systems or energy efficiency improvements. 

Will the Inflation Reduction Act help CEA businesses earn more revenue?

Perhaps one of the most intriguing parts of the Act is that it actively supports the development of agricultural processes and products that actively reduce carbon emissions. The authors of the Act, to be sure, primarily intended outdoor farmers to be the ones pursuing these activities. Typically, these activities would include improving ground and surface water, soil health, air quality, and drought and weather volatility.

But although indoor farmers don’t get an explicit mention in the Act, it is reasonable to expect that indoor farmers producing can also get in on the action. 

For example, producers of low-carbon building materials and other carbon-sequestering biomass products, such as those grown by some indoor hemp farms, will likely see increased orders due to preferential procurement rules that favor these materials.  Further, the Act will strengthen the Government’s ability to identify, source and procure low-carbon building materials for public and private building projects. 

What are the next steps for interested businesses?

We won’t know how or when the funding from this legislation will eventually trickle down to individual businesses, or for that matter, how much of the Act will survive attempts at dismantling it by Republican politicians

What we do know is that – to use an apt analogy – that the seed has been planted and is being nourished behind the scenes. Already, the U.S. Department of Energy and the U.S. Department of the Interior are advancing important projects with Act funding. 

Regarding agricultural opportunities, at the publication of this piece, the USDA is collecting public input to help identify strategies and provide recommendations that provide quantifiable reductions in greenhouse gas emissions. USDA is also seeking ideas for how to further streamline and improve program delivery to increase efficiencies and expand program access for producers, especially underserved producers.    

We are watching this space closely for development that can benefit our clients and indoor growers. Contact us directly and/or sign up for updates from Climate Resources Group to stay informed about the latest regarding how indoor farmers can benefit from the Inflation Reduction Act. 

Sam Milton is Owner and Founder of Climate Resources Group, a company that provides Energy and Sustainability services to the cannabis industry through its Enlighten Your Grow program. 

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