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ASHRAE Journal Podcast Episode 19

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Left, Alice Yates; Matthew Young

The Implications of IIJA and IRA on HVAC&R

Host: John Falcioni

How do the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) impact ASHRAE members and the HVAC&R industry as a whole? Join Alice Yates, director of government affairs for ASHRAE, and Matthew Young, manager of government affairs, as they give an overview of the bills and discuss the breadth of their funding.

Interested in reaching the global HVACR engineering leaders with one program? Contact Greg Martin at 01 678-539-1174 | gmartin@ashrae.org.

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  • Guest Bios

    Alice Yates serves as the Director of Government Affairs for ASHRAE and has over 20 years of experience on Capitol Hill, federal and state government and private consulting. Most recently, Alice served at the General Services Administration (GSA) in the Office of Congressional and Intergovernmental Affairs, first as a Senior Congressional Advisor and then as Deputy Associate Administrator for Policy. Prior to her work at GSA, she spent 10 years as a senior legislative advisor in the United States Senate. Alice has also advanced economic development projects in Massachusetts with MassDevelopment’s real estate and policy teams. She also provided consulting services for government and private clients at Industrial Economics, Inc. in Cambridge, Massachusetts, by analyzing the economic impacts of environmental regulations, sustainable development and land use planning. Alice has a BS in Electrical Engineering and a Master of Science, Technology and Policy from the Massachusetts Institute of Technology (MIT).

    Matt Young joined ASHRAE as the Manager of Federal Government Affairs in February 2022, prior to which he was the Associate Director of Policy and Government Relations at American Rivers. Matt also spent time on the Hill in the Office of Congresswoman Marcy Kaptur (OH-9) focusing on energy and water issues. He received both his B.S. and M.S. in Environmental Engineering and Science from Ohio State University, where his research on smart ventilation to reduce peak power demand was partially funded by ASHRAE. He also received the 2020 Science and Technology for the Built Environment Best Paper Award as a co-author on a research article: Response of eight low-cost particle sensors and consumer devices in typical indoor emission events in a real home (ASHRAE 1756-RP).

  • Transcription

    ASHRAE Journal:

    ASHRAE Journal Presents.

    John Falcioni:

    Hi everyone, and welcome back. This is ASHRAE Journal Podcast Episode Number 19. I'm today's host, John Falcioni, the editor of ASHRAE Journal.

    In our December, 2022 issue, we featured an article on the impact on our industry of the Infrastructure Investment at Jobs Act or IIJA, which was signed into law in November of 2021. The article also discussed the Inflation Reduction Act, known as IRA signed into law in the Summer of 2022. The co-authors of the article, Alice Yates, who was a Director of Government Affairs for ASHRAE, and Matthew Young, the Manager of Federal Government Affairs, are our guests today. They speak to us from Washington DC.

    Welcome to our podcast, Alice and Matt. Thanks for being here.

    Alice Yates:

    Great to be here. Thanks for inviting us.

    Matthew Young:

    Happy to be here.

    John Falcioni:

    You wrote an excellent article on the implications of these acts on our industry, and also on our communities, and on ASHRAE members. I'd love for you to give us an overview of the bills and the breadth of their funding. Why do we really need to pay attention to this, guys?

    Matthew Young:

    The Infrastructure Investment in Jobs Act, aka IIJA, as you referred to it, was signed a little over a year ago, November 15th, and this was a $1.2 trillion investment in the US economy and our physical infrastructure. That was the single largest investment that's ever been made in US history. I think you've probably heard over the last couple of years, decades even, infrastructure has always been something that Congress has gone after funding for, and this was a real chance to get that funding there.

    It was for building new programs for increasing the performance of existing programs. And to date, the impressive fact is that they've already announced $185 billion for that funding to be available. And it's not just physical infrastructure. It also covers things like grid resilience, indoor environmental quality at schools, or provides states with funding for capital improvements through revolving loan funds. There's just a wide breadth of things that will be funded for this, now and into the future.

    John Falcioni:

    Thanks, Matt.

    And what about IRA and the global implications of that bill? Alice?

    Alice Yates:

    Thanks, John. Happy to be here, and thanks for inviting us again.

    The Inflation Reduction Act, just stepping back a little bit, is a budgetary measure. So, it's different than the infrastructure bill. And it's a bill that totals $739 billion. In addition to the energy and climate provisions that we've been focusing on, it also addresses healthcare and corporate taxes. Those are really important to other sectors of the economy and many of you that are listening to this program, but the energy and climate provisions total $369 billion. This is the largest investment ever made by the US for tackling climate change. And when you take into account the funding from the infrastructure bill that Matt just talked about, we see a total of $479 billion in new climate and energy spending. And a lot of us might just think that's about energy generation and transmission, but this funding goes well beyond those into buildings, which we all care about, as well as a variety of energy and technology innovations and development.

    This massive infusion of capital into the energy and technology markets has global implications. This goes beyond our US audience. Any large capital investment does this. It's affecting the entire business community worldwide as well as consumer choices. But probably most importantly for our members, it also affects greenhouse gas emissions and what happened at the Climate Summit in Egypt.

    Modelers have estimated the Inflation Reduction Act will get the US to a 41% reduction in greenhouse gas emissions by 2030. That reduction, coupled with other government policies, is expected to set the US on target to meet its climate commitments of the Paris Agreement. This is major news, and it really changed the debate in Egypt. It boosted US credibility at the climate conference, which happened just this past November, and it put pressure on other countries to remain or get back on track with their climate commitments.

    And then, again, going back to ASHRAE, all of this activity has implications on the technology interests of ASHRAE, HVACR and building systems. This is because buildings contribute about 40% to global greenhouse gas emissions. Reducing their carbon footprint will necessarily involve advancements in building technologies, operations, and really their full life cycle.

    Matthew Young:

    One example I might want to add, Alice, example for international impact was, last week or two weeks ago when French President Emmanuel Macron was in the US talking to President Biden, he was expressing some concerns about how the IIJA and IRA are going to affect the European markets. And one provision he looked at specifically was EV manufacturing. There are a lot of benefits for manufacturing electric vehicles in the United States, and that raises some question about how the European market can get involved, or the difficulties of getting into that kind of manufacturing.

    Alice Yates:

    Yeah, Matt, that's a really good point. A lot of people are talking about this bill as being a national industrial policy. And this bill is more about providing incentives to businesses in the US to manufacture and invest in the US. And some countries, including France, are concerned that the investments are going to take place here in the US rather than overseas.

    But really, when you look at the broad economic implications, there are many more market dynamics in place beyond just a static look at our investment in this economy. But yeah, that's definitely up for debate, and probably not a topic for ASHRAE to debate whether we should have industrial policy or a carbon tax or pricing other externalities, but I'll leave that to another group of people.

    John Falcioni:

    Let's look into some of the details of these bills. Let's take a look at them one at a time. As far as IIJA and its impact on the built environment specifically, what are some of the important things we need to know, Matt?

    Matthew Young:

    I think the most important thing to be aware of, and the most exciting part of it, is the $225 million for resilient and efficient codes implementation. This is a program that, over the next five years, will provide DOE with funding to distribute to states, and entities that partner with states, to bring codes up to standards. And that can be through workforce training. There are multiple ways that you're able to access these funds.

    ASHRAE is working with states across the country on a proposal that we want to focus on enforcement and compliance of building codes, specifically Standard 90.1. While ASHRAE's been deeply involved in coming up with the logistical details for engineering design through 90.1, we don't have as much material on compliance and enforcement. And what good does a code do if it's not enforced?

    And so, we think this is an opportunity to a lot of those big program ideas, those big ideas that you've had, that said, "Oh, this would be great, but the money isn't there." This gives us the opportunity to swing to the fences on some of these big ideas. And like I said, there's five years, and we're just getting started.

    John Falcioni:

    So specifically, our members and others in the industry, will be able to directly access some of this money?

    Matthew Young:

    One of the requirements is that you need to partner with a state entity. When I say we're working with states across the country, we're working with state agencies. They have the networks available to distribute these resources to consumers. The flow of how things would go was, funding to states, states to organizations, organizations create materials or resources, and those materials or resources then get distributed to the consumer network.

    John Falcioni:

    I get it. Okay. And what about schools? How would they be impacted? Alice?

    Alice Yates:

    Thanks, John. That’s another big provision in the bill. It’s not as direct to ASHRAE as the codes funding that Matt just spoke about, but it is really significant for the students and the teachers, as well as our designers that will be making many improvements at schools.

    Specifically, the bill provides $500 million in grants for energy efficiency and renewable energy improvements at public schools. The first tranche of this funding, totaling $80 million, was released by DOE just a couple of weeks ago. It's expected to result in awards of between $500,000 and $15 million for 20 to 100 school applicants. This funding is really significant to our members, as well as those engaged in the broader buildings industry. The funding will generate new design opportunities, along with a greater awareness across the public about the need for school facility improvements.

    Some of you might have heard these figures before. I think it's worth it to repeat them. Just recently, a GAO study found that 53% of public school districts needed to update or replace multiple building systems. Another study by the National Center for Education Statistics found that 41% experienced issues with HVAC systems, and this has significant implications for our children and their ability to learn, their cognitive development, and also for the health and well-being of our teachers and other school facility officials.

    So, this funding is really significant. And importantly, President Mehboob, ASHRAE's President Farooq Mehboob, he recently stood up a leadership team of ASHRAE members to carry out a new project with the US Department of Energy that will work with certain ASHRAE chapters to share information about this $500 million funding program with schools in their areas.

    This is the beauty of ASHRAE. Our chapters are all over the place and they have real relationships with schools and community members. And this will give chapters an opportunity to share information, technical information as well as funding information, with the schools in how to implement these facility improvements.

    This is a pilot program, so we're just starting. It's being chaired by ASHRAE board member, John Constantinide. And he and the leadership team are in the process of reaching out to ASHRAE chapters to invite them to participate in the program. So, I think this is really exciting and something that ASHRAE can be really proud of.

    John Falcioni:

    Oh, that's great to hear.

    Since we started talking about schools, one of the things that I know ASHRAE is very involved with, and it's always been one of my personal interests, is the engineering workforce development pipeline. How do you envision that this is going to impact that component so it's not just for young students, but also for those working and progressing through their careers?

    Alice Yates:

    Great question.

    We certainly have a workforce problem with the building technology industry, with engineers in general, and with the HVACR industry. So the school's funding is significant because the students will see real activity happening. They'll see that there's an industry out there that is exciting, that makes their school healthier, more efficient, more modern. And having the pipeline developed at that early age is actually really, really important, just exposing kids to this industry is really important.

    In addition to the school's funding, there are a whole range of programs that will provide funding for workforce training. Some of them are not labeled workforce training. Some of them, like the codes funding that Matt talked about, doesn't say "training" in the section title at all, but training is one of the eligible uses for that funding. And that's true over many of the different funding programs, the new funding programs that are set up as well as the expanded funding programs.

    In addition to that, there are some specific areas, including $200 million in state-based home energy efficiency contractor training grants, and a whole wide range of other programs. So, this is exciting. It kind of depends on how these are rolled out, how they're used, but I'm excited about just developing the workforce, but also having some of ASHRAE's courses launch further into the market and really exciting the students and folks that might not have known anything about HVACR buildings or engineering. I'm excited we're going to have a whole new group of students that will be attracted to the industry.

    Matthew Young:

    And I think workforce development, it's always been essential, but I think now so more than ever with a number of opportunities that are going to be available because of the IIJA and IRA, trying to fill that gap so that there's not money hanging there with not enough resources behind it to actually implement it. So, I think bettering the training opportunities for workforce development among people who may have interest, I think will have a huge impact, now.

    John Falcioni:

    What about the grid? Can you guys comment on that? The impact on the grid?

    Alice Yates:

    Well, I guess I'll start.

    The grid, many of our members might think, "Well, we're buildings. We're not generating the energy, and we're not building the grid. We're not building new transmission infrastructure." But because the new buildings that we're looking at that are going to be lower carbon, maybe zero carbon, more resilient, etc., they need to understand the interaction with the grid.

    They will serve as new energy sources themselves. They will be generating energy. They will be storing energy. They'll need to talk with the grid to know what is available. Is it high carbon, low carbon, medium carbon?

    And so, the grid improvements are really important for our new SMART buildings as well as for understanding, how fast can we electrify buildings? That's a big question, and something that I know our task force for building decarbonization are looking into, as well.

    John Falcioni:

    I appreciate that description, Alice, because even with ASHRAE Journal, as we talk about different things that impact the grid, and it really is, it's an ecosystem that works with building development and SMART buildings, and also the grid. So, I appreciate that description. I do feel it's completely integrated.

    Matthew Young:

    The grid advancements are especially important through the technological advancements, but then there's also the security and resilience advancements. Last week, two weeks ago, North Carolina fell victim to an attack on one of their substations, and 10,000 people were left without power for multiple hours or days on end. Having a resilient grid that's interactive, you use the term ecosystem, and I think that's exactly right, grids being able to communicate not only building to grid, but grid to micro-grids, to island grids. There needs to be this full network established so that if one part fails, there will be more to back it up.

    ASHRAE Journal:

    Seeking a job in the engineering field? Or searching for the most qualified engineers? The ASHRAE Career Center connects opportunities and candidates. Search for jobs, manage your resume, and create alerts for when jobs are posted. Employers, post new jobs, review resumes, and manage recruiting. Go to jobs.ashrae.org.

    John Falcioni:

    What about IRA? Let's talk a little bit about that. What's the impact on codes and standards, and other areas?

    Matthew Young:

    Sure.

    We'll start with the $1 billion, that's billion with a B, that's going to be available for assistance for latest and zero building energy code adoption. How this is split is $330 million is going to be available to states to update to the latest codes and standards, and $670 million will be available for implementing zero-energy building codes.

    Now, what's so cool about this is that $330 million, when you're talking about what is the latest building code, in the legislative text, they identify ASHRAE's Standard 90.1-2019 as the latest standard, as well as IEC 2021. But there's going to be this huge need for states to meet the requirements, or meet the needs. States are going to need more resources to implement and adopt these standards. And similarly to the resilient and efficient code implementation funding, there's also funding through this latest and zero building energy code adoption funding for active training and enforcement programs. If you think about, we call it the RECI, but the resilient efficient code implementation funding, is really just the start of what will be a much larger investment over the next 5 to 10 years in building codes and standards.

    Alice Yates:

    Thanks, Matt, for explaining all of that, and thanks for keeping up with the legislation, which is really massive.

    I think what's really important to realize, and I think many of our listeners will know about this already, but even though it is the law of the land to adopt the most recent energy codes and standards, including 90.1 for commercial buildings, the bulk of the states are not there. DOE has this wonderful map that identifies which states are at what year of the energy code or standard, and it's just appalling.

    Most states are well behind 2019. We have so many states that are just operating at very inefficient codes, and they need help to adopt the more recent codes and to know what they mean, to know how to implement them, to know how to enforce these codes.

    I've been talking with some states, as Matt's been doing a lot of this work, and they don't have the resources to do so. There are some offices that have one person in the energy office and they're expected to do it all.

    I think this infusion of capital to the states and to partners like ASHRAE, to help the states to partner with the states, is critically important because they need resources. And this will help ASHRAE in terms of getting our best technology out there, our best standards out there, and of course will bring down energy costs for communities, and just save on our greenhouse gas emissions, etc. So, I think knowing the need is very important. I think this is the first time ever that this type of infusion of capital has gone out to the states.

    John Falcioni:

    So IRA also has some implications for tax credits and rebates for homeowners. Can you all comment on those two areas?

    Matthew Young:

    Sure.

    There were a couple different rebates. The main concern or the main rebate that we looked into was the 179D tax deduction, which provides building owners tax deductions for installing building systems that improve energy efficiency. This has been a program that's been successful for well over a decade. It was recently made permanent in the 2021 Consolidated Appropriations Act. So, this is a program that'll be sticking around.

    Prior to the Inflation Reduction Act, how it worked was buildings would receive $1.80 per square foot if they achieved 50% lower energy and power costs relative to ASHRAE's Standard 90.1-2007. How it works now is that buildings will qualify if they reach 25% lower energy and power costs compared to ASHRAE 90.1-2007, but the deductions have changed to a sliding scale. You can earn anywhere between 50 cents to $5.00 per square foot depending on how much more energy efficient your building is. There's also prevailing wage requirements and apprenticeship requirements that the treasury is currently taking comments on. That's how you qualify for that $5.00 per square foot. And again, previously it was $1.80 per square foot. So, there's certainly an opportunity to cash in on this, per se.

    The concern, the conversation, that was had amongst the building industry was using ASHRAE 90.1-2007 as a reference standard. You can imagine that's a quite outdated standard. Right now, we're working on 2019. The way the legislative language is written is that they use the code that was last affirmed by both the Department of Energy and the Treasury Department. Department of Energy, every time ASHRAE releases a new 90.1, they will do their analysis to say, "It's more efficient, more economic than the previous version," and they will affirm it. The Department of Energy has already affirmed 90.1-2019. Treasury has not affirmed an ASHRAE standard since 90.1-2007. Right now, 25% more energy efficient compared to ASHRAE 90.1-2007 versus 90.1-2019. That's a huge difference between that.

    The other piece to consider is, even when, hopefully if, Treasury Department adopts 2019 as the reference standard, there's still a four-year window until that'll take effect. They don't want to spring this on building designers all at once. So, there will be a four-year gap between the 2007 version and the 2019 version. And hopefully, in that four-year period, you think about technological advancements, think about shifts in market, increase in demand, reaching 25% below 2019 will be something that's achievable for most buildings.

    John Falcioni:

    We've covered quite a bit, and a lot of this information is great for our listeners to hear.

    Is there something that we haven't covered that you think we need to talk about?

    Alice Yates:

    Well, I'd say the big elephant in the room is implementation. Both of these bills are massive. The number of pages for both of the bills is over 1,300, and these are dense pages. These aren't the first drafts of the bills that first come out. It's a massive amount of text, but more importantly, it's a massive amount of new programs or changes to existing programs, changes to existing tax law, like Matt is talking about.

    The IRS, through the Department of Treasury, has released a number of RFIs, Requests for Information, to ask stakeholders, "How should we implement this? What should we do?" There are a lot more details. The law is one thing, but the regulations implementing the law are even more expansive, more complex. And with all of these related laws, like the Administrative Procedures Act, there are a lot of requirements for notice and comment and just setting up the offices. DOE recently restructured to accommodate some of these new programs. They're trying to staff them up, and I know they're having a lot of challenges doing that. So, I think we really need to watch what's going to happen.

    The first tranche of the $500 million was released just two weeks ago. This is for the school's funding. But we're monitoring a whole range of these programs. We haven't seen any movement yet in terms of a real notice of funding opportunity for the codes funding, even though they've had an RFI and a notice of funding availability. But we've also seen nothing for the $1 billion from the IRA for codes. So. I think implementation is going to be huge, and DOE has many websites that track implementation, but that's really going to be the thing I'm watching to see what's going to really happen with this legislation.

    John Falcioni:

    As we wrap up, how can our listeners keep up with all of this? How do they learn more? There's just so much information out there.

    Matthew Young:

    Sure.

    I think one good resource would be build.gov. That's b-u-i-l-d. it's a nice resource that the White House is put together that tracks what funding opportunities are available, what's been funded already, and what's going to be available in the future.

    The other would be the ASHRAE Government Affairs website. If you go to www.ashrae.org/government-affairs, you can find out about all of our public policy priorities, government outreach events that may be happening near you, and you can subscribe to the Government Affairs Update, which is a biweekly newsletter that we put out that touches on local, state, federal, international issues, the whole gambit, in addition to highlighting accomplishments and achievements by ASHRAE members.

    John Falcioni:

    Great.

    Any final words?

    Alice Yates:

    Well, thanks so much for having us, John. This is exciting for us to talk about something that we've been tracking for a long time, and we're really excited that our Government Affairs Committee is so active. Our members are so amazing, and they're linked to all the chapters. They're getting this information out to their communities, their schools, their chapters, and that's really where the Power of ASHRAE is, is with its members. And we're just excited that we get to serve as staff here. Thanks so much.

    John Falcioni:

    Well, that's a good way to end the episode. I definitely want to thank both of you, Alice Yates and Matt Young, for being here today.

    I also want to thank all of you for tuning in. From all of us at ASHRAE Journal, I'm John Falcioni. Join us the next time for another interesting conversation.

    ASHRAE Journal:

    The ASHRAE Journal Podcast team is editor, John Falcioni; managing editor, Kelly Barraza; producer and associate editor, Chadd Jones; assistant editor, Kaitlyn Baich; associate editor, Tani Palefski; and technical editor, Rebecca Matyasovski. Copyright ASHRAE. The views expressed in this podcast are those of individuals only, and not of ASHRAE, its sponsors, or advertisers. Please refer to ashrae.org/podcast for the full disclaimer.

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