Driving Forces: Impact of America's Inflation Reduction Act on the US Clean Energy Industry
Aa
Share
The US EV industry is also seeing huge investment announcements. By the end of July, the IRA had attracted $72bn in private-sector investment announcements. Notably, investment plans happen not just in EV manufacturing, but along the entire value chain, including battery manufacturing, recycling, and raw minerals. Several car manufacturers have also updated business strategies to ramp up EV production in the next few years.
EV investment announcement since the passage of the IRA
$bn
In the hydrogen industry, 6.5 million tonnes per annum (Mtpa) of low-carbon hydrogen (blue hydrogen with CCS) capacity and 2.4 Mtpa of renewable (green) hydrogen had been announced as of January 2023 to come online in North America by 2030. This is a rise of 30% and a 3.5-fold growth compared to their respective capacities announced as of May 2022 before the IRA. And the total announced capacity of 8.9 Mtpa of blue and green hydrogen is almost the level of today’s 10 Mtpa of (mostly grey, non-clean) hydrogen production in the US. To note, the 6.5 Mtpa of blue hydrogen project announcement accounted for more than 70% of the world’s total. This is partly because of the stronger policy support and consequently a stronger growth momentum in CCS in the US, which is a key technology in producing low-carbon blue hydrogen.
Announced North American clean hydrogen production capacity by 2030
$bn
Considerable progress has also been made in CCS and advanced biofuels (particularly sustainable aviation fuels, or SAFs). The US is traditionally leading in CCS development as Section 45Q tax credits for the technology had been in existence pre-IRA, and then it got another bump under the IRA. The DoE has also awarded $23.4bn to 16 projects in 14 states with locally tailored technical assistance to develop CCS technologies.
The US has also recently ramped up efforts to advance direct air capture (DAC). The DoE announced in August that two DAC projects in Texas and Louisiana would receive as much as $1.2bn in support. As for SAFs, the US is also in the lead. The IRA’s $1.25-1.75 per gallon of bioSAF tax credits is stimulating supply, putting the US in a position to drive SAF production capacity growth over the next few years.
