One Year On: Impact of America's Inflation Reduction Act on Clean Energy Industry
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One year on: America’s Inflation Reduction Act is closer to reshaping the US clean energy industry
The Inflation Reduction Act (IRA) has spurred massive investment announcements in clean energy, with greater tax credit implementation clarity sustaining investor and developer appetite. The US energy industry is set to change profoundly, and the IRA is responsible for much of this – but it is not a one-stop shop.
On 16 August last year, US President Joe Biden signed the landmark Inflation Reduction Act (IRA) into law. With almost $400bn in direct funding and tax credits allocated to clean energy development, the IRA was set to have a profound impact on America's path to net-zero emissions.
But one year on, we want to examine whether changes are in fact happening and whether they are going far enough. In this article, we take a look at what effects the IRA has already had since its enactment last year, and what the outlook is for America's decarbonisation journey over the next decade.
Heightened enthusiasm reflected in soaring investment announcements
Of the nearly $400bn dedicated to the energy transition, $260bn will be in the form of tax credits to support not only relatively more established clean energy technologies such as wind, solar, battery storage, electric vehicles (EVs), and nuclear, but also emerging technologies such as hydrogen, carbon capture and storage (CCS), and advanced biofuels.
Meanwhile, there is also significant direct funding available through government agencies such as the Department of Energy (DoE) in grants ($82bn) and loans ($40bn), which will be crucial in readying the technologies for private investment and widespread adoption across different sectors. For instance, the DoE recently announced roughly $6bn in grants to fund the decarbonisation of the most energy-intensive manufacturing sectors such as steel, cement, and chemicals.
The generous financial support from the IRA is already attracting soaring investment and project development plans. The DoE’s Loan Program Office has been reviewing more than 140 clean energy financing and guarantee requests totalling approximately $121bn.
In the power sector, $271bn of investment was announced during the first 50 weeks of the IRA becoming effective to develop utility-scale wind, solar, and storage projects, manufacturing facilities, supply chains, and others in North America. For project development, there was 185 GW of clean power capacity announced during those 50 weeks, which is equal to almost 80% of the current clean power capacity in the US. For manufacturing, 83 clean energy announcements were made during the same period – this would create a total of 76 GW of manufacturing capacity.
Investment announcement in clean power in the US
$bn
Number of clean power manufacturing announcements in the US
