By Matt Dallas
The Inflation Reduction Act (IRA) is a true gamechanger that provides long-term stable policy for clean energy, which is something the industry has never had. The IRA has turbocharged the cleantech sector with a number of incentives that are expected to drive strong growth over the next decade. According to industry estimates, the IRA stands to more than triple U.S. clean energy production, which would result in about 40% of the country’s energy coming from renewable sources such as wind, solar and energy storage by 2030.
This new legislation is jump-starting the green economy and bringing to America the manufacturing cleantech hardware, such as solar panels and wind turbines, which have historically been produced overseas. It is anticipated this will build a new U.S. clean power manufacturing sector that will create jobs and new opportunities for innovation across the domestic clean energy landscape.
Perhaps most importantly, the IRA will bring the country meaningfully closer to reaching our climate goals, which could have a profound impact on the environment and future generations.
From a communications perspective, this transformative legislation offers many new story angles and opportunities to position cleantech clients as thought leaders and put them forward for their industry expertise, as well as their views on the anticipated impact the IRA will have on their companies and industry.
Let’s look at how the IRA is expected to drive growth across several different areas of the cleantech sector:
Solar will benefit more in the near-term, as solar technology can be deployed faster than wind or other sources of clean power. The IRA provides 10 years of visibility on two key tax provisions — the investment tax credit (ITC) and production tax credit (PTC) — compared to prior extensions of 1, 2, or 5 years. These credits can really boost the economics of solar and wind projects.
On the residential side, rooftop solar is already seeing strong demand across the U.S., driven by higher retail electricity rates. Homeowners are increasingly looking to install solar and battery storage systems that allow them to create their own renewable power at a lower cost — and then fuel their electric vehicles (EVs) with it — effectively locking in their home electricity and “gas” prices.
The ITC and PTC are also expected to further accelerate commercial and industrial solar demand as companies look to reduce energy costs and emissions, and advance their ESG narrative backed by tangible and measurable initiatives.
The building of new wind projects has declined since the pandemic as global headwinds have made the economics less favorable. However, the tax incentives for wind in the IRA are expected to spur the construction of new — and increasingly bigger — wind power projects, utilizing larger turbines, which offer the strongest economics. The IRA also includes tax credits for the domestic manufacturing of wind components, which can benefit developers that can take advantage of additional tax credits from measures designed to boost local manufacturing and employment.
The passage of the IRA offers new tax incentives for both new and used passenger EVs. It seems to be working. Already, EVs are selling like hotcakes – and the biggest problem for consumers is getting their hands on one. To broaden the consumer base, automakers need to scale up their EV production rates. And that’s just what seems to be taking place. Automakers and battery manufacturers are shifting their strategy to take advantage of new battery and EV subsidies, which will help bring down costs. The tide is turning, and gas stations may soon go the way of Blockbuster video stores. For instance, GM has already announced it will offer only EVs by 2035, ending production of all vehicles with internal combustion engines.
The IRA includes attractive new incentives for energy storage and hydrogen. Energy storage offers the ability for intermittent renewable energy sources like solar and wind, to better produce power “around the clock” by storing energy during peak production and releasing it when the sun goes down or the wind stops blowing. The new energy storage ITC is available to both battery and hydrogen storage beginning in 2023, with the credits available to standalone projects and those co-sited with renewables. By incentivizing developers to add storage to new clean power projects, it will increase resiliency and reliability of the electricity grid. This means renewable energy can grow to become a larger portion of the energy mix and bring us that much closer to clean power goals.
This is an exciting time to be a communications professional in the cleantech sector. Public and private capital continues to flow into the industry driven by global demand for climate solutions and strong policy tailwinds, which is accelerating the development and commercialization of new technologies. The business, financial and trade media will be following the space closely and tracking its progress, presenting a significant opportunity to raise awareness of new climate solutions and communicate their value propositions and potential impact.
Follow the entire ICR 2023 trends series on the ICR Insights blog.