Heading Into 2023, the Inflation Reduction Act Is Bringing ‘a Lot of Confidence’ to the Renewables Industry

Source: By Julia Martinez, Morning Consult • Posted: Tuesday, December 20, 2022

A package of clean energy tax credits is expected to continue boosting growth across sectors in the new year

  • The Inflation Reduction Act will boost installed solar (70.3 gigawatts) and onshore wind (85.2 GW) capacity by an additional 155.5 GW by 2030, according to Rystad Energy.
  • At least 20 new clean energy manufacturing facilities or expansions have been announced since the adoption of the IRA.
  • Supply chain diversification and permitting reform remain top issues in the industry.
The passage of the Inflation Reduction Act marked the largest federal climate investment to date, with more than $370 billion set aside to spark domestic manufacturing of clean energy and to lower greenhouse gas emissions through a variety of tax incentives.

The legislation has already invited an influx of clean energy commitments, and 2023 is set to see more investment as companies familiarize themselves with the available credits and as they await tax code guidelines from the White House, which are expected early next year.

Since the implementation of the $700 billion IRA — signed by President Joe Biden into law on Aug. 16 after the surprise late-July agreement between Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-N.Y.) — companies have made $40 billion in domestic clean energy investments. That figure is equal to the total investment estimated for all clean energy projects installed in 2021, according to a report from the American Clean Power Association.

In total, companies have announced 20 new clean energy manufacturing facilities or expansions, adding 13 gigawatts of new clean energy capacity. Solar tops the list with 12 new manufacturing facilities announced, a 300% increase in U.S. solar module manufacturing capacity.

“The Inflation Reduction Act has really instilled a lot of confidence because now we have tax credits for 10 years, we have certainty,” said Geoff Hebertson, renewable energy analyst for Rystad Energy. The legislation provides for a lot of new opportunities for solar, wind and battery storage projects to come to fruition, he added.

The new clean energy incentives in the IRA are expected to attract more than $270 billion in additional investments by the end of the decade, adding around 85 GW of onshore wind capacity and about 70 GW of utility-scale solar installations by 2030, according to Rystad. Solar projects can take advantage of the production tax credit, while battery storage projects now have their own tax incentives.

Next year is all about setting up for a successful 2024, Hebertson said.

“2023 is exciting in that the IRA has really energized the industry, but we still have work to do,” he said. “There is new capital that still needs to come in, permitting reform that must happen in interconnection queues, an inflationary environment and supply chain issues.”