Last week, as part of the Inflation Reduction Act of 2022, U.S.
senators triumphantly announced a $369 billion commitment to energy security
and climate change action. The agreement comes after an arduous negotiation
process, and is a landmark achievement for American climate and energy policy.
Most importantly, in a variety of ways, the bill gives an enormous boost to
clean tech. At a time when it’s really needed, the agreement will spur a wave
of unprecedented investment into clean technologies to transform the energy
economy. In response to the announced funding, the market will invest heavily
in clean tech.
Massive Expansion of Funding for
Clean Tech Projects
The bill plans to provide tax credits for companies to build
clean energy technology. These financial incentives will lead to a major
increase in projects to expand clean energy infrastructure in the U.S. and
reduce emissions. To do so, the bill crucially includes $30
billion in tax incentives for companies to ramp up domestic
solar panel and wind turbine production and deployment over the course of the next
decade. Although such tax credits have existed previously, they typically
expired after 2 years. Now, tax
credits will last 10 years. What this will do is give
companies the capital and the confidence to make long-term investments. As a
result, there will be a wave of investment into clean technology projects.
These extended tax credits will give a much-needed boost to the entire U.S.
clean tech industry and spur major growth for off-grid solar and wind. As discussed in a previous
blog, government funding is a crucial factor for helping clean
technology cross the chasm to widespread adoption. The Inflation Reduction Act
of 2022 will bring the significant funding needed to help clean technology
cross the chasm. Funding for projects, such as the expansion of solar lighting
projects, or the implementation of more EV charging stations, will help spur cleantech
adoption across the U.S.
Key Advancements in Clean Energy
In addition to capital for clean tech projects, the bill,
expected to pass next week, will result in major investment in technological research
and development. According
to CNBC, the bill provides $27 billion to a clean energy
accelerator to support technologies which reduce emissions, with an additional
$2 billion to support energy research in government labs. As well, by helping new projects and products get to the
market, the act will spur new developments in solar and wind technology,
including the potential use of artificial intelligence to make clean tech even
more affordable and reliable. Thus, the bill is financing the innovation that
the clean tech industry needs.
Supply Chain Improvement
The climate agreement plans to massively ramp up domestic
solar and wind manufacturing in the U.S. A major barrier for clean tech market
growth in 2021 was supply chain issues. In the last few years, the U.S. has
relied heavily upon China for clean energy manufacturing. As a result, supply
chain delays from China have contributed to the recent slow
growth of the U.S. clean energy market. However, the Inflation Reduction Act plans to invest $30
billion to solidify US domestic manufacturing. Specifically, $10
billion in investment tax credits are being introduced to build
manufacturing facilities to produce electric vehicles, wind turbines, and solar
panels. Such investment in domestic manufacturing will drive growth for the
U.S. solar market.
A Resilient Energy Future
Finally, the latest climate bill will help build a resilient
energy future, one where clean energy plays a significant role. With the
rollout of major clean tech projects on the horizon, the U.S.’ fragile grid
infrastructure will be made more reliable. No longer will the country be solely
relying on fossil fuel sources and the grid to power infrastructure. By increasing
the adoption of clean technologies, energy infrastructure in the U.S. will be
supplemented by clean technology, thus making it more resilient. Ultimately, the Inflation Reduction Act of 2022 will provide
the supercharge that the clean energy industry needs. With major infusions of
capital into clean tech projects, research and development, and domestic
manufacturing capabilities, expect to see major growth for the clean tech space
in the near future, and major support from investors in the market.