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August 10, 2023
By
Felicity Bradstock
The Inflation Reduction Act Is
Fueling A Green Energy Manufacturing Boom
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Since its introduction in 2022, the IRA has
spurred over $28 billion in investments towards green energy
manufacturing, with potential to draw $1.7 trillion within a decade.
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Major automakers, both domestic and foreign, have
expanded their EV and battery manufacturing initiatives in the U.S.,
leveraging IRA incentives.
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Political initiatives like the IRA and Made in
America strategy are setting the U.S. up to be a competitive
powerhouse in green manufacturing, enhancing national energy security.
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An increasing number of investments have been made in a wide range of
clean energy projects since the introduction of the Inflation
Reduction Act (IRA) by U.S. President Biden in the summer of 2022. The
reform appears to have set in motion a renewable energy boom that many
other parts of the world hope to follow. One area of development that
has been accelerated by the IRA and other related policies is clean
energy manufacturing, with Biden encouraging greater national
production of energy components to create jobs and reduce the reliance
on foreign powers for new renewable energy capacity.
By October 2022, the IRA had spurred at least $28 billion in green
energy manufacturing investments. President Biden introduced the IRA
both to reduce national inflation and to support a green transition
through the rapid development of the U.S. renewable energy industry.
The IRA provides almost $400 billion in federal funding to the clean
energy sector. Although there was no promise that the reform could
attract higher levels of private funding to the industry, it outlines
favourable policies for companies looking to invest in clean energy
and decarbonisation projects, which seems to have caught the eyes of
investors.
Much of the initial green manufacturing funding was earmarked for the
electric vehicle (EV), battery, and solar manufacturing sectors,
however, we can expect to see a more diverse range of investments as
more companies take advantage of the public funding opportunities,
subsidies, and tax breaks. The legislation is expected to attract as
much as $1.7 trillion in new investment within the next decade, according
to Credit Suisse. This could help to create up to 9
million new jobs over the same period, as well as increase
the U.S. GDP by around 1 percent.
New green manufacturing activities have also been encouraged by
President Biden’s Made in America strategy. During his first week in
office, Biden signed Executive Order 14005, launching a government-wide
initiative to strengthen the use of federal procurement to
support American manufacturing. The order also allowed for the
establishment of the Made in America office within the White House
Office of Management and Budget.
In the EV manufacturing sector, nearly all U.S. automakers have
announced plans for operational expansion. Previously, there was
uncertainty around the future of the federal EV tax credit, which may
have dissuaded consumers from investing in EVs, but the IRA extends
this tax credit for a decade, as well as lifts the manufacturer cap of
200,000 vehicles. Last year, GM announced plans to invest
$760 million in its existing Toledo Propulsion Systems
plant to expand manufacturing, as well as $491 million at an existing
Indiana stamping plant, to produce EV components.
Foreign EV manufacturers have also shown an interest in the U.S.
market since the introduction of the IRA, including the South Korean
automaker Kia, which will begin production in the U.S. starting in
2024. By moving manufacturing operations to the U.S., foreign
companies can qualify for IRA incentives for which they wouldn’t
otherwise be eligible.
There has also been a surge in interest in battery manufacturing. In
September 2022, Ford commenced construction on its multibillion-dollar
advanced manufacturing complex for lithium-ion batteries in western
Tennessee. Meanwhile, GM and South Korean battery maker LG Energy
Solution Ltd. obtained a $2.5 billion loan from the U.S. Department of
Energy (DoE) for their Ultium Cells LLC venture. They expect to invest
a minimum of $7.2 billion in lithium-ion battery cell facilities in
Michigan, Ohio, and Tennessee. The anticipated growth in the U.S.
battery manufacturing market could see U.S. lithium-ion cell
production increase tenfold between 2021 and 2025, to 382 GWh. This
would give the U.S. a projected 14
percent share of global battery cell production capacity,
with Georgia, Kentucky, and Michigan expected to dominate the
country’s EV battery manufacturing market.
As well as EV and battery production, we are seeing greater interest
in renewable energy component manufacturing. In July, First Solar, the
biggest U.S. solar panel producer, announced plans to build its fifth
U.S. factory supported by financial incentives from the IRA. It is
expected to invest around $1.1. billion in the new facility and
increase its manufacturing capacity by 3.5 GW. The company has already
invested $2.8
billion over the last year to increase production, with a
new site in Alabama and an expansion to its Ohio site. First Solar has
been unable to meet the soaring demand for solar panels, having sold
out until 2026.
Recent political initiatives, such as Made in America and the IRA,
have spurred both public and private investment in the clean energy
manufacturing sector, with significantly more expected to follow over
the next decade. The IRA is thought to have attracted over $150
billion in capital investments since it was passed, many of which are
in manufacturing. This will see the U.S. become highly competitive in
the manufacturing of EVs, lithium-ion batteries, and green energy
components, helping to ensure the resilience of its supply chain for
future projects and therefore solidify its energy security.
By
Felicity Bradstock for
Oilprice.com
Green Play Ammonia™, Yielder® NFuel Energy.
Spokane, Washington. 99212
www.exactrix.com
509 995 1879 cell, Pacific.
Nathan1@greenplayammonia.com
exactrix@exactrix.com
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