The passing of the Inflation Reduction Act (IRA) in August 2022 heralded a new wave of clean tech manufacturing and deployment in the US. Project development has accelerated, with capacity in interconnection queues increasing by over 40% year-over-year in 2022—and growing.
Almost one year in, however, significant uncertainty remains around key IRA provisions. The Treasury has issued a plethora of guidance, yet exact definitions for tax credit adder qualifications, such as the energy communities, are still outstanding. Meanwhile, challenges with interconnection queue backlogs, permitting, and transmission upgrades continue to slow the pace at which new projects can be deployed.
Key takeaways from the report:
- The Biden Administration has set the United States the targets of a carbon pollution-free power system by 2035 and a Net Zero economy by 2050. Recent policies have focused on infrastructure, tax incentives, and a rejuvenated EPA to achieve decarbonization goals.
- The IRA supports the deployment of 865GW of renewables and storage capacity by 2035 across US markets in our Central scenario, representing $420bn of capital expenditure. The Inflation Reduction Act was signed into law 12 months ago. During this time, IRA guidance has been issued, but some remaining guidance is expected in Q4 of 2023.
- Tax credits for manufacturing will encourage the domestic manufacturing of clean energy products. Tax credits available to generators can be increased through the sourcing of domestic content and siting in energy communities. The supply of tax credits will grow to between $50-80bn by 2030, though uncertainty remains in the evolution of tax equity financing structures.
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