Inflation Reduction Act and Cleantech
Law signed in August brings substantial incentives to Cleantech/Renewables
Over $369 billion has been allotted to prompt an expansion of renewable energy and cleantech initiatives. Solar and wind construction could readily surpass the amount currently in use by a factor of two to three within the end of the decade, costs should continue on a downward trend, and job growth within the sector is anticipated to be exceptional. Tax credits and subsidies will be put in place that are structured in a manner that will make it highly attractive to start and operate projects in this arena. From component construction to supply chain management, the legislation is an impressive step in establishing a comprehensive approach that will allow the US to catch up and presumably become a leader in relevant energies and ecosystems.
One of the primary takeaways as the legislation pertains to the cleantech sector are the domestic production and manufacturing requirements attendant to receiving full credit value of tax amounts. Based on our discussions with clients and others operating in the sphere there could conceivably be a number of factors that may impede implementation by companies including:
• Constraints on the supply chain that were inherent prior to the pandemic and exacerbated by the events of the past few years.
• The type of components and services that must be built in country in order to garner a full accounting and receipt of available credits. Current production is heavily weighted toward outside sources thus a fair amount of time will be required to retool and increase domestic construction.
• Wage and training provisions. Companies will only be able to garner about 20% of proposed credit value unless specific marks are effectively met. This will call for a great deal of organizational and cultural reevaluation by many CEO’s and corporate leaders. Other ventures will have no problem with this and embrace it.
• Provisions in place that will allow developers to sell credits appears to balance to the positive side of things, but there will certainly be a great deal of nebulous exchanges and processes involved as deals are made and various intricacies ironed out.
• How will various state and local governments respond in order to take full advantage of these newly available resources?
• International events and potential risks brought about by fallout.
The key factor that we hear, however, is that many companies are viewing this change as a strong opportunity and push for firms to move into clean energy or significantly expand their production while consumers will have a much greater incentive to purchase and utilize their offerings.
