Monica Munoz, top, and Dennis Denning place black encapsulation material on a solar panel at the Elin Energys solar panel manufacturing facility in Brookshire, Thursday, April 25, 2024.
Brett Coomer | Hearst Newspapers | Getty Images
The Inflation Reduction Act sparked a manufacturing boom across the United States, mobilizing tens of billions of dollars in investment, especially in rural communities in need of economic development.
The future of these investments may depend on the outcome of the U.S. presidential election. The prospect of a Fianna Fáil victory has shaken the confidence of some investors, who fear the IRA could be weakened or, at worst, abolished.
Since President Joe Biden signed the IRA into law in 2017, companies have announced $133 billion in investments in clean energy technology and electric vehicle manufacturing. August 2022according to data MIT and Rhodium Group.
According to MIT and Rhodium, actual manufacturing investment totaled $89 billion, a 305% increase compared to the two years before the IRA was implemented. Overall, the IRA has leveraged $500 billion in investment in manufacturing, energy and retail, the data shows.
“It is having a transformative impact on manufacturing,” said Trevor Houser, a partner at Rhodium Group. “The amount of new manufacturing activity we are seeing now is unprecedented in recent history. This is largely due to new clean energy manufacturing facilities.”
According to the IRA, some 271 clean energy technology and electric vehicle manufacturing projects have been announced since the passage of the IRA, which if completed would create more than 100,000 jobs Advocacy group E2a partner of the National Resources Defense Council. Hauser said the IRA-sponsored investment has been a boon to rural communities in particular.
“Unlike artificial intelligence, technology and financial investments that are concentrated in big cities, clean energy investments are actually concentrated in rural communities and are one of the brightest sources of new investment in these areas,” Hauser said.
The IRA has also accelerated the deployment of renewable energy, investing $108 billion in utility-scale solar and battery storage projects. According to Rhodium, investment in solar energy and battery storage has surged 56% and 130% respectively in the past two years.
“More mature technologies, such as wind and solar power, electric vehicles, have reached escape velocity,” Hauser said. “They will continue to grow no matter what. It's a matter of speed.”
Trump threatens IRA
But Hauser said the “manufacturing renaissance” is still in its early stages and remains fragile. Chris Seiple, deputy chairman of Wood Mackenzie's power and renewable energy group, said the new plant would not be revived without the IRA.
Former President Trump threatened to repeal the law when he advocated for increased oil, gas and coal production.
“Immediately upon taking office, I will suspend all new spending subsidies and giveaways under Joe Biden's massive socialist legislation, such as the so-called Inflation Cut Act,” Trump said. told supporters at Wisconsin May rally.
“We will put an end to his new green scam,” he said. “We’re going to end this war on American energy — we’re going to drill, baby, drill.”
In late June, clean energy stocks tumbled after President Joe Biden's poor debate performance as investors worried about the growing likelihood that Trump and Republicans would sweep the White House and Congress.
First Solar CorporationMark Widmar, chief executive of the largest U.S. panel maker, told analysts on the company's July 30 earnings report that early-stage solar companies and larger players trying to build domestic manufacturing operations were gaining access to capital in the second quarter. are subject to more and more restrictions.
Widmar said investors are waiting to make a decision until they have a clearer picture of the policy environment for the solar industry. Utilities and oil companies that are investing in renewable energy are now considering prioritizing fossil fuel projects, he said.
Some investors worry that Republicans will use the reconciliation process, through which bills are passed with a simple majority, to dismantle the IRA to fund Trump's 2017 tax cuts and make them permanent.
Trump told Reuters on Monday that he would consider ending the $7,500 tax credit for electric vehicles. Rhodium said consumers and businesses have spent $157 billion on zero-emission vehicles since 2022, double what they spent before the IRA became law.
“Tax credits and tax breaks are generally not a good thing,” the former president told Reuters in an interview, even being asked about electric vehicle credits after the campaign in York, Pennsylvania.
Trump made no specific mention of tax incentives to support the expansion of renewable energy. former president's campaign platform Says Republicans will support energy production from all sources. The document supports oil, coal, natural gas and nuclear energy, but does not specifically mention solar or wind energy.
Republican constituencies benefit the most
Renewable energy company executives and analysts are betting that investment, production and manufacturing tax credits — which drive much of the spending on clean energy and technology — can survive even a Republican administration.
E2 data shows that the majority of IRA investments in new projects (85%) go to Republican congressional districts. Trump's campaign platform emphasized expanding domestic manufacturing and bringing supply chains back to the United States
The dynamics of the presidential race have also changed since Biden ended his reelection bid, with Vice President Kamala Harris slightly ahead in national polling averages as she formally accepts the Democratic nomination at this week's Democratic National Convention in Chicago. For Trump.
“We're seeing more and more Republican lawmakers embrace clean energy credits within the IRA because they see the positive impact it has on their states and communities, and it's hard to turn down,” said CEO John John Ketchum said. next generation energyThe company, which operates the largest renewable energy portfolio, told analysts during the company's July 24 earnings call.
“Tax laws are difficult to overturn,” Ketchum said. “We're likely to have slim majorities in the House and Senate, especially given some of the recent developments,” he said, suggesting Harris would be the new Democratic nominee.
In fact, 18 Republican members of Congress warned House Speaker Mike Johnson earlier this month that repealing the IRA energy tax credit would be bad for business.
“Premature repeal of energy tax credits, especially those used to justify investments that have already broken ground, will harm private investment and deter development already underway,” Republicans said. legislators wrote.
“Comprehensive repeal would create a worst-case scenario in which we would spend billions of taxpayer dollars for next to nothing in return,” they wrote.
John Berger, CEO of Rooftop Solar Installer Sannovatold analysts on the company's Aug. 1 earnings call that the Trump trade that sent clean energy stocks lower may not have much upside left.
“Obviously, it's very close right now,” Berger said of the presidential race. “I think the old Trump deals and so on, I would be very cautious about that.”