Although the one-year anniversary for the Inflation Reduction Act (IRA) has come and gone, the reported impact of the federal legislation is only just beginning.
Rhodium Group and MIT’s Center for Energy and Environmental Policy Research have released a new database and accompanying report, “The Clean Investment Monitor: Tracking Decarbonization Technology in the United States,” which identified $213 billion in new clean investments across the U.S. in the past year — a 37 percent increase from the year before and a 165 percent increase from five years ago. To put that into perspective, Rhodium Group calculated that level of investment to be larger than the annual GDP of 18 U.S. states.
The report breaks down the investments into three major categories — manufacturing, energy and industry, and retail. Of the three, retail — which includes the purchasing of clean energy generation technology and electric vehicles (EV) by both consumers and businesses — has the most funding, with $113 billion of investments between June 2022 and 2023. EVs lead within that sector, receiving $20 billion in investments in just the second quarter of this year alone.
While retail received the most funds, manufacturing saw the largest amount of growth, growing 125 percent year-on-year growth since 2021, reaching a total of $39 billion by June.
And of that $39 billion, the clear investment winner is battery manufacturing.
In the second quarter of 2023 alone, $10.01 billion was invested in battery technology, of the total $13.64 billion invested in the entire quarter. It makes sense that batteries lead the charge in investments, given that at least two well-funded IRA tax incentives exist to promote the production of electric batteries and clean energy storage.
The IRA’s 48C Qualifying Advanced Energy Project Credit Program supports the production of batteries, with the Department of Energy citing credit eligibility for "projects that expand clean energy manufacturing and recycling and critical materials refining." Additionally, the 45X Advanced Manufacturing Production Credit supports the development of a domestic supply chain for renewable energy storage.
Zero-emissions vehicles followed closely in second place in Q2 2023, receiving $1.85 billion in investments.
In addition to credits 48C and 45X, other IRA incentives contributed to the marked increase in investment, including the 45Q Credit for Carbon Oxide Sequestration, 45Z Clean Fuel Production Credit and 48E Clean Electricity Investment Tax Credit. A full list of the tax credits can be found here.
Looking ahead, it's fair to assume that this upward trend will continue. "Based on recent announcement activity, we fully expect clean investment to increase in the years ahead," said Trevor Houser, a partner in Rhodium’s energy and climate practice, to Cipher. "The Inflation Reduction Act and Infrastructure Investment and Jobs Act are clearly accelerating the pace of clean investment in the U.S."