- Annual renewables investment to drive up with an increase of $64 billion in 2022 to $14 billion by 2031.
According to a new analysis from Wood Mackenzie, the US’s Inflation Reduction Act (IRA) is predicted to spur an increase in annual renewables investment from $64 billion in 2022 to $14 billion by 2031.
The research company predicted the legislation would alter Thursday’s US renewables supply chain. According to its analyst Daniel Liu, the IRA will promote the establishment of whole supply chains for equipment from scratch as well as the reopening of shuttered facilities.
Two IRA provisions, known as the advanced manufacturing production credits (AMPC) for US-made renewable equipment and an additional tax credit made available to US developers who meet certain thresholds for domestic content, according to WoodMac, will primarily benefit producers of renewable energy equipment. The domestic content threshold is 40% for projects installed before 2025, or 20% in the case of offshore wind, and rises to 55% after 2026 for offshore wind after 2027.
According to Liu, between 4% and 30% fewer solar panels, storage devices, and wind towers were manufactured in the US because of IRA incentives. Domestic production might be cost-competitive with imported equipment if combined with tariffs on some imports, according to Liu.
According to WoodMac, the sector’s development will be impacted by yet-to-be-released instructions on implementing the IRA.