Inflation Reduction Act Giving Solar Power & Electric Cars Big Boost
I think the Inflation Reduction Act is one of the most under-appreciated pieces of legislation in American history. Of course, in an era of such political divide that we’ve got insurrectionists storming the capital instead of respecting the normal transfer of power, that isn’t too surprising. Nonetheless, the Inflation Reduction Act was a monumental achievement that’s both the biggest reshoring legislation in US history, the biggest climate legislation in US history, and one of the biggest pieces of manufacturing legislation in US history. It is a huge base of support for accelerating the transition to solar power and electric transport.
This week, the US Solar Energy Industries Association (SEIA) showed how much the Inflation Reduction Act (IRA) is boosting solar. Let’s first take a look at that.
Solar Power Booming — Thanks, IRA
“The U.S. solar industry added a record-shattering 32.4 gigawatts (GW) of new electric generating capacity in 2023, a 37% increase from the previous record set in 2021 and a 51% increase from 2022,” SEIA writes. “According to the U.S. Solar Market Insight 2023 Year in Review released today by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, solar accounts for 53% of all new electric generating capacity added to the grid last year. This marks the first time in 80 years that a renewable electricity source has accounted for over 50% of annual capacity additions.” Importantly, SEIA doesn’t just attribute some of this record-shattering success to the IRA, but also highlights that not interfering with what the IRA has put in place will lead to dramatically more solar power in the years to come.
“If we stay the course with our federal clean energy policies, total solar deployment will quadruple over the next ten years,” said SEIA president and CEO Abigail Ross Hopper. “The Inflation Reduction Act is supercharging solar deployment and having a material impact on our economy, helping America’s solar module manufacturing base grow 89% in 2023. We must protect and optimize the policies that are driving these investments and creating jobs, and the stakes in the upcoming election couldn’t be higher.”
Right now, if things continue on track, SEIA expects the US will have enough solar power capacity in 2034 to power 100 million homes. However, there’s a huge difference between the organization’s “bull case” and “bear case” for the industry depending on different policy and economic factors. SEIA indicates a 200-gigawatt gap between the more optimistic scenario and the more pessimistic one by 2034. “The scenarios consider various factors including interest rates, tax credit financing, trade policy, supply chain availability, and interconnection, amongst others, over the next 10 years,” the organization notes.
Getting back to the IRA, one big thing it did was encourage reshoring of solar module manufacturing by providing incentives for that. The result: a lot more solar module manufacturing in the US. The response began immediately, and it has grown into a mountain. From the end of 2022 to the end of 2023, it grew from 8.5 GW to 16.1 GW! Talk about progress!
EV Sales Booming — Thanks, IRA
This one may bee a little less obvious, especially since there’s so much anti-EV hype out there at the moment trying to tell us that the EV industry is struggling. However, without a doubt, the expanded tax credit that effectively reduces the price of Tesla vehicles by several thousand dollars has helped increase Tesla sales — and note that Tesla accounts for more than half of US electric car sales. The US tax credit for EVs had expired for Tesla years ago, but the IRA brought it back — except for trims that use batteries produced in China, or including components produced in China. The most popular electric car in the country — and in the world — can get its buyer a full $7,500 tax credit. GM also got its tax credit eligibility back, boosting sales of the highly competitive Chevy Bolt EV and Chevy Bolt EUV. (Though, GM is discontinuing them, but that’s another story or two.)
It’s true that some electric car models lost eligibility due to batteries or battery components coming from China, but that’s not as big of a deal as the changes above and it’s also a temporary matter that’s part of the focus on reshoring good manufacturing jobs in the US. Then there’s also the fact that the IRA basically includes a loophole for leasing — if you lease an EV of any brand, you can benefit from the tax credit. And the IRA includes subsidies for used electric cars, which never got any support before.
Then there’s the matter of the IRA dramatically incentivizing US EV production and production throughout the EV supply chain. I’ve written about this at length in the past, so I refer you here. But here’s some commentary from an industry expert, Xcelerate Auto CEO and founder KJ Gimbel, as well: “The IRA has influenced and stimulated EV production growth within the United States. Not just the vehicles themselves, but even drilling down to the raw materials and battery manufacturing.” Furthermore, on the consumer side, Gimbel says: “The incentives that were supplied through the IRA efforts have definitely helped stimulate interest within the EV space.”
According to one analysis, the IRA together with the Infrastructure Investment and Jobs Act and the CHIPS and Science Act has helped to drive more than $92 billion of investment into EV production, creating 84,000 jobs. “The Inflation Reduction Act’s strategic and plentiful incentives are essential to spurring EV and battery manufacturing. By investing and creating a strong American EV manufacturing sector, these policies and incentives are essential to breaking China’s dominance of critical mineral and battery component supply chains,” said Leo Banks, research associate for Domestic Climate Policy at the Center for American Progress and author of the issue brief. “Investment in new manufacturing capacity for zero-emissions vehicles, batteries, and critical minerals have jumped more than 250 percent, climbing from $14 billion in the year before Inflation Reduction Act’s passage to $51 billion in the year since its passage, according to the Clean Investment Monitor,” the Center for American Progress (CAP) added.
“EVs are the inevitable future of transportation, already constituting 14 percent of global vehicle sales in 2022—a figure that may hit 18 percent by the end of 2023.5 If American automakers fail to invest in EV innovation, this major pillar of U.S. economic and industrial strength will be overtaken by foreign competitors who are aggressively pursuing the EV revolution.6 The Inflation Reduction Act offers U.S. automakers a path of continued global relevance, and, fortunately, it seems to be working.”
The IRA is making US blue collar jobs great again, and particularly cleantech ones. It is stimulating massive growth in solar power equipment production and solar power generation in the US of A, and it is doing the same in the electric vehicle and battery industry. And it’s just the beginning! Wait until 2030! (Assuming it is not disrupted or killed by a change in political power.)
Featured image by Zach Shahan | CleanTechnica
Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.
Latest CleanTechnica.TV Video
CleanTechnica uses affiliate links. See our policy here.
