Monica Munoz, top, and Dennis Denning place black encapsulating material on a solar panel Thursday, April 25, 2024, at Erin Energies’ solar panel manufacturing facility in Brookshire.
Brett Kumar | Hearst Newspapers | Getty Images
The Inflation Control Act sparked a manufacturing boom across the United States, mobilizing tens of billions of dollars of investment, especially in rural areas that needed economic development.
The future of these investments could hinge on the outcome of the US presidential election, with the prospect of a Republican victory shaking the confidence of some investors who worry IRAs could be weakened or, worse, abolished.
Since President Joe Biden signed the IRA in August 2022, companies have announced $133 billion in investments in clean energy technologies and electric vehicle manufacturing, according to data from the Massachusetts Institute of Technology and the Rhodium Group.
According to MIT and Rhodium, actual manufacturing investment totaled $89 billion, up 305% from the two years prior to the IRA’s introduction. Overall, the IRA has leveraged $500 billion in investment across the manufacturing, energy and retail sectors, according to the data.
“This is transforming manufacturing,” said Trevor Hauser, a partner at Rhodium Group. “The amount of new manufacturing activity we’re seeing right now is unprecedented in recent history, and a big part of it is coming from new clean energy manufacturing facilities.”
Some 271 clean energy technology and electric vehicle manufacturing projects have been announced since the IRA was passed, and when completed, they could create more than 100,000 jobs, according to E2, an advocacy group that partners with the Natural Resources Defense Council. Hauser said the investment spurred by the IRA has especially benefited rural communities.
“Unlike investments in AI, technology and finance, which are concentrated in big cities, investments in clean energy are actually concentrated in rural communities and are one of the most promising sources of new investment in these regions,” Hauser said.
The IRA is also accelerating the deployment of renewable energy, investing $108 billion in utility-scale solar and battery storage projects. Investment in solar and battery storage has increased 56% and 130%, respectively, over the past two years, according to data from Rhodium.
“More mature technologies like wind power, solar power and electric vehicles are at escape velocity,” Hauser said. “They’re going to keep growing no matter what. It’s all about speed.”
Trump’s threats against the IRA
But Hauser said the “manufacturing recovery” was still in its early stages and remained fragile, and Chris Seiple, vice-chairman of power and renewables at Wood Mackenzie, said the bounce back in new factories would not have happened without the IRA.
Former President Donald Trump has threatened to repeal the law as he advocates for expanding oil, gas and coal production.
“When I take office, I will immediately halt all new spending subsidies and incentives under Joe Biden’s giant socialist bill, the so-called Stop Inflation Act,” Trump told supporters at a May rally in Wisconsin.
“We’re going to end his new environmental scam,” he said, “and we’re going to end this war on American energy. We’re going to drill, baby, we’re going to drill.”
Clean energy stocks plummeted after President Joe Biden’s dismal debate performance in late June, as investors worried that President Trump and Republicans would take control of both the White House and Congress.
First SolarThe largest U.S. maker of solar panels saw capital funding constraints increase in the second quarter for early-stage solar companies and larger companies looking to build a domestic manufacturing base, CEO Mark Widmer told analysts on the company’s earnings call on July 30.
Investors are holding off on decisions until there is more clarity about what the policy environment for the solar industry will be, Widmer said. Power and oil companies that had invested in renewable energy are now considering pivoting to prioritize fossil fuel projects, he said.
Some investors worry that Republicans will use the reconciliation process, which allows them to pass legislation with a simple majority vote, to raise funds to shrink IRAs and make President Trump’s 2017 tax cuts permanent.
President Trump told Reuters on Monday that he would consider eliminating the $7,500 tax credit for electric cars. According to Rhodium, consumers and businesses are set to spend $157 billion on zero-emission vehicles since 2022, double the amount they spent before the IRA became law.
“Tax credits and tax incentives in general are not very good things,” the former president told Reuters in an interview after a campaign stop in York, Pennsylvania, when asked specifically about the EV tax credit.
Trump did not specifically mention tax incentives that have supported the expansion of renewable energy. The former president’s campaign platform said Republicans would support energy production from all sources. It supported oil, coal, natural gas and nuclear power, but did not specifically mention solar or wind power.
Republican districts benefit most
Renewable energy executives and analysts are confident that the investment, production and manufacturing tax credit, which drives much of the clean energy and technology spending, would survive under a Republican administration.
The vast majority of IRA investments in new projects, 85%, are in Republican districts, according to E2 data, and Trump’s campaign platform has emphasized expanding domestic manufacturing and bringing supply chains back to the United States.
The balance of power in the presidential election has also shifted since Biden ended his reelection bid, with Vice President Kamala Harris formally accepting the party’s nomination at the Democratic National Convention in Chicago this week and holding a slight lead over Trump in the national polling average.
“We’re seeing a growing number of Republicans supporting clean energy credits in IRAs because they see the positive impact they can have on their states and communities, and that’s hard to ignore,” CEO John Ketchum said. NextEra EnergyThe company, which manages the largest renewable energy portfolio, told analysts during an earnings call on July 24.
“And tax reform is going to be very hard to overturn,” Ketchum said. “The House and Senate are likely to be very close, especially given recent developments,” he said, suggesting that Harris could emerge as a new Democratic candidate.
Indeed, 18 Republican lawmakers wrote to House Speaker Mike Johnson earlier this month warning him that eliminating the IRA energy tax credit would be bad for businesses.
“Prematurely eliminating energy tax credits, especially those used to justify investments that have already begun, will undermine private investment and halt development already underway,” the Republicans wrote.
“Total repeal would create a worst-case scenario in which billions of taxpayer dollars are spent with almost nothing in return,” they wrote.
John Berger, CEO of rooftop solar panel installer SunnovaThe company told analysts on its Aug. 1 earnings call that the Trump trade that sent clean-energy stocks tumbling may not have much room for further upside.
“Obviously, it’s a close race right now,” Berger said of the presidential election. “Given Trump’s past dealings and so on, I would be very cautious.”
