Expect US to Attract $114 Billion RE Investment By 2031

Wood Mackenzie Anticipates Over 78% Jump In Annual Renewable Energy Investment In US By 2031, Up From $64 Billion In 2022, Thanks To IRA

Expect US to Attract $114 Billion RE Investment By 2031

For utility scale solar growth, the country’s current small solar manufacturing base poses a challenge, according to the Wood Mackenzie analysts. (Source: Wood Mackenzie)

  • Wood Mackenzie’s analysis of the IRA sees the annual renewable energy investments in the US to go up by over 78% by 2031
  • It will be a growth from $64 billion reported in 2022, to $114 billion by 2031, thanks mainly to the AMPC and DCR incentives
  • The IRA’s impact will reshape the country’s renewables supply chain and incentivize shuttered facilities to reopen
  • IRA incentives may cut down the manufacturing cost of solar panels, storage equipment and wind towers by anywhere from 4% to 30%
  • IRS clarity on accessing support in the form of tax credits will be critical for manufacturing investors to take firm decisions

An initial assessment of the impacts of the Inflation Reduction Act (IRA) by Wood Mackenzie finds the US renewable energy industry can attract as much as $114 billion annual investments by 2031, which will be a growth from $64 billion in 2022 and completely reshaping the country’s renewables supply chain while incentivizing reopening of shuttered facilities.

The expected benefits will mainly be a result of tax credits to be offered for US made renewable equipment under advanced manufacturing production credits (AMPC), and incentives for developers if they purchase locally manufactured equipment and meet domestic content requirements (DCR).

Additional credit under the DCR is to be shelled out for 40% of all equipment used, to be made in the US and installed before 2025, and 20% for offshore wind. This will go up to 55% after 2026, 2027 for offshore wind.

In the report titled Boom time: what the Inflation Reduction Act (Act) means for US renewables manufacturers, Wood Mackenzie analysts estimate IRA incentives to cut down the manufacturing cost of solar panels, storage equipment and wind towers by anywhere from 4% to 30%.

While the IRA offers attractive opportunities for both onshore and offshore wind segments, Wood Mackenzie’s Principal Analyst and Lead Author of the report Daniel Liu sees a ‘somewhat foggier outlook’ for utility scale solar.

“With such a small solar manufacturing base currently in the region, juxtaposed against substantial forecasted growth in solar additions, fully meeting US solar needs with domestic equipment will be more challenging than other sectors,” explained Liu.

Developing a self-sufficient domestic manufacturing capability for solar PV in the US has ‘considerable challenges’ as the costs are 16% to 33% higher than imported equipment, but Liu sees the AMPC to help close this gap.

“The decision to invest in equipment manufacturing capacity expansion depends on the interplay of three factors,” added Liu. “First, the cost of manufacturing equipment in the US compared with imports, taking into account the benefits the AMPC provides. Second, the expected supply/demand imbalance for renewables equipment, and finally, specific guidance from the Internal Revenue Service (IRS) on what constitutes ‘domestically produced equipment.”

Eligibility requirement guidance from the IRS is now awaited to get clarity on how to access support in the form of tax credits which, according to Wood Mackenzie, will be a critical factor for investment decision by the manufacturing community.

Details about the complete report will be available on Wood Mackenzie’s website.

Nonetheless, the launch of IRA itself has spurred a momentum for US solar manufacturing with companies within and outside of the country announcing plans to start production here. Local PV panel maker First Solar is already investing in a new 3.5 GW fab and announced further expansions in August 2022 soon after the IRA was announced (see First Solar Reveals 4th US Solar Manufacturing Facility).

Very recently, Chinese module maker JA Solar announced a 2 GW fab in Arizona (see JA Solar Takes US Manufacturing Steps).

Inspired by the IRA, now the European Union has also announced Green Deal Industrial Plan to provide state aid for clean tech production in the bloc (see EU Promises Green Deal Industrial Plan For Clean Technology).

About The Author

Anu Bhambhani

SENIOR NEWS EDITOR Anu is our solar news whirlwind. At TaiyangNews, she covers everything that is of importance in the world of solar power. In the past 9 years that she has been associated with TaiyangNews, she has covered over thousands of stories, and analysis pieces on markets, technology, financials, and more on a daily basis. She also hosts TaiyangNews Conferences and Webinars. Prior to joining TaiyangNews, Anu reported on sustainability, management, and education for leading print dailies in India. [email protected]

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