The clean energy landscape dramatically shifted due to the signing of the Inflation Reduction Act of 2022 on August 16th. This new law significantly increases the tax incentives available for energy transition initiatives and technology while removing many of the roadblocks that have hindered the United States’ shift to cleaner energy. Certain industries will see a major rise in financing due to these new regulations, which will alter how capital is managed and invested, tax credits are monetized, and clean energy projects are financed.
$369 billion will be spent on climate and clean energy initiatives, including tax subsidies for electric and renewable vehicles, investments in U.S. production of sustainable technologies, and environmental justice. The Act also authorizes the Department of Energy to issue guarantees of up to $250 billion for clean energy projects. Norton Rose Fulbright notes that these fall under three types of energy infrastructure projects. One type is projects that retool, repower, reuse, or replace outdated energy infrastructure. Another is attempting to make energy infrastructure operational so that air pollution or greenhouse gas emissions can be avoided, reduced, used, or sequestered. The third type of projects consist of initiatives to repair environmental harm brought on by energy infrastructure.
The Act is also extending the project eligibility to dedicated energy storage and geothermal energy. According to J.P. Morgan, solar and wind production have been down the last few years in part due to the uncertainty surrounding the renewable Investment Tax Credits (ITCs) and Production Tax Credits. However, with the Inflation Reduction Act, we can expect to see an increase in wind and solar production. Additionally, there will be a new standalone 30% investment tax credit for energy storage, particularly battery, pumped hydro, and thermal. Wood Mackenzie predicts that a 30% storage Investment Tax Credit would lead to a 20-25% rise in U.S. storage deployments over the next five years. Many analogies have been made to the solar business, where, according to the Solar Energy Industries Association, the Investment Tax Credit was one of the most important government policy tools for fostering industry growth. The solar industry has expanded by more than 10,000% since the ITCs implementation in 2006.
The Inflation Reduction Act further offers long-term tax credit incentives for a wide range of renewable energy technologies. These incentives represent a considerable improvement over the current energy tax credit programs, which were only applicable to a restricted number of technologies and have been the subject of continuous phase-out and extension cycles during the past two decades. With the guarantee of a long-term and steady tax credit through at least the next ten years, the majority of clean energy technologies, such as wind, solar, biomass, thermal, and carbon capture, are now more financially viable. A variety of innovative energy transition technologies that had not previously qualified for tax credits are now eligible for subsidies under the Act, including energy storage projects, clean energy manufacturing facilities, hydrogen projects that adhere to minimum carbon emission standards, biogas production facilities, and current nuclear power plants.
With new incentives for energy storage, companies such as ours can more cost effectively deploy energy saving technologies to more clients and industries. The Inflation Reduction Act will open many doors for energy storage and those interested in temperature control and thermal energy management. With our Thermal Energy Storage, Viking Cold has developed the only proven, environmentally friendly way to store renewable energy in the refrigerated and temperature-control industries. We look forward to using the provisions of the Inflation Reduction Act to help businesses to be more efficient and reduce their carbon footprint while lowering their energy costs up to 50%.
Whatever its other impacts, the Inflation Reduction Act of 2022 is the broadest ranging legislation to address sustainability and decarbonization of the energy sector in our lifetime. To read the Inflation Reduction Act in full, click here. For more information on how thermal energy storage can help manage refrigeration energy costs, click here.