The Inflation Reduction Act: A Boon for American Clean Energy—But When?

The Inflation Reduction Act (IRA) has been called historic, transformative, and imperfect. But despite detractors’ criticisms, the IRA is the most significant piece of climate change legislation US lawmakers have ever passed. With the recent rise in extreme weather events, drought, heat waves, and forest fires, the detrimental impacts of climate change can no longer be denied, and Congress has taken action.

The IRA commits nearly $370 billion in funding and tax incentives to clean energy investment and emerging technologies, and emphasizes the decarbonization of manufacturing in the US, domestic sourcing of materials, the creation of new energy economy jobs for Americans, and support for electrification and energy efficiency in disadvantaged communities. It takes a significant step toward the Biden administration’s stated goal of cutting greenhouse gas (GHG) emissions to just half of 2005 levels by 2030; indeed, according to several early analyses, the IRA could result in a ~40% reduction in GHG in the next seven years.

The IRA represents a massive policy shift that can benefit green energy economy stakeholders over the long term, but it includes some provisions that could slow or inhibit immediate investment; negotiating a bill all parties could support required compromises that could limit the law’s effectiveness or even generate unintended negative consequences in the near term. 

In this white paper, Guidehouse Insights provides its early-stage analysis of key provisions of the IRA and suggests how vendors and OEMs should prepare to meet its requirements and take full advantage of the funding and incentives offered to maximize their—and their customers’—benefit.