The IRA is reshaping the American economy and reinvigorating manufacturing. Also, Enphase has opened three U.S. manufacturing facilities already this summer.
On the first anniversary of the Inflation Reduction Act
A little over one year ago, on August 16, 2022, President Joe Biden signed the Inflation Reduction Act (IRA) into law, ushering in a new era of investment in clean energy, electric vehicles and environmental initiatives. The act’s primary aim was to combat carbon emissions and move the nation closer to its climate goals. As we mark this first anniversary, it’s worth examining the legislation’s impact.
Australian Energy Minister Chris Bowen recently said that the IRA was the most important thing done for climate so far, including the landmark UN Paris Agreement of 2015. (1)
In a recent interview with ADT Solar’s Good Energy Podcast, Abby Ross Hopper, CEO of the Solar Energy Industries Association agreed. “I think Mr. Bowen is absolutely right. It’s the biggest thing that’s happened in the climate space in the world,” she said. “And what an exciting thing that has happened here and that we’re all a part of it.”
Beyond its environmental implications, the Inflation Reduction Act marks a significant shift in the American economy. It has paved the way for a resurgence in manufacturing, potentially leading to the creation of well-paying jobs across the country. This focus on bolstering the workforce and revitalizing struggling cities represents a departure from conventional trickle-down economics.
Although it’s still early in the life of this legislation, data from the past year indicates that the Inflation Reduction Act has already begun to rebuild the U.S. manufacturing sector.
Restoring U.S. manufacturing through the IRA
Over the last few decades, the United States has experienced a decline in manufacturing jobs due to offshoring. In turn, this has led to the decline of once-thriving communities. The number of manufacturing firms and plants has dropped by approximately 25% since 1997, resulting in significant job losses.
In just one year, the law has sparked a manufacturing renaissance, nearly doubling manufacturing construction. Major investments have been announced by battery component manufacturers, wind and solar equipment producers and electric vehicle (EV) makers. Clean energy initiatives have been unveiled in 44 states, with Michigan, Georgia, South Carolina, California and Texas leading the charge. (2)
Local policies designed to capitalize on the Inflation Reduction Act are just beginning to emerge. With uncapped tax credits available through the act, the private sector has the potential to contribute even more capital to clean energy projects, ultimately generating more manufacturing jobs than initially anticipated.
In the summer of 2022, the Congressional Budget Office estimated that around $369 billion in federal clean energy tax credits could be utilized under the law. However, an analysis by Goldman Sachs in April 2023 suggests that as much as $1.2 trillion in federal incentives could drive up to $3 trillion in private investment over the next decade. (3)
The Inflation Reduction Act offers a lifeline to communities that have traditionally depended on fossil fuels and carbon-intensive industries. Michigan, for instance, is poised to benefit from new investments in electric vehicles and battery manufacturing as the nation transitions toward low-carbon transportation, leveraging its history in the auto industry.
Another big feature of the IRA is its stability. Earlier incentives were usually only in effect for five years or less. With IRA incentives lasting up to a decade, companies can invest in long-term projects with greater certainty. Businesses are encouraged to use federal incentives to attract additional capital, fostering innovation and growth.
Despite promising progress, the Inflation Reduction Act continues to face political and technical challenges. The efficient and safe transmission of energy, particularly for renewable energy projects connecting to the grid, continues to lag. Overcoming challenges with the grid is a crucial next step for clean energy production.
Incentives for consumers
For consumers, the Inflation Reduction Act provides rebates that cover a significant portion of the cost of energy-efficient appliances. Electric heat pumps, water heaters, clothes dryers and ovens are all covered. Replacing a furnace or air conditioner with an electric heat pump, for instance, can qualify for rebates of up to $2,000, contributing to more efficient heating and cooling.
The Act’s Solar Investment Tax Credit (ITC) provisions allow American taxpayers with eligible solar panel systems to claim a credit worth 30% of their solar system’s cost. Moreover, the program has extended to eligible standalone backup battery installations.
The Inflation Reduction Act offers enticing savings for those purchasing or leasing electric vehicles (EVs). Eligible buyers can save up to $7,500 on approved new EVs or $4,000 on used ones. The landscape for electric vehicles is evolving rapidly, with electric cars projected to gain prominence over gas-engine vehicles. By 2027, approximately 46% of new model launches are expected to be electric vehicles(5), accompanied by an increase in EV charging infrastructure supported by federal funding.
The Inflation Reduction Act provides a unique opportunity to drive both climate action and economic rejuvenation. As the nation moves forward, the Inflation Reduction Act stands as a testament to the power of legislative action in reshaping the economy and addressing critical environmental challenges.
- A conversation with Saul Griffith, Volts Podcast
- FACT SHEET: One Year In, President Biden’s Inflation Reduction Act is Driving Historic Climate Action and Investing in America to Create Good Paying Jobs and Reduce Costs, The White House
- One Year In, How the Inflation Reduction Act Is Creating a Manufacturing Resurgence in the US, World Resource Institute
- The Inflation Reduction Act could energize the economy, Brookings Institute
- Car Wars report says Ford, GM, and Stellantis will gain the most US EV market share, Electrek
- Biden-Harris Administration Opens Applications for First Round of $2.5 Billion Program to Build EV Charging in Communities & Neighborhoods Nationwide, USDOT
Enphase Energy goes all in on U.S. manufacturing
Enphase headquarters in Silicon Valley
How quickly can a renewable energy technology company go from zero to sixty in manufacturing in the U.S.?
If the company is Enphase, the answer is ten months.
In October of 2022, the company responded to the recently signed Inflation Reduction Act by announcing plans to produce “millions of inverters” in the U.S. by the end of 2023. (1)
Given that Enphase had no manufacturing facilities in the country, it was a bold statement.
This past week, Enphase opened a new manufacturing facility in Arlington, Texas, and promptly started delivering on that promise. (2)
Along with Enphase leadership, ADT Solar President Jaime Haenggi spoke at the opening. “When it comes to manufacturing in America, this is about creating strong, stable supply chain,” she said. “And if there’s anything I’ve learned in the solar industry, it’s that stability is really nice to have. Thank you for bringing us that.”
As big a deal as the Arlington plant is, it’s actually the third new Enphase factory to open in the U.S. in the last couple of months.
In early July, President Joe Biden visited West Columbia, South Carolina to help celebrate a new manufacturing facility there. (3) A second facility in Wisconsin quickly followed. (4)
Each of the facilities is run by contract manufacturers. Salcomp is heading up the Arlington project, but the product is all Enphase with “Made in America” emblazoned on the shipping boxes.
Enphase is best known for its microinverters. A component of nearly every solar energy system, the microinverter converts the direct current of solar panels into the alternating current required by most homes. But modern inverters also serve as the brains of residential energy systems, monitoring and redirecting energy as needed.
Enphase has become a major supplier of backup batteries in recent years and has recently entered the EV charging market.
- Enphase to manufacture solar inverters in US, spurred by new tax credits, Canary Media
- Enphase Energy Begins Microinverter Shipments from Texas with Salcomp, Enphase Energy
- Biden to Announce $60 Million Enphase Energy Investment, Bloomberg
- Enphase announces second U.S. solar microinverter factory in Wisconsin, Solar Power World