A landmark legislative package signed by President Joe Biden, the IRA ushered in a new era of investment and innovation in renewable energy, electric vehicles and other key sectors for the green and energy transition.
Cleantech Supply Chain Transformation
In just one year, IRA has marked a revolution in the clean technology supply chain. From renewable energy, such as wind and solar, to breakthrough technologies, such as hydrogen and electric vehicles, the IRA has catalyzed investment, job creation and capacity expansion. Among the most notable effects is the rise in national production capacity. Today, more and more companies are announcing significant investments to relocate their manufacturing capacities to the United States.
The numbers tell a compelling story. Nearly $86 billion in private investment (Figure 1) has flowed into clean energy projects, sparking a ripple effect across industries. The solar panel sector saw the establishment of 51 new manufacturing plants or expansion. Battery production has seen a similar boom, with 91 factories now engaged in battery manufacturing. More than 100,000 clean energy jobs have been created, supporting local economies and fostering a greener future. This economic boost highlights IRA’s potential to drive economic growth while propelling the nation toward a sustainable energy future.
Source: BloombergNEF, Jack Conness (energy policy analyst), Mandarine Gestion analysis. Figures in billions of dollars.
Giants such as Tesla, General Motors and Ford (figure 2) have announced significant investments in the manufacturing of electric vehicles, putting the United States back at the front of the race to develop these cars. SK and Ford have established battery manufacturing facilities in Tennessee and Kentucky to meet growing demand for electric vehicles. LG Energy Solution’s investment in a battery complex in Arizona and Panasonic’s third U.S. battery plant in Oklahoma illustrate the large-scale transition to cleaner technologies.
A changing geopolitical landscape
The impact of the IRA influences the complex geopolitics of new green technologies as China and the United States, the two main players in the clean energy race, vie to assert their dominance in this crucial sector. The IRA has increased U.S. competitiveness while reducing its dependence on foreign supply chains and challenges China’s established position as a major supplier of key materials. The wave of American and foreign companies moving production to the United States speaks to a broader trend sparked by the IRA, underscoring the plan’s central role on the world stage.
The emphasis on localized production has also prompted other economies to act. Canada and the European Union (Figure 3), for example, are developing their own initiatives to remain competitive in the evolving green economy, but without much success so far. The IRA’s incentives triggered a broader reassessment of subsidy policies and competitive strategies.
Source: European Commission, Goldman Sachs Research, Mandarine Gestion analysis
Bipartisan support and the future of the IRA
Critics have speculated about the fate of the IRA in the face of changing political winds: what would happen in the event of a change of administration in the United States? However, the IRA’s resilience is rooted in its tangible impact. Remarkably, this Democratic-led legislation generates more than two-thirds of jobs and three-quarters of investments in Republican-friendly states (figure 4). While the political landscape may shift, the economic benefits of the IRA run deep into local communities, reflecting a lasting impact that transcends political divisions, thereby securing its future.
Source: Jack Conness (energy policy analyst)
One year after its signing, the transformative effects of the IRA plan on the clean technology supply chain are undeniable. From overhauling domestic manufacturing to influencing global geopolitics, the IRA has charted a new path for sustainable development. While uncertainties remain, one thing is clear: the IRA has established itself as a driving force for change, reshaping global supply chains and laying the foundations for a more resilient future. The IRA thus positions the United States as a leader in clean technology innovation, also contributing to a more sustainable future on a global scale.