Inflation Reduction Act to Boost Clean Energy Investment

The recently enacted Inflation Reduction Act (H.R. 5376) includes over $370 billion in energy, climate, and manufacturing investments, providing major tax and policy incentives for the clean energy sector as well as direct spending and other policy changes oriented towards the goal of placing the U.S. on a path to reduce carbon emissions by approximately 40% based on 2005 levels by 2030.
 
New Clean Energy Tax Credits
The bill creates an entirely new credit for the production of clean hydrogen — based on lifecycle greenhouse gas emission rates — for properties that begin construction before 2023. Last year’s Bipartisan Infrastructure Law defined clean hydrogen as “hydrogen produced with a carbon intensity equal to or less than 2 kilograms of carbon dioxide-equivalent produced at the site of production per kilogram of hydrogen produced.” According to analysis from Bloomberg, the credits, which can provide up to $3 per kilogram (kg) of H2 produced, will make low-carbon hydrogen immediately competitive with its fossil counterpart in many parts of the United States.
 
The nuclear power industry will also benefit from a new production tax credit for qualifying zero-emission nuclear power produced by facilities placed in service before the measure’s enactment. In addition to supporting the current nuclear fleet, the credit supports the continued building of two AP1000 reactors in Georgia, as well as the construction of advanced reactors, including the small modular reactor that NuScale Power is building at Idaho National Laboratory.
 
The bill extends and expands a number of other tax credits related to production and investment for clean energy technologies, including for investments in carbon capture and mitigation technologies. The bill also provides 10 years of consumer energy efficiency and emission reduction tax credits, totaling almost $9 billion, in support for the purchase of energy and water efficient home appliances, as well as revised credits to support purchases and domestic manufacturing of electric vehicles.
 
Manufacturing Loans and Investments
The bill provides the Department of Energy (DOE) with $5.8 billion over the next four years to provide financial assistance for domestic, nonfederal, nonpower industrial or manufacturing facilities engaged in energy intensive industrial processes to purchase, install, retrofit, or upgrade advanced industrial technology to reach net-zero GHG emissions.
 
Similarly, DOE will have $3 billion in funding available to support electric vehicle manufacturing in the form of direct loans for the advanced technology vehicles manufacturing incentive program to support facilities in the U.S. in producing low or zero GHG emission vehicles. Another $2 billion would be provided to DOE for fiscal 2022 for the department to provide grants for domestic production of efficient hybrid, plug-in electric hybrid, plug-in electric drive, and hydrogen fuel cell electric vehicles. The measures would also allow DOE to make as much as $40 billion in loan guarantees for projects to reduce, avoid, or sequester GHG emissions and air pollutants through fiscal year 2026; however, DOE could not provide guarantees for loans to entities for projects receiving any other federal contracts, grants, or financial assistance.
 
Click here to read the full text of the Inflation Reduction Act.