Clean energy manufacturing is growing exponentially under President Joe Biden, according to two reports released Wednesday that highlight the significance of a groundbreaking 2022 law.
Most of the expansion occurred since Biden signed the Inflation Reduction Act two years ago, authorizing nearly $370 billion to help industries that produce renewable energy, electric vehicle infrastructure, carbon capture facilities and low-emissions appliances.
Private capital began flowing quickly. Businesses and consumers spent $493 billion investing in factories and buying products that involve cleaner technologies and infrastructure since the law was enacted in August 2022, according to a report by research firm Rhodium Group and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research.
The spending is 71 percent higher than in the two-year period leading up to enactment.
The American Clean Power Association, a trade group, found in a separate report that corporations announced $500 billion in clean energy spending since the inflation law was enacted.
“The clean power industry is really setting itself up to invigorate the U.S. economy,” John Hensley, the association’s vice president of markets and policy analysis, said in a call with reporters.
The findings are notable at a time when the broader manufacturing industry is struggling. A key manufacturing index hit an eight-month low in July in a potential sign of weakening economic growth.
Of the $500 billion in announced spending, $75 billion has been spent, the association said. It estimates that 42 factories have started operating, making components for the solar, wind and energy storage industries. Another 119 facilities are in development, and companies have announced plans to build more than 160 additional factories.
The manufacturing growth has been accompanied by a rapid build-out in renewable industries such as wind and solar. Companies in the U.S. have installed 55 gigawatts of clean energy capacity over the past two years, enough to power 10 million homes, the trade group said.
Some projects cited in the association’s tally are in the early phase of development and may not come to fruition. The solar industry in particular has seen a series of factories announced that may not be built. Hensley said the association largely counted projects that had secured funding or achieved other development milestones.
The outlook for clean energy manufacturing in the U.S. is brighter than it would be without the inflation law, said Eric Scheriff, an analyst at Capstone not affiliated with either report. U.S.-based manufacturing would not be economically competitive without the law due to the subsidies that China gives its clean energy manufacturers.
But predicting the future of American-based manufacturing is difficult because the law’s future hinges on this fall’s presidential election in the U.S., he said. Former President Donald Trump, the Republican nominee, has labeled the 2022 legislation a “Green New Scam.”
“There continues to be a lot of concern about how resilient the IRA will be,” Scheriff said.
Rhodium and MIT found that spending on zero-carbon power and transportation was $89 billion between the second half of 2022 and the first half of 2024. Spending was $22 billion in the two years before the law’s enactment.
Spending on clean technologies and infrastructure now accounts for 4.5 percent of private-sector investments on “structures, equipment, and durable consumer goods,” up from 2.6 percent in the two years before the Inflation Reduction Act, the report found.
But while the climate law’s passage is seen to be the catalyst for much of this investment, the Rhodium-MIT study shows that, to date, much more private capital has been committed than federal funds.
Federal money from the Inflation Reduction Act — mostly tax incentives with some loans and grants — is rolling out slowly as federal agencies craft regulations and review applications.
The Rhodium and MIT researchers, which include Brian Deese, a former director of the National Economic Council under Biden, found that the federal government has made $78 billion in investments in these sectors since the Inflation Reduction Act became law. Of that, Rhodium and MIT estimate that only $2.2 billion came from federal grants, loans and loan guarantees since the third quarter of 2022.
Michael Delgado, a director in the energy and climate practice at Rhodium, said the report’s authors expect the ratio of public to private investment to change. He said the Inflation Reduction Act’s continued success in leveraging private capital for clean investments will turn on whether the next administration continues to implement it in a way that is accessible to businesses and consumers.
