IRA Brings Energy and Manufacturing Opportunities

President Biden has repeatedly discussed the need to onshore or re-shore U.S. manufacturing to improve national security and competitiveness.  The war in Ukraine and worldwide supply chain issues created by the COVID-19 pandemic have underscored the need to reduce U.S. dependence on foreign manufacturing.  In response to these calls for action, Congress recently passed the “Inflation Reduction Act” (IRA), which attempts to build on the “White House Strategy for Advanced Manufacturing.”  This article will provide a high level outline of these two initiatives and their relevance and opportunities for our clients. 

The Administration fused its two national imperatives-conversion from a fossil fuel economy to combat Climate Change and development of an advanced manufacturing economy-into a strategic plan for the new economy.  The action plan has three goals: 1) A 30 percent reduction in greenhouse gases (GHG) by 2030, and a reduction to net zero by 2050; 2) Acceleration of domestic manufacturing of microelectronics, semiconductors, and support for bio-manufacturing advancement; and 3) Development of new materials and processing technologies. In order to accomplish these goals the Administration also wants to expand the human resource base and improve work force training in order to man the new economy.  It is estimated there will be a shortage of 2.1 million skilled workers if nothing is done to enhance STEM education, particularly among disadvantaged populations where education opportunities lag.  In early December, the Administration presented “BUILDING A CLEAN ENERGY ECONOMY: A GUIDEBOOK TO THE INFLATION REDUCTION ACT’S INVESTMENTS IN CLEAN ENERGY AND CLIMATE ACTION.”  The 183-page document begins to lay the roadmap of manufacturing support funding to advance and to de-carbonize the economy.  The executive summary of this document describes and highlights the strategy with the following statement:

“The Inflation Reduction Act will deliver results through a combination of grants, loans, rebates, incentives, and other investments to support the President’s whole of-government economic plan. The Inflation Reduction Act includes some two dozen tax provisions that will save families money on their energy bills and accelerate the deployment of clean energy, clean vehicles, clean buildings, and clean manufacturing. Many of the clean energy tax provisions offer bonus credits to projects that are located in low-income communities or energy communities, pay prevailing wages and use registered apprentices, or meet certain domestic content requirements—all with the goal of creating good-paying, high quality jobs and shared economic growth that will last well beyond the Biden-Harris Administration. The Inflation Reduction Act also provides billions of dollars in grant and loan programs and other investments for clean energy and climate action. As with the tax provisions, Congress and President Biden designed these programs to benefit working families and parts of the United States that are too often overlooked and underserved. The law advances President Biden’s Justice40 Initiative, which commits to delivering 40 percent of the overall benefits of climate, clean energy, infrastructure, and other investments to disadvantaged communities, including Tribes, communities with environmental justice concerns, rural areas, and energy communities.”

The Guidebook represents a good start to providing a path on how companies can access IRA funding, but as of late December 2022 much of the regulatory structure to deliver funds has either yet to be developed by the relevant agencies, or will be left to the discretion of the states. In the meantime, companies may want to engage in the regulatory process in order to help shape ongoing funding priorities, including the $1.7 trillion funding appropriation package approved just before Christmas.  We have already helped clients secure tax credits and training reimbursement opportunities in excess of $3 billion dollars.

In 2023, we expect that the new Republican majority in the House of Representatives will work to shape these initiatives more to their liking.  Investigative hearings will try to highlight waste or inefficiencies in the new programs.  Unspent funds and projects that require further congressional direction for funding will receive particular close scrutiny in the appropriations process.  Companies that wish to protect sources of future funding will want to pay particularly close attention the budget process as it unfolds.