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New Energy World magazine logo
New Energy World magazine logo
ISSN 2753-7757 (Online)

US to boost annual renewables investment to $114bn by 2031


Aerial view of wind farm on hilly terrain Photo: Adobe Stock
Nevada, US – Onshore wind manufacturers in the US are expected to take full advantage of production credits available under the Inflation Reduction Act

Photo: Adobe Stock

The Inflation Reduction Act (IRA) in the US will significantly boost annual investment into renewable energy deployment in the country, with a rise from $64bn in 2022 to nearly $114bn expected by 2031, according to Wood Mackenzie.

‘The IRA will completely reshape the renewables supply chain in the US, incentivising the reopening of shuttered facilities as well as provide opportunities to build entire equipment supply chains from scratch,’ says Daniel Liu, Principal Analyst and lead author of Wood Mackenzie’s latest report.

Two key provisions of the IRA are likely to be game-changing for renewables equipment manufacturers, according to the report. First, the Act provides a tax credit, known as advanced manufacturing production credits (AMPC), for US-made renewable equipment. Second, the Act incentivises developers of US renewable projects to purchase domestically produced equipment by providing an additional tax credit if they meet domestic content requirement (DCR) thresholds. To qualify, 40% of all equipment must be US-manufactured on projects installed before 2025, 20% for offshore wind. This rises to 55% after 2026, and 2027 for offshore wind.

‘It’s high stakes for US equipment sales, as the IRA provides incentives that cut the manufacturing cost of solar panels, storage equipment and wind towers in the US by anywhere from 4% to 30%. This, along with tariffs on some imports, potentially puts domestic manufacturing on a cost-competitive footing with imported equipment,’ Liu says.

He continues: ‘We expect the US onshore wind manufacturing community to take full advantage of the AMPC. The credits will help original equipment manufacturers reverse declining equipment sales margins in the short term and incentivise investment in manufacturing capacity.’

The US has enough manufacturing capacity to supply most domestic demand for turbine equipment to 2031, though the industry faces a near-term shortage of US-produced equipment. This creates an opportune pricing environment for manufacturers, as not all developers will be able to meet DCR thresholds within the Act, Wood Mackenzie says.

Developers can potentially meet pre-2025 DCR thresholds with US-manufactured wind turbine components, such as domestic foundations, towers, and balance-of-plant equipment. Turbine blades will help developers reach the 55% threshold after 2026.


Despite the nascency of US offshore wind manufacturing, the country is one of the most attractive markets for offshore wind suppliers due to its ambitious targets, lack of existing supply chain, focus on local content in tenders and consolidated client base.

Liu says: ‘We expect manufacturers to capture the full value of the AMPC given the limited capacity of US manufacturing, the natural cost advantages versus imports and the need to invest in domestic manufacturing capacity. Utility solar PV has a somewhat foggier outlook, however. With such a small solar manufacturing base currently in the region, juxtaposed against substantial forecasted growth in solar additions, fully meeting US solar needs with domestic equipment will be more challenging than other sectors.’

Solar PV panel manufacturers face considerable challenges when it comes to developing a self-sufficient domestic manufacturing capability. US manufacturing costs are 16–33% higher than imported equipment, but the AMPC will help close this gap.


‘The decision to invest in equipment manufacturing capacity expansion depends on the interplay of three factors. First, the cost of manufacturing equipment in the US compared with imports, taking into account the benefits the AMPC provides. Second, the expected supply/demand imbalance for renewables equipment, and finally, specific guidance from the IRS on what constitutes “domestically produced equipment”,’ Liu concludes.

Meanwhile, European Union (EU) Competition Chief Margrethe Vestager has called for simplification of EU state aid rules, including protection of the EU single market ‘to avoid a harmful subsidy race within Europe’, in a tit-for-tat response to the US IRA. The goal is to allow EU companies to subsidise companies in sectors that are considered strategic for the green transition. ‘I am proposing to enlarge the scope of the existing simplified provisions to cover all renewable energies,’ she announced at a clean tech conference in Brussels. The EU executive is also considering the introduction of a new ‘anti-relocation’ clause to dissuade EU companies moving to the US to take advantage of the IRA Act.


US companies purchased more clean energy than ever in 2022
In other news, the American Clean Power Association (ACP) has released a report showing that US corporations purchased more clean energy in 2022 than any previous year.


Even as power purchase agreement (PPA) prices increased, corporations purchased nearly 20 GW of clean energy in 2022, more than 4 GW higher than any previous year. By the end of the year, over 300 corporations had contracted more than 77 GW of clean energy.


‘Economic and environmental benefits, as well as growing pressure on corporations to meet sustainability targets, have led to a 100-times increase in corporate clean power procurement over the past decade. During that same period, solar and wind costs have decreased 71% and 47% respectively, making both more attractive to corporate energy buyers. American companies are benefiting from – and contributing to – the affordability of clean power,’ says JC Sandberg, Chief Advocacy Officer, ACP.


Technology companies have contracted more clean energy than any other industry, and Amazon, Meta and Google – in that order – are the top three clean power buyers. The energy industry now has the second most clean power capacity contracted, at 6.7 GW, with traditional oil and gas companies such as Shell, TotalEnergies and ExxonMobil accounting for 60% of total capacity contracted by energy companies.


Corporations are purchasing clean energy from 540 projects spread across 49 states, DC, and Puerto Rico, but Texas is home to the majority of corporate contracted clean power, followed by Illinois and Ohio, says the report. There are 326 companies with clean power procurement agreements in place across the nation, with operating contracts accounting for 16% of total operating clean power in the US – the equivalent of nearly 6 million US homes.


Solar projects are now outpacing wind as the preferred choice for corporate buyers, with utility-scale solar accounting for 58% of corporate contracted clean power. Hybrid projects that include storage – primarily solar plus storage – are growing rapidly, according to the report.


‘Texas might be the home of the oil and gas industry, but it is fast becoming the leading state to buy clean energy to power business activity,’ continues Sandberg. ‘Corporate demand for clean energy is a key driver for wind, solar and battery storage development. Even traditional oil and gas companies now recognise the value of clean energy for their operations, making the energy sector the second-largest industry for clean power purchases.’


2021 cleanest year of energy
Finally, the US Vehicle Technologies Office recently reported that 20% of electricity net generation in the US came from renewable sources in 2021, with wind power surpassing hydroelectric in 2019 as the predominant renewable source. It also reported that electricity generated from solar began a steep rise beginning in 2012, quadrupling between 2015 and 2021.