Department of International Cooperation

The Biden administration's Inflation Reduction Act (IRA) will provide long-term tax credits for energy technologies and is expected to significantly boost the development of renewable energy in the U.S. It is estimated that the capacity of renewable energy installations such as solar and wind storage in the U.S. could be increased by more than 20% by 2030.

IRA has a total budget of 437 billion U.S. dollars, of which 369 billion U.S. dollars will be allocated for the development of energy security and clean energy, with solar energy as the main focus, providing a number of installation incentives. In addition, a tax credit will be provided for the purchase of electric vehicles, high-efficiency appliances, and renewable energy devices. For example, tax credits ranging from $4,000 (for buying used cars) to $7,500 (for buying new cars) will be provided for the purchase of electric vehicles.

IRA also helps local industries. For example, green hydrogen plants are offered a $3 subsidy for every kilogram of hydrogen produced. Carbon removal programs that qualify for direct air capture can receive grants of up to $180 per ton. Solar, wind and energy storage manufacturers are also eligible for tax credits for up to 10 years. Electric vehicle procurement subsidies are only available for locally produced brands in the U.S., and battery materials are subject to a 40 percent local content requirement.

First Solar, the largest U.S. solar panel manufacturer, plans to invest nearly $1.2 billion to increase the company's domestic manufacturing capacity by 75 percent, including a $1 billion investment in a new plant in the Southeast and a $185 million expansion of its Ohio plant.

Currently, the U.S. solar market is highly dependent on imports (accounting for approximately 86% of total U.S. installations). External forecasts suggest that solar and wind power will account for 85% of total U.S. electricity supply by the end of 2030, up from 72% today, potentially driving $270 billion into the industry and creating hundreds of thousands of jobs.

In addition to reducing inflation and achieving carbon reduction goals, it is said that the reasons of Biden administration's promoting the Act also include stabilizing energy supply and national security, stimulating domestic demand, and supporting industrial development. The Act's first priority is to accelerate investment in clean energy, to help the United States get rid of fossil fuels and its dependence on high-carbon energy as soon as possible. The bill also aims to stimulate the domestic economy and foster industrial development by providing tax incentives to local manufacturing industries.

Sources: Economic Daily News; Investment & Trade Office, TECRO.