The Inflation Reduction Act is a $370 billion rocket booster for the US clean energy industry—and companies big and small are already strapping in for the ride.
Kontrolmatik Technologies, a Virginia-based energy storage company, was already in the midst of building a factory in Turkey to manufacture utility-scale batteries, and had plans underway for a similar factory in the US. The production capacity of the US facility was planned for 2 gigawatt-hours per year—about one-tenth the output of Tesla’s “gigafactory” in Nevada, but still substantial.
Between tax incentives in the IRA and the virtual guarantee it affords that there will be strong demand for batteries in the US, the new plant will be expanded to 3 GWh, Bahadir Yetki, the company’s CEO, said.
“With the IRA signed into law, we are once more assured that energy storage is here to stay and demand for grid-scale energy storage systems will grow at a much faster pace and with more volume than we assumed before,” he told Quartz.
Meanwhile, SPI Energy, which assembles solar panels in California, said on Aug. 24 that it had placed an order for equipment to manufacture solar wafers, a component of solar cells. There are currently no active manufacturers of solar wafers or cells in the US, but the company said in a statement it was motivated to try because of the IRA’s tax credit of $12 per square meter for solar wafer manufacturing. Roughly 97% of wafers globally are made in China, so if SPI is successful, it would represent a direct challenge to China’s clean energy hegemony.
Even Volkswagen has jumped on the wagon, releasing a plan on Aug. 23 to build an electric vehicle battery factory in Canada, which would allow its EVs to comply with the IRA’s local sourcing requirements for car buyers to qualify for tax credits. And on Aug. 26, Panasonic, which manufactures EV batteries for Tesla, announced plans to build a new $4 billion factory in the US.
One of the remarkable features of the IRA is that, all things considered, $370 billion is not a very expensive investment for the US government. The costs of clean energy technologies have already fallen enough that it takes a relatively small nudge to foster more domestic manufacturing. And since local sourcing requirements in the law are designed to become stricter over time, the momentum behind onshoring will only increase.