The Supercharged Green Shoots of the IRA: Two Short, Impactful Years of Growth

Two years after being signed into law, the Inflation Reduction Act (IRA) continues to deliver on its promise to be the most significant act of climate legislation ever. Despite initial doubts about its novel approach, the legislation has proven to be a gamechanger for the U.S. economy and for the clean energy transition. Policy analysts and political commentators have called the investment stimulated by the legislation nothing less than an American manufacturing renaissance, and momentum has continued to build throughout the legislation’s second year.

Shortly after its passage in 2022, investment money began to pour into the U.S. for clean-energy manufacturing projects. This has continued to increase in the last year, with record-breaking numbers reported in the first half of 2024. A May 2024 report from Clean Investment Monitor confirmed that clean energy and transportation investment in the U.S. reached a new record high for a single quarter, at $71 billion in Q1 2024. This is a more than 40% increase from Q1 2023.

These are remarkable figures, but to get a real sense of the significance of the change driven by this legislation, you have to go further behind the scenes. More than merely a plan for economic stimulus, the Inflation Reduction Act has proven to be the ultimate kickstarter of the clean energy transition.

Well positioned to reflect on this is Tom Jensen, co-founder of FREYR Battery, a producer of next-gen clean batteries. Because clean batteries will be critical in the wider uptake of renewable energy from intermittent sources – like solar and wind – legislation that scales up this storage technology is directly scaling up and supercharging the energy transition.

"The IRA took the whole industry by surprise,” says Jensen. “It is, in my opinion, the poster child for incentivizing the scale-up of renewable energy. For the battery space, the incentives are much stronger and better than what we had anticipated. That is really generating an impetus to rapidly scale up in the U.S.--and we are doing that, as a company."

Countless projects funded by the legislation are pushing the envelope in revolutionary energy technologies across the board, and local economies are being transformed. Clean energy is now central in major sectors of economic growth across the country. This will go a long way in pushing the U.S. toward full adoption of renewable energy, and the fruits of this change are already apparent.

Powering a Revolution in Cleantech R&D

The IRA employs two kinds of investment policy — incentives to invest, most prominently in generous tax credits offered for clean energy manufacturing, and direct investments from the government through grant funding, primarily through the Department of Energy (DOE). Similar funding programs have been implemented as part of the 2021 Infrastructure Investment and Jobs Act (IJA, also known as the Bipartisan Infrastructure Law), and the CHIPS and Science Act of 2022.

Edison Electric Institute (EEI), a trade organization that represents all U.S. investor-owned electric companies, had played a key role in advocating for the legislation, and then after its passage worked to assist its members in applying for grants. The process takes time, but the applications are steadily coming to fruition.

One prominent example is the recent announcement by several EEI members of a $7 billion award of federal funding for the development of seven clean hydrogen hubs, which are key components in a growing network of hydrogen power infrastructure. Clean energy technologies like hydrogen, nuclear, and geothermal power have been given an unprecedented jolt by the surge in federal funding, and the effects have been transformative.

“It’s amazing that we've gotten this far in a year and a half,” says Eric Holdsworth, Director of Climate programs at EEI. “This normally takes quite a long time to develop from concept to prototype to lab. This is really moving a lot faster than people realize. And of course, the faster things can move, the faster you can have technology developments and advances.”

Development of cutting-edge energy technology requires large-scale investments to break new ground in R&D, and this research is now experiencing a momentum not seen in decades. The Grid Resilience and Innovation Partnerships (GRIP) program, a Department of Energy initiative provisioned by the IJA, has directed major funds toward existing technology improvement and innovation. More than 25 EEI member companies and their affiliates received more than $1.7 billion from the first round of GRIP funding.

Holdsworth, a longtime veteran in the world of clean energy, recognizes the key role played by recent legislation in enacting this extraordinary change. “I think this is a historic moment in addressing climate and the development of clean energy,” says Holdsworth. “We have funding, we have policies, we have incentives, we have focus. We have industries that are committed. We have investors that are getting in. I hope we can take advantage of the opportunity. The legislation is really groundbreaking.”

The Clean Energy Economic Boom

The incentives packed into the IRA have proven they can bring manufacturing investments, and at an ever-growing scale. Companies have announced nearly 600 new clean energy projects, totaling 312,900 jobs and $361 billion in investments since the bill’s passage, according to a report by Climate Power.

But perhaps less discussed are the additional benefits such investments will have on surrounding communities. Georgia, the leader in new clean-energy investments, offers an instruction case study. In addition to the influx of new clean-energy projects, the state has also seen a virtuous ripple effect: initial investments by manufacturers have led to subsequent investments by suppliers, with more coming all the time.

Workforce demands encourage the development of training and re-skilling programs, which are fostered through educational initiatives in partnerships with local schools and nonprofits. Incoming students have a growing set of new opportunities, with jobs available to workers of a diverse range of education and skills. All these elements of growth reinforce each other, and make for a vibrant economy.

This story again can be told in numbers. The IRA has been a jobs powerhouse for Georgia. Investment since August 2022 has generated more than 30,000 new clean energy jobs from over 40 new projects, accounting for over $23 billion of investments.

But more powerful is the testimony of those on the ground. Cynthia Curry, Senior Director of Cleantech Ecosystem Expansion for Metro Atlanta Chamber, a nonprofit supporting economic growth in the Atlanta area, tells the story of a long-awaited clean energy boom. In the years before the IRA, the U.S. lagged behind the rest of the world.

“I have gone to the Smart Cities Conference in Barcelona every year for the past eight years,” says Curry. “Europe and Asia have been so far ahead of us. I just sat, green with envy, in the audience. They've had billions and billions of dollars for so many years. Now, with the IRA, we have that.”

Countless major companies have been driven to invest in the Atlanta metro area, which is rapidly becoming a cleantech hub. “A lot of money has come in through the suppliers of Kia, Hyundai, SK, and Qcells, because they want to be close to their customers,” says Curry. “I think eventually we'll start seeing more investment from software companies as well. There are many many different orders of new businesses that are going to be born from the IRA.”

New business will bring new jobs, with exciting opportunities for the existing labor force to re-skill. Supported by government programs like the Georgia Department of Economic Development’s Quick Start, as well as partnerships between technical schools and industry, job training and re-skilling have taken off like never before. “It's a great way to open up a whole world to a lot of people that didn't have a potential space in these careers of the future,” says Curry.

The jobs created by the clean energy boom in Atlanta also provide opportunities for workers with different educational backgrounds. “It’s a great opportunity for equitable employment. There will be a plethora of jobs that would not have been available without the IRA, for both people re-skilling and for young adults,” says Curry. “It gives the younger generation those jobs that are really purpose-driven.”

Industry continues to be active in fostering further economic development. Innovation initiatives and incubators like Engage and the Advanced Technology Development Center (ATDC) provide funding and go-to-market support for startup companies, including many cleantech startups.

As Georgia pursues its lead as the number-one cleantech state, the Atlanta metro area economy continues to grow more dynamic. Curry credits Atlanta’s willingness to come together to work toward a common goal as the primary driver of this success.

“I am very thankful that Georgia has embraced this drive to become the number-one clean tech state in the country,” says Curry. “I think that we have the ability to do that and the resources to do that. I always say collaboration is Atlanta's superpower.”

One Lesson of the IRA So Far: Clean Energy Works for Everyone

These are just a few examples of the fast-paced change already underway during the IRA’s short two-year lifetime. The legislation’s continued success over these two years has underscored the wisdom of the policy’s design and its pragmatic focus on delivering results.

Holdsworth credits the role of collaboration and consensus of many different parties in getting the bill passed: “A lot of these pieces suddenly came together because there was an opportunity. A wide variety of stakeholders came together, which I think was really critical. It wasn't just one type of group, it was people on all sides of the aisle, all types of industries and groups that came together. I think that sent a powerful message to Congress.”

Curry agrees, citing the change in the cleantech landscape brought about by the bill. “Gone are the days of doing sustainability just because it's good for the world,” she says. “Now it's also financially beneficial, financially responsible. It's an easy place to promote the cleantech ecosystem when it is so economically viable and it's pushing so much of the economy. The IRA has so much to do with that.”

Unprecedented investment, dynamic economies, robust education, and successful collaboration between government, industry, labor, and the public — this is the legacy of the Inflation Reduction Act. As its effects become more visible, its influence will likely only expand.