In February, the US-based company LanzaJet, specializing in sustainable aviation fuel (SAF) derived from ethanol, disclosed plans to construct a second, larger plant within the United States.
According to Jimmy Samartzis, the company’s CEO, the decision was significantly influenced by the Inflation Reduction Act (IRA), which he referred to as a pivotal factor.
LanzaJet’s upcoming facility would complement its existing plant in Soperton, Georgia, recognized as the world’s first commercially operational ethanol-to-SAF plant.
“We have a global picture that we are pursuing… [but] we have doubled down on building here in the United States because of the tax credits in the IRA, and because of the support system that the US government has put in place,” stated Samartzis.
Enacted by President Biden in August 2022, the IRA, alongside the Bipartisan Infrastructure Law (BIL) ratified in November 2021, aims to channel substantial federal funds into the development of clean energy technologies.
The overarching goal is to mitigate greenhouse gas emissions, stimulate private investments, and foster the expansion of green industries, laying the groundwork for a revamped US economy.
With a lifespan of 10 years and an initially estimated cost of $391 billion (£310 billion), now potentially exceeding $1 trillion (final figure undetermined), the IRA offers enhanced tax credits and financial support, including loans and loan guarantees, for deploying emission-reducing technologies.
Companies engaged in domestic clean energy production or manufacturing equipment pivotal to the energy transition, such as electric vehicles (EVs) and batteries, are eligible for tax credits.
Similarly, consumers can benefit from tax incentives, such as those for purchasing EVs or installing heat pumps.
Notably, the IRA introduces a new tax credit specifically for SAF producers like LanzaJet, providing between $1.25 to $1.75 per gallon of SAF over a five-year period.
Running for five years, the BIL complements the IRA by offering direct investments predominantly through government grants for research and development as well as capital projects.
The Brookings Institution, overseeing the law’s implementation, indicates that approximately $77 billion (£61 billion) from the BIL will be allocated to clean energy technology projects.
One beneficiary of these initiatives is Ascend Elements, an EV battery recycling company, which secured BIL grants totaling $480 million (£380 million).
This funding, matched by equivalent private investments, will facilitate the establishment of Ascend Elements’ second commercial facility in Hopkinsville, Kentucky.
Adie Tromer from the Brookings Institution highlighted, “[The IRA and BIL] are massive investments… larger than the infrastructure-related provisions in the New Deal.” This underscores a concerted effort by the US to transition towards a cleaner economy.
Although the full impact of these policies on private investment is still unfolding, early indicators suggest a positive trend.
According to the Clean Investment Monitor (CIM), jointly operated by Rhodium Group and the Massachusetts Institute of Technology, the federal government directed approximately $34 billion (£27 billion) towards clean energy investments in the 2023 fiscal year, primarily through tax credits.
Moreover, total clean energy investment in the US surged to a record $239 billion (£190 billion) in the 2023 calendar year, marking a 38% increase from 2022.
This heightened investment activity demonstrates a growing commitment to renewable energy initiatives.
Trevor Houser from the Rhodium Group acknowledged two significant effects of the IRA: bolstering investment in mature technologies like solar, EVs, and batteries, and fostering substantial growth in emerging climate technologies such as clean hydrogen, carbon dioxide capture and removal, and SAF.
However, challenges remain, as some sectors within the green economy, like wind and heat pumps, have yet to experience a similar investment boost.
Looking ahead, the fate of these laws, particularly the longer-term IRA, hinges on future political dynamics, particularly the outcome of the November elections.
While repeal or amendment would necessitate Republican control of the Presidency, Senate, and House, any changes could disrupt ongoing projects, potentially affecting the broader clean energy agenda.
Europe faces pressure to match the US’s clean energy initiatives, as evidenced by European companies establishing facilities in the US to leverage available tax credits.
The EU’s Net Zero Industrial Act (NZIA) aims to coordinate existing financing and enhance domestic manufacturing capabilities, setting a target for locally producing 40% of clean energy equipment by 2030.
As the US leads the charge towards a cleaner energy future, global observers are closely monitoring its progress.
This momentum could prompt other nations to intensify their efforts, ultimately benefiting humanity by accelerating the transition to sustainable energy solutions.
