How will the Inflation Reduction Act impact the clean energy sector?

The Inflation Reduction Act is on its way to the House for voting (likely to pass) — before making its way to Biden for signing. The bill has major implications for the clean energy sector…

$370B over 10 years will be available for climate and clean energy investments — estimated to reduce U.S. carbon emissions by 42% by 2030 — nearing Biden’s goal of 50%.

Two-thirds will come from tax credits for generating electricity from clean energy sources, investing in renewable tech and clean energy manufacturing.

The end result:

• Speed up and lower the cost of clean energy project developments.
• Lower electricity bills and prices on solar panels and electric vehicles.
• Increase investments into the sector and create more jobs.

The American Clean Power Association (ACP) thinks clean energy production in the U.S. could triple by 2030.

Tax credits: ACP CEO Heather Zichal expects the bill to “supercharge” investments into the clean energy sector (FT) thanks to the long-term tax credits.

• Past tax credits were short-term, making it difficult to get the loans needed for expensive projects.
• Clean energy companies had no idea when tax credits would expire, and banks were reluctant to give loans given the uncertainty.

The iShares Global Clean Energy ETF (NASDAQ:ICLN) has been up 16% since the end of July — when Senator Joe Manchin supported the legislation. But the sector still has a long way to go before reaching last year’s peak.

The Joe’s Take: We wouldn’t be surprised if this became a “buy the rumor, sell the news” type of event. Rising interest rates and a slowing economy are still driving the markets. While we got a nice recovery in recent weeks, investors shouldn’t get too complacent in the current market.