How a New Administration Could Reshape the Inflation Reduction Act and Clean Energy Investments

Since the Inflation Reduction Act (IRA) was passed in 2022, there have already been 42 votes to repeal it. This comes as no surprise, given that the law is a comprehensive and multifaceted piece of legislation addressing healthcare costs, tax reform, and a significant commitment to clean energy. One of the most frequent questions we receive as a clean energy service provider is, "Is my project's funding secure under the IRA?" In the context of a potential change in political leadership, this concern becomes even more pronounced. While a full repeal seems unlikely, some changes could still be on the horizon.

What is the IRA?

The IRA is a major legislative initiative aimed at reducing inflation, lowering healthcare costs, reforming corporate taxation, and investing heavily in climate solutions. With a $369 billion allocation for renewable energy and climate-related initiatives, the IRA is reshaping the landscape for clean energy. The law extends tax credits, supports green infrastructure, and introduces incentives like the Investment Tax Credit (ITC) and Production Tax Credit (PTC) for renewable projects such as solar, geothermal, and wind.

What Changes Could a New Administration Bring to the IRA?

A shift in political leadership could result in alterations or funding reductions for certain aspects of the IRA. For example, future leadership could reduce the scope of the ITC and PTC or modify the eligibility criteria for tax credits. Although the IRA has widespread support from industries benefiting from its incentives, changes are possible if other budgetary priorities take precedence.

In the event of a partial repeal, several steps would need to take place before any changes are enacted. First, new legislation must be proposed to amend or repeal parts of the IRA. This legislation would need to pass both the House of Representatives and the Senate before receiving presidential approval. Should moderate opposition or negotiations be required in Congress, any partial repeal would likely take 9–18 months.

Could the IRA Survive an Administration Shift?

While changes in administration could introduce revisions to the IRA, a full repeal is unlikely. The IRA’s benefits, including job creation and economic growth from the clean energy sector, offer some degree of protection. For instance, 18 Republican members of Congress signed a statement opposing the Act's repeal due to its positive impact on job creation and investment (The Hill).

An analysis from Columbia Threadneedle Investments notes, "Since the introduction of the IRA, investment announcements have increased by 60% to more than $114 billion. Most of these investments are for battery manufacturing and are concentrated in Republican and/or swing states." This highlights the broad economic benefits of the IRA across different political landscapes (Columbia Threadneedle Investments).

Source: Bloomberg NEF. March 2024. 

While the likelihood of a full repeal remains slim, future administrations could still make adjustments, such as scaling back tax credits, reducing funding, or altering the focus of energy investments. These potential shifts make it essential for stakeholders to stay informed.

Preparing for the Future: What Should You Do?

As a business owner with sustainability goals or mandates, it's essential to stay informed and understand that while your funding is likely secure for now, the landscape may shift in the not-too-distant future. Preparing for potential changes while taking advantage of existing IRA incentives is the best approach to future-proof your projects

Contact Brightcore today to explore your options and learn how to maximize the benefits of clean energy incentives under the IRA.

Brightcore Energy LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. Please consult your own tax, legal and accounting advisors before engaging in any transaction.

Citations

Budryk, Zack. "18 Hourse Republicans ask Johnson not to target IRA clean energy tax credits."The Hill, 2024.

Columbia Threadneedle Investments. "Will the Inflation Reduction Act Be Repealed?" Columbia Threadneedle US, 2024. https://www.columbiathreadneedleus.com/institutional/insights/latest-insights/us-elections-will-the-inflation-reduction-act-be-repealed/details?id=5852cff2-2203-45b9-85f0-15e732a4cc7b

Department of Energy (DOE). Clean Energy Jobs and Economic Impact Projections, 2023.

Forbes. "More Than 300,000 Jobs Created Through IRA Initiatives." Forbes, 2024.