Researchers at Dartmouth and Princeton released a BlueGreen Alliance-funded report on the estimated impacts the Inflation Reduction Act will have on the U.S. wind and solar industry, including changes in wind and solar manufacturing, labor standards for clean energy workers, job creation, and demand for materials. Specifically, the report explores the impacts of the law’s clean electricity production and investment tax credits (PTC and ITC) and the 45x Advanced Manufacturing Production Tax Credit.
The report finds that the Inflation Reduction Act offers wind and solar developers an airtight business case to use U.S.-manufactured components and pay workers fair wages. It has always been the right thing to do. Now it’s also the most economical thing to do.
By transforming the economics of wind and solar power, the Inflation Reduction Act will spur the creation of millions of new U.S. solar and wind manufacturing and deployment jobs, with strong incentives for fair wages and career pathways.
The findings show strong, unprecedented potential to build our clean energy future on a foundation of good jobs, clean manufacturing, a reliable industrial base, and greater equity.
A Game-Changer for U.S. Clean Energy Manufacturing
For the first time in U.S. history, using U.S.-made wind and solar components will be cheaper than importing them.
Due to the 45X manufacturing tax credit alone, the cost of solar photovoltaic (PV) modules assembled in the U.S. and made from 100% domestically manufactured components will now be more than 30% less expensive than imported modules.
Before the Inflation Reduction Act, the cost of domestic production exceeded the cost of imports for all of the following solar components: polysilicon, wafers, cells, and modules. Under 45X, the cost of domestic production falls below the cost of imports for each of these components.
U.S. manufactured onshore and offshore wind components (like towers, blades, and nacelles) will also be cheaper than imported products for the first time.
By spurring growth in U.S. solar and wind manufacturing the Inflation Reduction Act will help to:
- Link climate action with the creation of high-paying manufacturing jobs;
- Reverse the economic and racial inequality fed by manufacturing job losses;
- Counter the labor and human rights violations that plague overseas solar and wind supply chains;
- Support cleaner domestic manufacturing of the aluminum and steel that go into solar panels and wind turbines rather than relying on more emissions-intensive imports;
- Build reliable supply chains for solar and wind power rather than exposing our climate goals to shipping bottlenecks and geopolitical conflict; and
- Foster global competition in solar and wind manufacturing to drive down costs, rather than trusting the world’s monopoly producers to maintain low prices indefinitely.
It Pays to Pay Workers Well
Wind and solar developers can significantly cut costs by meeting prevailing wage and apprenticeship criteria in the clean energy tax credits.
The Inflation Reduction Act—for the first time ever—pairs high-road labor standards with clean energy deployment. To receive the full value of the clean electricity tax credits, developers have to pay construction workers a prevailing wage and utilize a certain percentage of registered apprentices in the projects.
The new report finds that when a developer meets the prevailing wage and apprenticeship requirements, the cost of producing solar or onshore wind power drops more than 60%, relative to deciding not to offer workers fair pay and career pathways. Any additional project costs associated with meeting these labor standards are more than offset by the full credit.
Costs will likewise be roughly 20% cheaper for offshore wind projects that meet these labor standards than projects that do not.
More than 1 Million Additional Solar and Wind Jobs
Together, the clean energy tax credits and the 45X manufacturing tax credit will induce demand for 1.6 million additional solar and wind jobs.
These two provisions alone in the Inflation Reduction Act are projected to induce demand for about 1.3 million additional jobs related to utility-scale solar PV and about 0.25 million additional wind related jobs in 2035, compared to projected employment levels if the Inflation Reduction Act had not passed.
The additional solar jobs created include about 0.8 million (more than 60%) in manufacturing of solar components and about 0.5 million in construction and operations of solar projects. The additional wind jobs created include more than 50,000 in manufacturing and about 0.2 million in construction/operations.
Without these investments in the Inflation Reduction Act:
- Demand for solar jobs would have grown from about 0.3 million today to about 0.4 million in 2035, according to projections. With these investments, demand for solar jobs is now projected to grow to about 1.7 million in 2035 – a more than fourfold increase in projected solar jobs.
- Demand for wind jobs would have grown from about 0.2 million today to about 0.27 million in 2035. With these investments, demand for wind jobs is now projected to grow to about 0.52 million in 2035 – a two fold increase in projected wind jobs.
Increased Demand for Clean Materials
The Inflation Reduction Act will significantly increase demand for U.S.-made aluminum, cement, and steel for use in solar and wind projects.
The report finds the expansion of wind and solar power due to the Inflation Reduction Act will dramatically increase demand for aluminum—a primary material for solar panels—and cement and steel—significant materials for wind turbines.
While projections vary considerably, mid-range estimates suggest a more than threefold increase in solar and wind demand for aluminum and cement and a more than twofold increase for steel in 2035, compared to a scenario in which the Inflation Reduction Act had not passed.
By 2035, the mid-range estimate of aluminum demand generated by the growth of wind and solar power due to the Inflation Reduction Act amounts to 156% of 2022 U.S. aluminum production. That means, aluminum demand from U.S. solar and wind power alone will significantly exceed current U.S. aluminum production for all end uses. Increasing clean aluminum manufacturing is critical to meet the needs of the growing clean energy economy.
For steel, the report estimates that demand generated by the growth of wind and solar power due to the Inflation Reduction Act will amount to 42% of 2022 U.S. steel production, signaling a need to expand clean steel manufacturing in tandem with clean energy.
To meet this rising demand for the materials that go into clean energy, expanding clean U.S. aluminum and steel production will better support our climate goals than relying on emissions-intensive imports. The U.S. already produces cleaner steel on average than all of the world’s other major steel producers. And about two-thirds of the world’s aluminum is made in countries with more emissions-intensive production than in the U.S. Even more, the Inflation Reduction Act includes about $6 billion in new investments to further reduce emissions from U.S. steel, aluminum, cement, and other energy-intensive industries. By cutting emissions in these industries while expanding production, we can meet the growing materials needs of the clean energy economy while supporting a livable climate.