It takes a long time to replace a foreign-sourced supply chain.” “It takes a long time to stand up a factory. The IRA is already spurring construction of new US factories to manufacture critical clean-energy gear, but that’s lagging behind renewable project development, exacerbating the issue in the short term.
“The irony here is that the Inflation Reduction Act probably has had some part in stoking inflation for some of the green goods that it intends to encourage,” said Kevin Book, managing director at ClearView Energy Partners LLC. While the law provides at least $370 billion in grants, tax credits and other incentives for climate and clean energy projects, that’s proving no match for rising inflation and borrowing costs. And by dangling higher incentives for companies sourcing US-made parts, it’s fueling demand before the domestic supply chain catches up, driving prices higher still.
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Orsted’s warnings are the most concrete example yet of the limits of the IRA, which was hailed as a key driver for America’s nascent offshore wind industry. Read More: Orsted Ready to Abandon US Wind Projects as It Asks for Help “It’s pretty evident that inflationary pressures have blunted the impact” of the IRA, said Josh Price, a director with Capstone, a Washington-based research group. Other developers are already paying tens of millions in penalties to exit contracts they say no longer make financial sense. More than 10 gigawatts of offshore wind projects along the US East Coast - the equivalent of roughly 10 nuclear power reactors - are at serious risk as higher costs force developers to re-crunch the numbers for proposals originally modeled years ago, before a runup in interest rates and material costs. Orsted A/S, the Danish wind giant, said this week it’s prepared to walk away from projects unless it gets even more government aid. In fact, the law might even be making it worse.
(Bloomberg) - The US offshore wind industry, banking on a big boost from the landmark Inflation Reduction Act, has found itself face-to-face with a major hurdle that’s been right there in the name all along: inflation.
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