The Inflation Reduction Act, which includes $370 billion in green energy subsidies, has created a snowball effect.
It is one of the largest, if not the largest, green transition packages ever passed by any government.
Most importantly, the IRA funds will work their way into the whole green energy supply chain.
They won’t go exclusively to the green energy producers.
Potentially hundreds if not thousands of companies could benefit from it.
Including commodity producers and financial intermediaries.
This tells us that the passing of the IRA is one of the biggest investment opportunities created in the “new economy.”
What Sectors Are Set to Benefit the Most?
The IRA targets several clean energy sectors.
But it is mostly focused on battery manufacturing, renewable gas, and hydrogen.
These areas may be capital-intensive, but the new tax regime makes them much less expensive.
One estimate says that total tax credits could be equivalent to one-half of a project’s fair value or up to two-thirds of a developer’s hard costs.
Energy producers will also get tax credits not only based on their initial investment but also on qualifying annual production of clean energy, for example.
Hydrogen in Focus
Hydrogen has the potential to transform logistics. It’s perfectly suited for long-range transportation, much better than lithium-ion batteries.
Volvo, a Sweden-based auto manufacturer, introduced a concept truck powered by hydrogen. It has a 600-mile (965 km) range and can be refueled in 15 minutes.
On top of that, the concept truck can haul 65-ton (130,000-lb) cargo.
In California, a fuel-cell trade group plans to put 70,000 heavy-duty trucks powered by hydrogen on the road before 2035.
It also plans to install 200 hydrogen stations to power them.
Nikola Corp., a US-based electric car manufacturer, has already started working on hydrogen plants that will be the basis of the company’s hydrogen infrastructure.
Nikola says that by 2026, or in just three years, it plans to have enough fuel to power 7,500 heavy-duty trucks.
Nikola says that it already has orders for 1,000 trucks, 800 of which will go to the beer manufacturer Anheuser-Busch InBev.
But in addition to hydrogen fueling stations, transportation and energy companies are working to build out a network of hydrogen hubs.
A hydrogen hub is a cluster of hydrogen production and storage facilities.
They will become the cornerstone of the green economy.
And New Zealand, for example, is already working to deploy hydrogen hubs in the country’s airports.
The country’s flag carrier Air New Zealand has partnered with Airbus, a major airplane manufacturer, to work on a plan that would overhaul the country’s air transportation systems and make them emissions-free.
In the United States, the Department of Energy has accelerated its $7-billion H2Hubs program. The program aims to develop hydrogen hubs as part of the country’s overall clean energy strategy.
That $7 billion investment is just part of a massive $25.8-billion package included in the IRA, CHIPS act, and the bipartisan infrastructure law.
On top of this, there’s the $100-billion tax credit.
This is why we say that the green transition is accelerating.
In total, the IRA could put about $800 billion into the economy and attract about $1.7 trillion in both public and private investment.
This is the biggest megatrend of the coming decades, in our opinion.
Every investor should put companies exposed to the IRA and hydrogen on their radars.
Thank you for your loyal readership,
The Financial Star team