Clean-Tech Builders Should Pay Attention to IRA's Warning Labels

Today's Take: Sobering Warnings from the IRA

During the CERAWeek by S&P Global conference this week in Houston, oil and gas executives can't stop raving about the potential made possible by the Inflation Reduction Act in the corridors, meeting rooms, and reception areas.

As a result of the statute's commitment of more than $360 billion to low- and zero-emission technology, envy and angst have spread from Brussels to Ottawa over this enormous expenditure. John Podesta, a top adviser in the White House, declared that there has never been a better opportunity to invest in renewable energy in the United States. It's a once-in-a-generation chance.

The historic tax and climate legislation is already influencing plans for new factories throughout the US and igniting fierce competition for government-supported hydrogen hub and carbon-capture schemes. Yet there is a catch to all this promise: You must now shut up or else.

Andy Marsh, CEO of hydrogen and fuel-cell manufacturer Plug Power Inc., said, "The level of support is stratospheric. If we are not successful this time, we will never be successful."

Energy executives from other countries are urging their governments to adopt similar policies in order to avoid being left out of the escalating arms race in clean energy. According to Cenovus Energy Inc. CEO Alex Pourbaix, Canada needs to implement comparable incentives to accomplish its climate goals and prevent money from flowing south of the border.

But even in the US, difficulties lie ahead. Although businesses typically have ten years to collect additional tax credits under the IRA, valuable time may be lost waiting for permits. Such delays will be expensive for the project's development as well as for carbon dioxide emissions.

According to an analysis by Jesse Jenkins of Princeton University, approving energy transmission facilities in the US at the current historical rate will result in a loss of more than 80% of the IRA's potential reducing emissions by 2030.

It serves as a sobering caution to developers who have been seduced by opportunities' promises.

Podesta stated, "These initiatives might take 10, 12, or 18 years. We are short on time.

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Being green Has Benefits

Low carbon intensity green bond issuers were shown to receive better price.

According to M&G Investments research, the green debt of corporations with reduced carbon emission trades at a big premium to that of major polluters. According to the asset management, low-carbon enterprises in sectors like finance and technology reach 7.5 basis points, whereas green bonds from companies in the utilities and auto sectors have an estimated "greenium" of just 1.7 basis points.

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