Manufacturing Has a Green Spine
The U.S. Manufacturing Revival Has a Green Spine
The massive reorganization of energy impacted the U.S. in a significant way. Helped along by the new Inflation Reduction Act of 2022 (IRA), manufacturing jobs are returning to the U.S.
In the U.S., manufacturing jobs declined for forty years. At the bottom in 2010, the U.S. had its fewest manufacturing jobs since 1941. That’s despite having more than double the population. These are the jobs the built the middle class in the United States. And as they declined, so did the economic status of a large part of the U.S.
To put this in perspective, in 1979 about 22% of all non-farm jobs were in manufacturing. In 2019, it was just 9% according to the Bureau of Labor Statistics.
The lack of opportunity for folks who don’t want to go to college is a problem in the U.S. That’s one of the more subtle impacts of the IRA. It addresses climate change, manufacturing jobs, and improved wages.
Dr. Jesse Jenkins, Assistant Professor and energy Systems Engineering at Princeton University told the Associated Press:
“It seems like every week there’s a new factory facility somewhere” being announced, said Jesse Jenkins, a professor at Princeton and leader of the REPEAT Project which has been deeply involved in analysis of the law.
We’ve been talking about bringing manufacturing jobs back to America for my entire life. We’re finally doing it, right? That’s pretty exciting.”
He’s correct. Jobs in the U.S. energy industry rose 3.8% last year according to the Department of Energy. That’s faster than overall growth in jobs. And clean energy jobs led the way.
According to the U.S. Energy and Employment Report, jobs in wind, solar, nuclear, grid, and energy storage grew by 114,000. That works out to a 3.9% increase. And it’s about equal to all the jobs created in oil and natural gas. In the energy sector, only coal power lost jobs – down around 9%.
The best news is that most of the jobs spurred by the IRA are still coming. Energy Secretary Jennifer Granholm told reporters:
“Most of those are still in the planning stages. That means hundreds of thousands of new jobs are already coming down the pike and there’s countless more behind them.”
And if the jobs are coming, that means demand is already here. And its no surprise. The IRA created a tailwind for demand by offering significant tax breaks for people who simply make more energy efficient choices.
For example, the IRA offers a 30% credit for solar power and battery storage. That’s interesting to me because I was considering it. I want the security of a power backup system, but I don’t like the noise and the upkeep of my generator. A battery bank would be better, and I can get a big break on the price right now.
The new law also provides significant cost savings on home renovations. You can get a 30% tax break on the cost of new energy efficient windows, doors, and insulation. There are also benefits for air conditioners and electric panel improvements.
This is pure stimulus. As interest rates rise, homeowners are less likely to spend money on new windows or a new air conditioner. However, the IRA incentives can offset the lack of low-cost financing.
The legislation also offers up to $7,500 for new electric vehicles. However, in order to meet the full requirement, the vehicles’ components must be sourced in the U.S. For example, there is an additional benefit if 100% of the iron or steel used came from the U.S. And there’s an additional benefit if at least 40% of the manufactured products
However, these new incentives are not limited to homeowners and new car buyers. The IRA extends to manufacturers as well. And that’s where the new manufacturing job creation comes in. There are a series of tax credits aimed at bringing manufacturing jobs back.
The new Section 45X Advanced Manufacturing Tax Credit is one example. It encourages new manufacturing of wind, solar, and batteries in the U.S. There’s also a tax credit for commissioning a new manufacturing facility before January 2025. This credit provides up to $10 billion in total benefits and extends to renovating existing facilities.
The IRA legislation will have a lasting positive impact on U.S. manufacturing. And it’s a story that should get more attention over the next year or two.
For the Good,
Numbers to Know
Nearly 100 new clean energy manufacturing facilities or factory expansions were announced in the U.S. between last August when President Biden signed theInflation Reduction Act and the end of May. (Canary Media)
The clean energy subsidies that undergird President Joe Biden’s climate agenda have just prompted one Norwegian manufacturer to choose Michigan, not Europe, as the site of a nearly $500 million factory that will produce the equipment needed to extract hydrogen from water. (Politico))
Global investment in the low-carbon energy transition totaled $1.1 trillion in 2022 – a new record and a huge acceleration from the year before. Investment in low-carbon technologies appears to now match capital deployed in support of fossil fuel supply.(BloombergNEF)
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