2022 was marked by several major events that will influence the energy and renewables industry in 2023 and potentially beyond. The most crucial one was obviously Russia’s invasion of Ukraine, which led to elevated commodity prices around the world.
Although in the short term there has been a lot of focus on fossil fuels, especially for natural gas supply this winter and next, longer-term governments are looking to aggressively diversify their energy sources and increase energy security by all means necessary. This increased government support for renewable energy favored policies such as the Inflation Reduction Act (IRA) in the US and REPowerEU in Europe.
In the US, the IRA is arguably the most important clean energy legislation in recent history. The policy visibility that the IRA brings is key, too. In the past, renewable tax credits were often extended unpredictably on a year-to-year basis. Now, tax credits have been extended for a minimum of 10 years, which helps developers, utilities, equipment manufacturers and investors in project planning and development.
The IRA also looks to streamline the monetization of clean energy tax credits by allowing them to be transferred (i.e. sold) to a third party, or via simple direct-pay mechanisms. Overall, for investors, these tax credits mean that previously marginal projects are suddenly economic, which should broaden the investable universe for clean energy and accelerate project deployment.
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