The Inflation Reduction Act (IRA), signed into law in 2022, commits $369 billion to combating climate change. This money, largely in the form of tax cuts, will boost green tech industries. 

In fact, the scope of this support is so broad that it is expected to substantially boost job creation. Research from the University of Massachusetts Amherst projects that an additional 900,000 people will be employed on average each year for a decade as a result of the IRA

These numbers illustrate the breadth of the legislation which can be confusing for investors who want to understand the bottom line impact the funding will have on different green industries. Here, we provide a simplified overview of some parts of the IRA which investors can use to make informed decisions that benefit from the US government’s long-term support of green tech industries with ETFs focused on solar, wind, and batteries.

Solar

What’s in the Bill? 

The IRA wants to incentivize more Americans to harness solar power. Their stated goal is to help up to 7.5 million families install solar panels on their roofs. To jump start progress the government is allowing 30% of the cost of installed solar equipment to be tax exempt. This number falls to 26% in 2033, and 22% in 2034.

The IRA boosts the savings by permitting an extra 10% if certain components are manufactured in the US. With this level of financial support the White House projects that the IRA will lead to 950 million solar panels installed by 2030.

What Will The Outcome Be? 

Research from Princeton University, Dartmouth College and others concluded that solar deployment may accelerate from the 10 GW added in 2020 to 49 GW in 2024. This figure could rise to more than 100 GW by 2030.

The same research forecasts that investment in solar could hit $321 billion in 2030, which is almost double the $177 billion expected under the existing policy. These long-term growth expectations are echoed by data from Solar Energy Industries Association & Wood Mackenzie showing a rise in US solar photovoltaic (PV) deployment between 2023 and 2027.

Source: Solar Energy Industries Association & Wood Mackenzie

What Options do Investors Have? 

There are many solar ETFs to consider. These are three with potential:

Invesco Solar Energy UCITS ETF (SOLR)

Global X Solar UCITS ETF (RAYZ)

HANetf Solar Energy UCITS ETF (TANP)

Wind

What’s in the Bill? 

The US government is offering an energy investment tax credit (ITC) of 30% for offshore wind projects that start construction before January 1, 2026. Additionally, the IRA offers a 10% credit for the production or retrofit of vessels needed for offshore wind. 

The legislation allocates an approximate 10% credit for the domestic production of towers, blades, nacelles, and foundations. The package also includes grants totaling $760 million for onshore and offshore interstate transmission lines.

What Will The Outcome Be? 

The bill aims to create 30 gigawatts of offshore wind in the US by 2030. The ample support offered to the industry in the bill might explain why an analysis from Vantage Market Research calculates that the global offshore wind energy market is valued at approximately $31.2 billion.

The market is expected to grow to $60.9 Billion by the year 2028, with a forecasted CAGR of 11.8% over the forecast period based on this research.

What Options do Investors Have? 

Offshore wind is a more cost-effective energy source than oil and gas and the added support of the US government means that investors have the potential for long-term growth in this segment of the energy sector.

Global X Wind Energy UCITS ETF (WNDG)

Invesco Wind Energy UCITS ETF (WNDE)

Battery     

What’s in the Bill? 

The American Battery Materials Initiative intends to secure a reliable and sustainable supply of crucial minerals used for power, electricity, and EVs. The initiative invests over $7 billion to support domestic manufacturers with the minerals and components to build the batteries that will reduce emissions that harm the planet.

The Department of Energy is providing $2.8 billion for 20 manufacturing and processing companies in 12 states. The White House has also stated that “when matched by recipients, the funding leverages a total of more than $9 billion to boost American production of EV batteries.”

What Will The Outcome Be? 

The incentives are intended to make half of all new vehicles sold in 2030 EVs.

Polaris Market Research calculates that the global EV battery market size & share is valued at about $50.12 billion and is expected to reach $225.55 billion by 2030 at a CAGR of 18.9% during the forecast period.

What Options do Investors Have? 

Given that lithium is a crucial component in EV batteries investors seeking exposure to the industry may want to consider the following:

Global X Lithium & Battery Tech UCITS ETF (LITU)

WisdomTree Battery Solutions UCITS ETF (VOLT)