The construction of new manufacturing facilities in the U.S. is rising dramatically – fueled in large part by financial incentives from landmark legislations such as the Inflation Reduction Act (IRA), CHIPS Act, and the Bipartisan Infrastructure Law (IIJA). And many of the companies taking advantage of the financing are multinational companies expanding their presence in the US.
The IRA and CHIPS Act have notably supercharged U.S. manufacturing construction, with companies investing an average of $16.2 billion monthly on new production facilities, according to data from the Atlantic Council. This investment surge is a testament to the effectiveness of these policy measures. It signals a broader shifttowards strengthening the U.S. industrial base in response to global competitionand supply chain vulnerabilities.
European manufacturers like Volkswagen, BMW, Enel, and the Norwegian battery group Freyr are among those taking advantage of the generous incentives offered, underscoring the international interest in the U.S. manufacturing renaissance.
Beyond the infrastructure and energy transition investments in the BIL and the IRA, the CHIPS Act alone has catalyzed over $210 billion in private investments toward semiconductor projects across 20 states. This influx of capital is expected to lead to the construction of numerous chipmaking facilities, significantly bolstering the U.S. semiconductor industry’s infrastructure and global competitiveness.
The anticipated benefits of these legislative acts are vast, extending beyond direct investments in manufacturing. For instance, the IRA’s focus on clean energy will necessitate upgrades to the national grid to accommodate renewable energy sources, likely stimulating demand across the infrastructure value chain. Similarly, the CHIPS Act’s emphasis on domestic semiconductor manufacturing will drive demand for materials, equipment, and engineering services, further invigorating the U.S. economy and infrastructure sector.
This significant increase in manufacturing construction activity indicates the long-term commitment to revitalizing the U.S. industrial sector, promising multiple opportunities for growth and development in the coming years for multinational and foreign companies willing to leverage US incentives.
Indeed, the Inflation Reduction Act, CHIPS Act, and Bipartisan Infrastructure Law offer a significant financial impetus for foreign companies looking to enter or expand their operations in the U.S. energy transition market.
These acts provide opportunities for acquisitions or construction of new manufacturing facilities in the U.S., leveraging government funding for investment in infrastructure expansion; supply chain and workforce incentives; and decarbonization innovation funding and tax incentives.
- Investment in Infrastructure Expansion: The Inflation Reduction Act should channel over $1 trillion into the U.S. economy over the next eight years, mainly focusing on power generation, hydrogen, and carbon capture, utilization, and storage. This considerable investment aims to decarbonize the energy sector, with non-emitting power generation being the largest expected spend area. It necessitates a massive scale-up in energy, manufacturing, and construction industries to meet the ambitious infrastructure boom, driving foreign companies to consider entering the U.S. market.
- Supply Chain and Workforce Incentives: The act incentivizes the domestic manufacturing of renewable energy components by offering a 10% bonus, encouraging the onshoring of supply chains. These incentives could significantly draw foreign companies to manufacture these components domestically. Additionally, there’s a focus on expanding the workforce to support the build-out, with tax credits of up to 30% for companies meeting prevailing wage and apprenticeship requirements, thus ensuring a skilled workforce to support these expansive projects.
- Decarbonization Technologies and Tax Incentives: The act provides considerable tax incentives for hydrogen and carbon capture, utilization, and storage (CCUS) technologies. These incentives make such projects more commercially viable, encouraging foreign companies with expertise in these areas to invest in the U.S. The act’s provisions, which last for a decade for most production tax credits and twelve years for CCUS, offer a clear timeframe for investment and development, making it an attractive proposition for foreign investors.
- Strategic Planning for Energy and Utilities: The Inflation Reduction Act, along with the Infrastructure Investment and Jobs Act and the CHIPS Act, offers nearly $370 billion in tax credits, incentives, and financing options to spur investments in renewable energy, hydrogen, fleet electrification, and technologies like carbon capture and storage. This broad array of financial mechanisms is poised to impact business significantly, adding strategic planning costs within the energy and utility sectors. It’s an opportunity for foreign companies to leverage these incentives to accelerate their investments and expand their operations within the U.S. market.
Companies worldwide should take advantage of these opportunities, contributing to the global shift towards more sustainable energy solutions.
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