Executive
Perspectives

US Inflation Reduction Act:
Clean Tech Growth
Opportunities & Value Pools
October 2022

Introduction to this document

This BCG Executive Perspective, the third in our series on the US Inflation Reduction Act,
explores the clean tech growth opportunities that will come directly or indirectly as a result of thebill, barriers to growth, and how companies can achieve competitive advantage.
For previous analysis, please see:• Part 1 | US Inflation Reduction Act: Climate & Energy Features and Potential Implications• Part 2 | US Inflation Reduction Act: Broader implications for corporate decarbonization

Copyright © 2022 by Boston Consulting Group. All rights reserved.

With $369B in funding earmarked for climate and energy, the recent US Inflation Reduction Act(IRA) will drive new clean tech opportunities both in the US and globally. Through the IRA,
companies directly involved in the energy transition (e.g., renewable energy, alternative fuels,
electric vehicles) will be able to cut cost, drive growth, and cultivate innovation. Moreover, ripple
effects will be felt throughout the supply chain as new market opportunities arise to support
growth in the clean tech sector.

1Clean tech growth opportunities:
Three ways to take advantage of new value pools created by the IRA

Proactive
companies standto win new value
pools from IRA• Directly develop projects: Many companies can participate in climate tech markets, e.g., renewables,hydrogen, carbon capture, etc.
• Participate in the broader value chain: New markets also create opportunity for companies that support
the climate tech ecosystem such as finance, construction, raw materials, and machinery• Make low carbon products: Companies can capture value by making net-zero products, e.g., using hydrogento produce low-emissions chemical ingredients for a net-zero pharma company

2

Overcoming bottlenecks:
Despite strong incentives, barriers may delay growth opportunities
Although briefly mentioned in prior materials, barriers across several areas may delay growth opportunities:• Regulatory clarity around the IRA: Multi-year process establish what qualifies under tax law and regulation• Permitting, stakeholders, and state/local political barriers: Getting ahead of lag times and balancing ofmultiple stakeholders needed; permitting processes poised for streamlining• Enabling infrastructure: Physical, digital infrastructure needed for integrated decarbonization• Supply chains: New supplier relationships and circularity require time and investment• Resource availability: New models required to solve rising scarcity for sustainable inputs• Workforce: Growing demand for workforce adept in clean tech

3

Securing competitive advantage:
Early entrants into new clean-tech industries may gain first mover advantage• Move quickly: Early entrants to the clean tech space have historically gained larger market share than theircompetition, with strong examples from electric vehicle (EV) and energy efficient lighting• Secure supply: Supply scarcity and the need to navigate domestic content requirements, especially formaterial inputs (e.g., green steel, green hydrogen), will affect pace of change and growth strategy• Consider technological maturity: Winning strategies will differ for nascent technologies (e.g., hydrogen, CCUS)
compared to mature technologies where scale and implementation are key

Carbon-free energy

Transportation

Clean Tech

Manufacturing

Direct tax credits will drop
the cost of renewable energy
18-63% accelerating thepace of redeployment

Electric vehicle incentives(up to $7500 for a new and$4000 for a used EV) will
drive down cost and increasedemand for new EVs and EV
charging infrastructureBlue and green hydrogen
will soon be cost competitive
with fossil-derived hydrogenand the 45Q tax credit will
make CCUS and DAC moreaccessible, capping the costof achieving Net Zero

$71B in stimulus foradvanced manufacturing
and industrial facilities will
expand adoption of energy
efficient technologies andmaterials including heatpumps and leak detection
and repair (LDAR)

For more details, see US Inflation Reduction Act: Climate & Energy Features and Potential Implications
1. Note: $479B Includes funding from Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) 2. Over the next 10 years
Source: BCG analysis.

Copyright © 2022 by Boston Consulting Group. All rights reserved.

1

Develop projects| $479B1 in new climate and energy finance will catalyze$1.3T2 opportunity for companies directly involved in climate mitigation

1

Broader value chain| Adjacent markets also benefit from clean tech growthNon-exhaustive

Machinery & equipment

FinanceDemand is expected to increase for hardware andelectronic components, batteries, robotics, andfinishing and testing services presenting a $4.7T
opportunity in the US through 2040 (see example).

IRA will stimulate development of new marketse.g., ability to sell unused tax credits will necessitate
secondary markets for trading1

Agriculture & land use

Construction & maintenance
Rebate programs1 will accelerate residential
construction (e.g. retrofits, energy upgrades), $3B in
grants will support transportation infrastructure andhydrogen supply chain expansion

Raw materials
Clean tech will require raw materials, chemical, andenergy input, e.g., increased demand for cobalt,
lithium, ion, steel, aluminum for renewable energy
generation.

CLEAN
TECH

IRA will accelerate demand for carbon markets
which will stimulate investment in agriculture andland management

Education
Workforce development to upskill and train millions
of workers for a clean tech economy will lead torequire traditional training programs, trade
apprenticeship, teaching materials, etc.

Shipping and logistics

Professional services

Redesigning supply chains to meet the needs ofclean tech will require expansion of shipping routes
and logistic services

Navigating a complex and uncertain transition will
require lawyers, accountants, and other professional
services

1. The High Efficiency Electric Home Rebate and Home Energy Performance-Based Whole-House Rebate
Source: Levelset; BCG analysis

Example | Clean technology machinery and equipment represents a US
market opportunity up to $4.7T between now and 2040

Cumulative opportunity size for machinery makers 2020-40 ($B)
5,000

862

4,000

428
767
151

3,000

1,128
255

2,000

1,355
1,000

76

184
119
539

127

4,666

81

1.

Wind
Solar PV
Others2Hydro

2

143 95 19

Grid
Investment

T&D Upgrade
EV Charging Infrastructure
Smart Grid
Off-highway BEV 3

206

3

370

EnergyStorage

Other 4
Stationary Batteries
Battery Manufact. Equipment~$4.7 Trillion

797

H2 Value Chain5

4

total potential

170 17523

Alternative
Fuels

Bio Fuels6
Bioenergy
Off-highway FCEV

5

644
0

1

Renewable
Energy12

3

4

Renewable
EnergyGrid
Investment

Energy Storage

Alternative
Fuels

5

6

Green Building
Carbon& HeatCapture andRemovals

Green
Building& HeatTotal

6

CarbonRemovalHeat Pumps
CHP & Heat Optimization & Recovery
Building Automation
Electric Arc Furnace
Power gen. CCUS
Industry CCUS
Direct Air Capture

Includes converter stations, cables and other equipment for transmission and distribution upgrade 2. Geothermal and concentrated solar power (CSP) 3. On highway automotive batteries not included in this model 4.
Includes battery manufacturing equipment market, thermo-mechanical storage, and pumped storage hydropower (PSH) 5. Includes mining, marine, construction, material handling, defense, rail and O&G 6. Includes H2
production, distribution & storage, conversion, transportation, iron & steel, existing feedstock, process power & heat, back-up & off-grid power
Note: Analysis not intended to be exhaustive
Source: BCG analysis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

1

Low carbon products | Thousands of companies have committed to
Net Zero targets; investment is needed to achieve ambition
New incentives can reduce cost to produce net-zero products for those industries,1 for example:

PharmaAviation

Chemical producer useshydrogen to synthesize key
pharmaceutical inputs withlower carbon footprint

Airline adopts sustainableaviation fuel to provide low
emission transit

Construction

Consumer Goods

Steel supplier installs
carbon capture to provide
construction company
lower emissions steel

Shipping company switches
to hydrogen fuel cell trucks
for lower emissionsdeliveries of goods

1. For further details on the cost implications of the IRA, please see:Part 2 | US Inflation Reduction Act: Broader implications for corporate decarbonization
Note: SBTi (science-based targets initiative)
Source: SBTi; BCG analysis

Copyright © 2017 by The Boston Consulting Group, Inc. All rights reserved.

1

Overcoming bottlenecks | Need to overcome near term obstacles
to fully realize decarbonization

Regulatory
clarity
Federal rulemaking will
be required to clarify
critical attributes of the
IRA in order to provide
investment confidence

Clarifying key rules andprocesses requires
doubling of IRS staff1

Permitting, state/
local politicalchallenges

Enabling
infrastructure

Developing new
supply chains

Multiple state andlocal government rules
can block or delay
infrastructure,especially for emerging
technologies

Clean tech growthrequires new andexpandedinfrastructure,including grid,
pipelines, and storage

Significant new sourcesof value from sourcing
domestic content
and/or restructuring
supply chains

Supply scarcity in
critical minerals andcomponents may
require collaborative
sourcing and new
procurement models

Net zero transition
requires 6.5M moreskilled clean techworkers in US amid eraof changing workforce
dynamics

Developing hydrogenvalue chains will
require significant
deployment of storage
and trucking infra.

Developing new libattery sourcing toreceive EV incentives
and capture higher ITC
incentives

Need for new
procurement models toaccess to green H2electrolyzer capacity
and components

Deep dive into clean
energy workforce infollowing pages

Deep dive into CCUS
in following pages

Source: USA Fact "How will the Inflation Reduction Act change the IRS? – USAFacts," Accessed 9/15/2022, BCG analysis

Resource
availability

Workforcedevelopment

Copyright © 2022 by Boston Consulting Group. All rights reserved.

ExampleProposed solutions

Obstacle2

Deep dive | Multiple regulatory barriers can hinder scalability of clean
technologies

2

US Permitting process
faces significant challenges

Example:Scaling CCUS requires navigating challenging regulation

4+ years

42%
Nearly half of clean energy ventures aredelayed by regulatory red-tape,compared to just 15% in fossil fuel projects

50 states
Players must stay apace with state-specificand fast changing regulations to staycompliant in e.g., RES markets

IRA provides $350M in funding for
Permitting Council to improve
permitting efficiency and predictability

CCUS
incentives• Outstanding clarity on IRS rules,
including qualifying facility criteria,"stackability" of credits, etc.
• Multiple permit processes to own
and operate CO2 pipelines to transport
CO2 for storage or utilization• Lagging product standards, e.g., need
years to evaluate performance and safetyof CO2 -cured concrete for highmechanical strength applications1• Unclear verification of carbon
footprint reduction, e.g., from CO2 derived building materials1 complicates
45Q and IRA tax credit claiming

Source: Congress Passes Inflation Reduction Act | Permitting Dashboard (performance.gov); For the Inflation Reduction Act to work, theUS needs permitting reform | The Hill; Permitting Reform Needed to Reach Clean Energy Goals (c3newsmag.com)

Carbonstorage• EPA backlog for underground injection(UIC) Class VI permits• Undefined legal rules on geologic
pore-space ownership & rights,
including ownership pooling, in property
documents• Long process to obtain pore spaceacess requiring consensus fromhundreds of landowners e.g., 60%
landowner agreement in ND, 80% in MT,
etc., where poor rights are defined• 100-year post-injection liability sharing
negotiation between company and state

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Massive time investment (~4-16 years) tonavigate long permit processes and increase
community buy-in for clean energy, mining.
Permitting time has doubled since 1970s

Deep dive | Interconnection ques are filling up, making it difficultfor offshore wind (OSW) to identify and develop points of interconnection

Interconnection points being pursued on East Coast
for OSW projects

Capacity of interconnection requests made across
PJM, NYSIO, and NE-ISO (MW)Annual (GW)
25

20

Cumulative (GW)
99

Cummulative
NE-ISO
PJM

100

80

NYSIO
15

60

10

40

5

20

0

Source: : PJM Interconnection Que; NYSIO Interconnection Que, NE-ISO Interconnection Que; HIFLD; BCG analysis

2022 2023 2024 2025 2026 2027 2028 2029 2030

0

Copyright © 2022 by Boston Consulting Group. All rights reserved.

2

Deep dive| The transition to global Net Zero will require millions
of jobs as America builds a clean energy workforce2

6.5 million new jobs needed in US toachieve net zero

Clean workforce must grow despite changing skill
landscape and differing regional strengths

Change in US employment by 2035
Solar1
Electricity
2
Wind
Transmission & Distribution
Natural Gas
Storage
Efficiency
Buildings
Electrificaiton
Alt. Vehicles
VehiclesAlt. Vehicles Infrastructure
ICE Vehicles** -5.5
HydrogenBiofuels
Fuels
Fossil Fuels**
-1.8
-6

-4

-2

US employees are quitting at levels higher than pre-pandemic levels

2.5

US skill supply or job preferences may not align with manufacturing demand

1.3

Certain regions already ahead on overall clean jobs

0.2
0.2
0.0
3.0

Clean Energy Employment

1.6(% of statewide employment, 2017-2020)
>5%

3.3

WA
MT

2.5-3.5

0.2

ORBaseline

NE
UT

CO

NZ

0

2

4

KS

NY
MI

IA

NV
CA

WI

SD

<1.5%

ATC

IL

PA
OH

IN

MO

VA
KY

Jobs (M)

AZ
AK

NH
VT
MA
RI
CT

MN
WY

IRA accelerates expansion of American climate workforce adding 900k jobs••

ID

1.5-2.5

0.4
0.3

ME

ND

NM

OK

TX

NC

TN

AR

NJ
DE
MD
DC
WV

SC
MS

AL

Renewables
StorageGA

LAFL

Tax credits are tied to apprenticeship requirements$200 million to the Department of Energy establishes training to facilitate training

Hot Spots4

Energy Efficiency
Clean Fuels

HI

ATC = Advanced Tax Credit scenario NZ = Net Zero scenario.
1 Includes distributed and utility solar. 2. Includes onshore and offshore wind; IRA drives growth in onshore. 3. Combines residential and non-residential 4. Top 4 states by share of clean workforce
Source: World Resources Institute; World Energy Employment Job openings and labor turnover survey; Clean Jobs America 2021, E2; BLS includes non-farm industries; BCG analysis

Clean Vehicles

The time to act is now| Incumbents that fail to embrace emerging trends
risk being left behind

3

Adoption for new technologies
follow "s-shaped" curve

Clean tech in the United States is reaching a tipping point for adoption
as new technologies reach critical mass

Example 1: Phillips gained competitive
advantage through introduction of LED

Example 2. Electric vehicle penetration rapidly accelerated after reaching 5% penetration
across the globe; US market recently crossed the 5% threshold and is positioned to follow suit

Worldwide lighting market revenues ($B)

EV share of vehicles (BEV)EV share of vehicles (BEV)

100%

100%

100%

Lighting
59%

Introduces
first IoT
LED bulb

75%

Sells off
lighting
division50%

Conventional
luminaires

5% adoption threshold
0

2

4

6

75%

12-monthmoving average

50%

25%

0%

75%

LED
luminaires

LED
~13%

8

10

Years after crossing 5% threshold

If US follows trend of 18
other countries in study,
25% of new cars would
be fully electric in 2025

Norway

50%

25%

USA
Projection

25%
5% adoption threshold

0%

0

1

2

3

4

5

6

7

8

5% adoption threshold
9

Years after crossing 5% threshold

0%

0

1

2

3

4

5

6

7

8

9

Years after crossing 5% threshold

Note: LED electronics used in LED luminaires are included in the LED–luminaire market total; blue–collar services are excluded
Source: Energy.gov; A Turning Point for US Climate Progress, Rhodium Group; Philips Lighting Annual Report (2017); BCG 2020 lighting–market model; expert
interviews; BCG model validated by 2019 Statista data; CNN Business; US Crosses the Electric-Car Tipping Point for Mass Adoption, Bloomberg

3

Securing competitive advantage | Business leaders must move quickly tosecure scarce inputs needed for scalable sustainable business models

As funding floods clean tech, demand for sustainable resources, capabilities and infrastructure
will outpace supply. Previously, we presented several ways to engage suppliers1:

IRA and IIJA have provisions tobolster long-term resource
availability

Demand signals

Strategic investments• Form coalition of peers, including
industry or tech coalitions and pooled
procurement• Invest in specific partners,
via concrete volume agreements or otherpartnerships• Make advanced market commitments
to purchase specific tech

• Provide capital with lower expected returnSource: Part 2 | US Inflation Reduction Act: Broader implications for corporate decarbonization

Onshoring and building a domestic
clean tech workforce will reduce
geopolitically-induced scarcity

Previously cost-prohibitive
alternative energy sources e.g., H2will increase clean energy supply

Copyright © 2022 by Boston Consulting Group. All rights reserved.

$3B green procurement funding
increases market-competitiveness ofdomestic materials

Securing competitive advantage | Strong growth expected across all techsectors, but strategic approach must account for technological maturity
Two broad strategies to consider:

Global annual market
CAGR$2.1 T(2021–30)

+9%
+9%
0.5

Renewable Energy

6%

0.6

Grid Investment

7%

0.3

Energy Storage

9%

0.3

Alternative Fuels1

16%
33%

Mature technologies
Capturing opportunity in renewables and grid
infrastructure requires making big bets to quickly
build scale: leveraging existing capabilities toaccelerate growth, orchestrating partnerships, or
engaging in M&A.

$1.0T
0.3

$0.6 T
0.3

0.1

0.1
0.1

0.0

2021

0.1

0.2

Carbon Removal
Green Building &Renewable Heat

11%

2030

1. Green Fuels not included in Alternative Fuels estimate due to limited data on annual growth
Source: BCG analysis

Less mature technologies
Hydrogen, CCUS, and DAC face technologicalbarriers, labor shortages, and unknown politicalclimates. Strategies in this space will require
testing and iteration to build new markets, anddiversification to mitigate risks. Companies withcompetencies in related technologies will likely
have a starting advantage.

Copyright © 2022 by Boston Consulting Group. All rights reserved.

3

Further reading
Machinery

Digital & AI
Nov. 12, 2021

April 20, 2021

Net-Zero Trucks? Yes, It’s
Possible.

Why Electric Cars Can’t
Come Fast Enough

Finance

April 20, 2022

What It Will Take to Reap
the Rewards ofRenewable Fuels

July 7, 2022

AI Is Essential for Solving
the Climate Crisis

Jan. 26, 2021

Reduce Carbon andCosts with the Power ofAI

Additional indirect clean tech market opportunities
Jan. 19, 2021

A $2T Banking Climate
Opportunity Hiding in
Plain Sight

July, 2022

Private Equity Should
Take the Lead in
Sustainability

April 11, 2022

Six Pitfalls to Avoid When
Mobilizing for
Sustainability

March 5, 2021

Aluminum Can Come
Back Greener andStronger

Sep 24, 2021

Global Shipping’s NetZero Transformation
Challenge

Oct. 13, 2021

Measuring Emissions
Accurately

New Products
July 8, 2022

The Untapped Climate
Opportunity in
Alternative Proteins15

BCG contacts

Tom Baker

Cornelius Pieper

Pattabi SeshadriThomas Dauner

MD & Partner
Renewables & Decarbonization
San Francisco
baker.thomas@bcg.com

MD & Senior Partner,
Sustainability in Industrial Goods
Bostonpieper.cornelius@bcg.com

MD & Senior Partner,
BCG Global Leader - Energy
Dallassheshadri.pattabi@bcg.com

MD & Senior Partner,
BCG Global Leader –Industrial Goods
Stuttgartdauner.thomas@bcg.com

Simon Rees

Andrew Alcorta

Alex Dewar

Katherine Phillips

MD & Partner
Greentech
Bostonrees.simon@bcg.com

Principal,
Greentech
Bostonalcorta.andrew@bcg.com

Partner
Decarbonization
Washington DC
dewar.alex@bcg.com

Project Leader,
Decarbonization
New Yorkphillips.katherine@bcg.com

Hubi Meineke

MD & Senior Partner,
BCG Global Leader –Climate & Sustainability
Hamburg
Meinecke.Hubertus@bcg.com

Marielle Remillard

Principal,
Climate & Sustainability
Bostonremillard.marielle@bcg.com

Appendix | Overview of technology landscapeRenewable Energy

Utilities

Buildings

Utilities
Hydro

Wind

Other1On-highway
transport

Off-highway
vehiclesAgricultural & Industrial Processes
Marine & air Metals, mining
transport& cement

Clean tech

Agriculture& wasteTransmission, distribution, and Smart Grid2
EV Charging
TMS & PHS3

Off-grid
stationary
battery

EV Charging–Onsite Batteries
BEV4

Stationary Battery
H2 power turbine

Fuel Cells(H2, Synfuel, & Bioenergy)

FCEV5

Alt. fuel engine

H2 furnace

Reactors,
crackers,
compressors>50% SAF
engines

Biomass &biogas furnace

Pyrolizers, gasifiers,
heaters, separation
membranes

Biogas CHP
Biomass furnace
Combined heat & power

Digesters
CH4 Capture

Steam and process heat optimization

Heat Pumps

Green building tech& renewable heat

Electric driers, furnaces,
compressors, tools

High SEER, low GWP HVAC
Building automation & EMS

EAF6
e-boilersGreen building materials
Utility CCUS

CCUS and Engineered
Carbon Removals

Discretemanufacturing

Off-grid RE
generation

Electrolysis, compression, storage, carrier pathways, & transportation tech

Alternative Fuels

Oil, gas, &chemicals

Distributed Solar PV

Grid Investment
Energy Storage

Commercial &Industrial

Residential

Solar PV

Transportatione-cracking

Industrial CCUS
BECCS

BECCS7
Direct Air Capture (DAC)

Efficientresourceuse

Biochar, Biooils, and enhanced mineralization
Materials recycling & transport

Circular Economy
Efficiency gains

Recycled building materials

Sort machines

Waste mgmt

Remanufacturing

Efficiency in conventional
power gen

Improved thermal efficiency

Higher efficiency ICE

LDAR8Heat optimization & recovery

Hydraulic Electrification

Variable speed drive motors
Controls, software, and analytics
LDAR

Hydr. Elect.

= Opportunities most benefitted by IRA … but full climate tech opportunity space expected to grow due to increased focus post-IRA
1. Includes geothermal and concentrated solar power 2. Includes converter stations, cables and other equipment for transmission and distribution upgrade; 3. Thermo-mechanical storage, andpumped storage hydropower; 4. Battery Electric Vehicle; 5. Fuel Cell Electric Vehicle; 6. Electric arc furnace; 7.Bioenergy with Carbon Capture and Storage; 8. Leak detection and repair. Additional
mitigation equipment exists beyond LDAR. Source: BCG analysis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Technology category(non-exhaustive)

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