Executive
Perspectives

US Inflation Reduction Act:
Climate & Energy
Features and Potential
Implications
August 2022

Introduction to this document

US Congress recently enacted legislation, the Inflation Reduction Act (IRA), that includes $369B of funding forclimate and energy over the next decade. This funding builds on more than $110B of climate and energy funding
in the Infrastructure Investment and Jobs Act (IIJA) adopted in late 2021. The primary vehicles for fiscal spending
for the IRA will be through tax credits and incentive funding, intended to create investment multiplier effects
Legislation of this magnitude and duration lasting through the 2030s and beyond is likely to have profound andlasting impacts across US and global climate and energy systems, supply chains, industries, and trade
US legislation on climate and energy also has the potential to trigger policy actions from other nations, bothlarge energy producers that compete across these value chains, and large energy consumers
This document provides an overview of the key climate and energy features of the legislation, shares thepotential shift in economics of clean energy investments and technologies it can deliver, and describes initial
implications and opportunities for firms

The second and third order implications of this legislation will emerge over time. For example, these policies
impact the ability of every industry across the economy to decarbonize their supply chains. We will explore
these in future BCG Executive Perspectives across select areas of focus
2

US Congress recently passed legislation to support
climate priorities and the energy transition
Infrastructure Investment and Jobs Act (IIJA)
Signed into law Fall 2021

Inflation Reduction Act (IRA)
Passed Summer 2022

Biden Signs Infrastructure Bill,
Promoting Benefits for Americans

How the $1 Trillion Infrastructure Bill
Aims to Affect Americans' LivesThe Inflation Reduction Act Is a Huge
Deal for the Climate

Inflation Reduction Act Could
Supercharge Grid Energy Storage

Biden Signs Bipartisan Infrastructure
Bill, Vowing Change 'For the Better'

Infrastructure Bill Provides Money for
Bridges, Broadband, and more

Senate passes Democrats' Landmark
Tax, Climate, Drugs Bill

What the Inflation Reduction Act
incentives mean for your wallet3

Recent US Climate
policies enable acase for action
across industries

elements of the legislation
1 Key
Recently passed US climate policies are poised to dramatically shifteconomic viability of carbon free energy, clean tech, and electric vehicles••••

Incentives will materially reduce renewable and other carbon free energy costs, with potential
to drive increases in carbon free energy deployment to 65-80% of electricity by 2030
EV adoption will accelerate by several years, lowering entry price for passenger and heavyduty vehicles. However, in the near-term this could be constrained by ability to ramp up
supply chains
Significant funding for emerging clean technologies will promote rapid demonstration anddeployment, catalyzing decarbonization of hard-to-abate sectors
Manufacturing tax credits will boost domestic production of key energy and EV components

implications
2 Direct
These policies will make decarbonization cheaper across industries, but
executives must start now to capture their full value••••

Reduce costs: Take advantage of sizable credits that reduce energy and transportation costs,
regardless of industry
Re-evaluate decarbonization plans: Leverage massive shifts in carbon abatement curves
and clean technology improvements to reduce greenhouse gas emissions
Capture early mover advantage: Act now to mitigate bottlenecks expected to emerge inlow carbon infrastructure development and related supply chains
Pursue new value pools: Plan ahead for how you can shape and capture value from newmarkets in energy, transportation, or manufacturing
4

1

Overview: Infrastructure Investment and Jobs Act (IIJA) and Inflation
Reduction Act (IRA) include $479B in new climate and energy spending
Infrastructure Investment and Jobs Act (IIJA)
Signed into law Fall 2021~$1.2T$110B

Inflation Reduction Act (IRA)
Passed Summer 2022

$739B

$440B

$369B

$650B

$306B

$64B
Total
infrastructure
spending over the
next 10+ years

New energy
and climate
infrastructure funding

Other newinfra.
investments

Ongoing
infra.
funding

1. Includes corporate tax, prescription drug pricing reform, and IRS tax enforcement
Source: 'FACT SHEET: Historic Bipartisan Infrastructure Deal', The White House

Total funding
for Inflation
Reduction
Act1

Clean Energy andClimateInvestment

Deficit
Reduction

Affordable
Care Act
Extension

5

Detail: Infrastructure Investment and Jobs Act (IIJA) and Inflation
Reduction Act (IRA) include $479B in new climate and energy spending

1

479
$B

Key incentives:

237
41

Funding from IIJA

110

Funding from IRA

Carbon-freeenergy

196

41
23

18

369

Transportation

35
17

18

71
0
71

95

Clean tech

34
61

Total
climate &energyinvest.

Carbonfree
energyTransportation

Clean Manufacturing Other
tech

Manufacturing

Other• Tax credits for investments in solar and storage• Tax credits for producing wind and nuclear energy• Tax credits for transmission interconnects related tothese clean energy projects• Funding for energy efficiency• Tax incentive for purchase of electric vehicles• Funding for EV charging infrastructure
•
•
•
•
•

Carbon capture tax credit for point source capture
Carbon capture tax credit for direct air capture (DAC)
Tax credit for production of clean hydrogen
Funding for hydrogen and DAC hubs
Funding for sustainable aviation fuels (SAF)• Funding for advanced manufacturing production• Investment for advanced industrial facilities••••

Agriculture initiatives
Methane emissions charge (revenue generating)Resilience investments (e.g., rural area dev.)
Greenhouse gas reduction fund6

Note: additional details on the IIJA and IRA in appendix; Source: EPA, CBO, BCG analysis

1This funding will drive material changes to the energy, transportation,and manufacturing sectors and will spur innovation in clean tech

$237B

$41B

$35B

$71B

Carbon-free energy

Transportation

Clean tech

Manufacturing

Ramp up adoption ofrenewable and nuclear
electricity in the US, andincrease energy efficiency

Accelerate EV adoption

Catalyze innovation toaddress hard to abate
emissions

Spark domestic
manufacturing of low carbon
infrastructure components

Driven by facility funding
and technology-specificincentives

Driven by facility funding

Driven by incentivizing EV
purchases and funding EV
charging infrastructure

Driven by tax credits that
reduce costs

7
Note: additional details on the IIJA and IRA in appendix; Source: EPA, CBO, BCG analysis

Carbon-free energy | Base, multipliers and bonus tax credit structure
intended to shape and target clean energy investments
Renewable investment tax credit eligible forbonuses up to 70% of upfront investment cost
1

2

3

4

20%

With a potential to increase base incentive by 10x
while also supporting a just transition
1

70%

Prevailing wages andapprenticeship qualify projects
for a 5x bonus multiplier overbase for most nonmanufacturing credits

Significant apprenticeship
opportunities to help
upskill the US workforce
in low-carbon technologies

Domestic content bonus
provides up to a 10 ppt bonus
on renewable energy production
or investment tax credit

Domestic content bonus toincentivize shift to US
manufacturing, requiring≥55% of all parts to be
produced in the US by 2027
and 100% of steel and ironfor turbines and solar panels

10%
10%

2

24%

6%
6% baseInvestment in the energy
community and low-income
4 community qualifies renewableenergy projects for up to a 10
and 20 ppt bonus credit
increase, respectively
3

5x bonusof 6% base(total 30%)

Domestic
content
bonus

EnergyLow-income
community
bonus
bonus

Total

Note: Not all clean energy technologies are eligible for all bonuses; ppt (percentage point); production tax credit eligible for similar bonuses, but domestic
content and energy community bonuses are 10% increases (not 10 ppt); low-income community bonus has project cap of 5 MW
Source: 'FACT SHEET: Historic Bipartisan Infrastructure Deal', The White House

Support for the energy andlow-income communities toenable economic
development and jobs

8

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

1

Carbon-free energy | Full tax credits can significantly
reduce costs of generating renewable energy-18%

Cost without tax credit
Cost with tax credit

Levelized
Cost ofEnergy
$/MWh

$112

-35%
-41%

-57%
$24

-21%
$100
$79

$77
$40

Post-IRA
incentive
applied

$136

$50

$35
$15

Solar

Onshore wind

Offshore wind

Storage

Nuclear1

50% Investment
Tax Credit$31/MWh[2] Production
Tax Credit

50% Investment
Tax Credit

50% Investment
Tax Credit$31/MWh[2] Production
Tax Credit

1. New small-modular reactor; 2.Assumes $15/MWh incentive, inflation adjusted and with bonuses; Note: all technologies assume base + prevailing wage bonus + domestic production bonus + energy
community bonus. Source: Lazard, BCG analysis

9

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1

1

Carbon-free energy | Potential for step change increase in renewableenergy buildout by 2030 and beyond
Utility-scale Solar

Onshore Wind

Non-residential
Storage

Offshore Wind

4-6x
Installed
Capacity
(GW)

408

~2x

307
68

2020 capacity

221

252

40-50x

>500x

125
0
2030 capacity, base case (conservative adoption rates)

28

35

2

81

99

2030 capacity, 'deep green' (wider adoption rates)

Improved economics of renewables and storage will accelerate transition from fossil fuelgeneration• Expect upwards of 65-80% generation from renewable capacity in 2030 vs. ~40% in 2020
• Projects that start construction in or before 2032 eligible for tax credits; expect continued growth past 2030
• Need for firm (low-carbon) generation to ensure grid reliability and resiliency remains

10

1

Transportation | Electric vehicle purchaseprice parity accelerates >5 years
Passenger vehicles:• Incentive: Up to $7500 for new purchases,
up to $4000 for used
• Purchase price parity jumps forward 5 years1
for qualifying passenger vehicles compared tointernal combustion engine vehicles (ICE)• 5-year total cost of ownership favors battery
electric vehicles immediately1
Commercial vehicles:• Incentive: $40,000 for new purchases• Includes off-highway vehicles

Purchase price difference between internal
combustion engine and battery electric vehicles
Segment: Compact SUV (SUV – M)
US Dollars ('000)
20

10

Purchase price parity

0
2015

-10
1. Purchase price parity and total cost of ownership parity differ by vehicle segment (e.g., SUV vssedan) and state where vehicle is purchased (some states have additional purchase incentives)
Source: BCG powertrain model

No-incentive

2020

2025

2030

2035

With fullincentive

11

1

Transportation | Close to half of vehicle
sales likely to be electric by 2030
>10% of light-, medium, and heavy- vehicles in operation
expected to be electric by 2030 in US

2021
2030 basewith incentives

3%
6%

90%

38%

15%

2021

98%

47%

80%

% of US New Medium- andHeavy-Duty Vehicle Sales1

Stack-able incentives in the form of:• Point of sale rebate% of US Light Vehicles in
Operation ('parc')2
1%
1%
12%
8%

% of US Medium- and Heavy-Duty
Vehicles in Operation ('parc')2

96%

2%

98%

<1%
2%

<2%
2030 basewith incentives

70%

5% 25%

Non-electric3 vehicles

Hybrid and plug-in
hybrid vehicles

84%

12%
4%

Battery electric andfuel cell vehicles•

30% rebate on EV charging / alternative fuelhardware + installation•

Higher residual values due to used vehicle credit•…and continued state-level incentives such as
LCFS (California)

Several non-financial factors in the Inflation
Reduction Act are also likely to drive adoption:• Eliminates volume cap for individual vehicle
manufacturers•

Provides 10-year incentive certainty•

Simplifies incentive payout

1. Forecast includes all light vehicles, except heavy vans; 2. Assumes decrease in scrappage rate over time (EVs + AVs); Including such changes in consumer mobility
behavior as car and ride sharing; 3. Includes internal combustion (diesel + gasoline) and mild hybrid electric vehicles
Source: BCG Powertrain Model 'base case incl. incentives'; BCG vehicles in operation (VIO) model

12

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

% of US New Light Vehicle Sales1

Transportation | US domestic and trade allied battery supply
chains will need to ramp up quickly to qualify for the incentives

Today's EV batteries rely heavily on raw materials from China

Inflation Reduction Act mandates two
sourcing requirements to receive the clean
vehicle credit, starting in 2023:

Share of global production, 2021 (%)•

40% of battery minerals sourced fromUS or country with free trade agreement

50% of battery components
manufactured in US, Mexico, or Canada

These percentages increase 10 ppts/y 1'Excluded entities':
Disqualifies vehicles that are imported or
built with battery materials sourced from'foreign countries of concern' (namely,
China + Russia)
Note: All dates refer to when construction must start by or safe
harbor achieved by
1. For minerals: Up to 80% by 2027; for components: up to
100% by 2029, but no 10 ppts/y increase in 2025 (vs 2024)
Source: H.R.5376 - Inflation Reduction Act from congress.gov

Lithium

9% 1%

Cobalt 1%
Nickel1%

4%Graphite

3%

60%

CobaltClass 1 Nickel

72%
16%
42%

Anode

65%

Electrolyte

65%

Separator

10%
2%

43%

6%

Cell
China

2%

68%

LithiumCathodeCell &
Component•

Raw
Processing materials

Sourcing requirements:

79%
Other Exclusions

US

6%

Qualifying US Free Trade Countries

Other
13

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1

1

Clean tech | Significant incentives to help scaleclean hydrogen, CCUS, and DAC
Carbon capture, utilization,and storage (CCUS)

Hydrogen (H2)Emissions (kg CO2 emitted / kg H2 produced)

2.5-4

0.60

1.5-2.5

0.75

0.45-1.5

50

1.00

<0.45

3.00

Production tax credit ($ / kg H2 produced)1

Hydrogen can receive significant
incentives, with exact value
depending on the associatedemissions; additional $8B tobuild regional H2 hubs$/ton CO2

Direct Air Capture (DAC)
180
50$/ton CO2

1535Previous value
Sequestration

85
25
60

50

15

130

New Value

35
Previous value

New Value

Utilization

Sequestration

Utilization

Expansion of existing 45Q credit
to $85/ton for permanentgeological sequestration of CO2,
or $60/ton for utilization of CO2(incl. enhanced oil recovery)

1. Assumes facility receives 5x bonus from meeting prevailing wage and apprenticeship requirements; Note: $/tCO2 ($/ton of carbon dioxide)

Expansion of existing 45Q credit
to include additional incentive forcarbon captured directly from theatmosphere, with $180/ton forsequestration of CO2 ($130/ton
for utilization); $3.5B for DAC
hubs
14

1

Clean tech | Incentives improve cost competitiveness ofclean hydrogen against traditionally produced hydrogen
United States Levelized Cost of Hydrogen

Two forms of cleanhydrogen (H2):
Green: Renewableenergy + waterelectrolysis
Blue: Fossil-derived
hydrogen + carbon
captureLighter shades reflects range of cost uncertainty2($/kg hydrogen, production cost)1,2

3.0

2022

2025

Blue hydrogencost competitive
now

Green hydrogencost competitive
soon

0.8

3.0
0.8-1.3

0.2-0.8

0.8

2030

0.8-1.3

3.0

0.8

0.8-1.3

0.2-0.8

0.2-0.80-0.3

0.9-1.2-0.4 - -0.6
Production tax credit

Green Hydrogen

Blue Hydrogen2

Fossil-derived2

1. Excludes infrastructure costs associated with storage and delivery to end consumer 2. Lighter shade reflects pricing uncertainty regarding
natural gas (lower limit $2/MMBTU, upper limit $5/MMBTU) and electricity 3. Starts at $0.4/kg H2 for 60-75% greenhouse gas reduction vsfossil-derived hydrogen, goes up to $0.75/kg H2 for 75-85% greenhouse gas reduction.
15
Source: BCG North America H2 Supply ModelClean tech | Higher 45Q tax credit will triple the scale ofemissions addressable with CCUS
High CO₂ Conc. Sectors

Volume of emissions within sector by cost (million tons per year)123
Totals<$50/ton
High-Concentration
Emissions

Low CO₂ Conc. Sectors

Gulf Coast

MidwestCalifornia

Ohio River

Northeast /Mid-Atlantic

44

35

2

1

1

83 million tons

Power

Other

Northwest

Rockies02

per year(6%)

45Q was$50/ton16$50-$85/ton
Industrial Emissions+ Highly Utilized
FossilControl Power Gen

25

316 million tons

1
93

122

per year(23%)

Power Generation
Emissions

956 million tons
per year
(71%)

17

1

1

$85-$120/ton

30

4

69
291

23

315
8

12

0

0

1

6

4

0
14

7

23

0

111

0
30

45Q now$85/ton

0
1
12

1
55

1

1. High CO2 sectors include: Ammonia, Chemicals (ferm.), Conv. Oil (incl. NGP), H2, Petrochem.; Low CO2 sectors include: Aluminum, Cement & Lime, Iron & Steel, and Petroleum Refining;
Power sectors include: Fossil power Generation; Others include: Waste management, Wood, Pulp and Paper and Other Manufacturing | 2. Abatement costs based on emitters assigned to hubs
within BCG CCUS tool, covering selected regions, using hub T&S costs, per emitter data directional |3. Excludes ~690 Mtpa from isolated emitters which are not connected to hubs and ~120 Mpta
over $120/ton; Source: EPA flight database 2019; BCG CCUS tool

16

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1

Clean tech | Direct air capture (DAC) incentive makes
DAC facilities significantly more attractive
Projected cost of DAC ($/ton) inclusive of new tax credits,
2022 vs. 2030
2022

$600

Sequestration$180/ton CO2

2030

$180
$420

$250
$400
$600

$220

$180
$70

$200

$20

$130
$470

Utilization$130/ton CO2

DAC is investable now
with these significant
incentives

$250
$400

Total cost pre-incentive(range)Source: CARB; Stillwater Associates; BCG Research$270

45Q Tax Credit

$130

$200

Net abatement cost
(range)$120$70

Lower technology
costs plus 45Q tax
credits will reduce
DAC costs and provide
a ceiling for Net Zero
costs
17

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1

1

Clean tech | Higher incentives likely toaccelerate deployment of clean technologies
Carbon capture, utilization,and storage (CCUS)

Hydrogen (H2)
Thousand tons H2 per year
Blue H2

2,248

Million tons CO2 per year1

Green H2692
<12020 volume<1

202030 volume, base case (conservative adoption rates)

Clean hydrogen's cost reductions
will drive use as a low-carbon fuelfor energy or transport, and as afeedstock to decarbonize
production of steel and othermaterials
1. Does not include direct air capture (DAC)

Million tons CO2 per year

84

1,000

971

170

Direct Air Capture (DAC)

Increased cost competitivenessof carbon capture bring carbon
abatement for several
sectors in-the-money, e.g.,refining, cement, and steel

16

5
0

2030 volume, 'deep green'(wider adoption rates)
With expectations of costdeclines, support for DAC
provides "backstop" carbon
removal technology

18

The Inflation
Reduction Act
also simplifies
the ability tocapture incentives

Investment
clarity

Qualification timing: Bills provides funding
for projects that start construction by theend of 2032
Funding duration: Several incentives
provide tax credits for 10+ years (e.g., 10-year
clean energy production tax credit, 12-year
carbon sequestration tax credit)

Transferability

Transferability removes need for equity
investment to receive tax credits,
simplifying financing

Direct pay

Direct pay allows immediate payment
rather than tax credit for EVs, but isallowed in only limited settings for otherincentives (e.g., only tax-exempt andgovernmental entities for renewables, only
allowed for 5 years for carbon capture)
19

Recent US Climate
policies enable acase for action
across industries

elements of the legislation
1 Key
Recently passed US climate policies are poised to dramatically shifteconomic viability of carbon free energy, clean tech, and electric vehicles••••

Incentives will materially reduce renewable and other carbon free energy costs, with potential
to drive increases in carbon free energy deployment to 65-80% of electricity by 2030
EV adoption will accelerate by several years, lowering entry price for passenger and heavyduty vehicles. However, in the near-term this could be constrained by ability to ramp up
supply chains
Significant funding for emerging clean technologies will promote rapid demonstration anddeployment, catalyzing decarbonization of hard-to-abate sectors
Manufacturing tax credits will boost domestic production of key energy and EV components

implications
2 Direct
These policies will make decarbonization cheaper across industries, but
executives must start now to capture their full value••••

Reduce costs: Take advantage of sizable credits that reduce energy and transportation costs,
regardless of industry
Re-evaluate decarbonization plans: Leverage massive shifts in carbon abatement curves
and clean technology improvements to reduce greenhouse gas emissions
Capture early mover advantage: Act now to mitigate bottlenecks expected to emerge inlow carbon infrastructure development and related supply chains
Pursue new value pools: Plan ahead for how you can shape and capture value from newmarkets in energy, transportation, or manufacturing
20

Reevaluate decarbonization plans | Massive changes todecarbonization actions: Steel example

2

Illustrative example – steel industry
Abatement cost curve for direct operations of illustrative steel plant
Abatement cost for each decarbonization lever($/ton CO2e)360

Categorizationof decarb lever

Cost reductions
from new policies

320

Recycling

4

Efficiency

280
240

Renewable
electricity

200

Fuel Switch

160

Tech.
substitution

3

120

Clean H2

80

Carbon capure

40
0
-40
-80

0

DAC

2

1
20

40

60
5

80

100

Abatement potential(% of yearly CO2e emissions)

Note: Assuming 2500 Mt of crude steel production by 2040; CO2e (carbon dioxide equivalent)
Source: BCG Decarbonization tool; BCG analysis

1

2

3

Lowest cost decarbonization levers areoften already cost-saving
Switching to renewable energy reduces
absolute costs based on new incentives,in addition to abating greenhouse gas
emissionsCertain clean hydrogen (H2) and carbon
capture levers are now in-the-money;
others are not yet but are now higher
priority4

Direct air capture (DAC) provides anabatement cost ceiling

5

Other technologies are now relatively
more expensive as decarbonization
levers, changing prioritization andtradeoff considerations
21Capture early mover advantage | 'Sustainability
scarcity' is likely, given expected rapid scale-up
Corporate decarbonization commitments
have continued to grow…
Companies with pledgedscience-based targets… but supply is expected to fall short ofdemand for several key technologies

4x

Forecasted supply of US solar will need to
grow by ~4x to meet demand by 2030

100x

Supply of green hydrogen will need to grow100 – 200x to meet projected global demandby 2050

up to

200x

1/3

Supply of key metals for battery productionis less than 1/3 of what is required to meet
2030 demand1

Source: Net Zero Tracker; Science-Based-Targets initiative (SBTi); Cairn Energy Research Advisors; Renewable Energy Buyers Alliance (REBA) Corporate Renewable Energy Deal Tracker, 2019, Wood
Mackenzie Global Solar PV Market outlook Q4 2021, Net additions, Solar PV - IEA Renewables 2021, Cairn Energy Research Advisors, The Global Commitment 2020 Progress Report

22

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2

Pursue new value pools | New value pools will emerge inenergy, transportation, and manufacturing

2

Carbon-free energy

Transportation

Clean tech

1

2

3

A technology/software
company expands its asset
management and analytics
product to manage theoperations of the growingbase of utility-scale
renewables

A medium-duty OEM of ICE
vehicles starts
manufacturing electricdelivery trucks and also
expands into services
associated with EV charging
infrastructure

An energy player builds
large scale green hydrogenparks in advantaged US
hubs to produce green
Ammonia for export

5

6

7

A smart home and home
security player expands
offering to support
residential customers withrooftop solar and distributed
battery installation

A heavy-duty vehicle service
company with sites acrossthe US expands it’s offeringto cover electric and fuelcell vehicles for fleet
operators and long-haultrucking players

A chemicals company
scales up production of CO2
adsorbent to takeadvantage of a growing
carbon capture market

Manufacturing

4
A pulp and paper
manufacturer builds a costadvantaged zero carbon
facility in the US to sell net
zero packaging solutions to
the global market

Deep dive provided on next page

8
A metals processing
company builds new
capacity to supply processed
ore to EV battery cell andpack manufacturers

2

Pursue new value pools | US export competitiveness will
improve in a step change: N. Asia Hydrogen Example
Illustrative example – Low-Carbon Hydrogen in N. Asia

Delivered Levelized Cost of Low-Carbon Ammonia (LCOH) in N. Asia
2030 Delivered LCOH ($/kg H2 eq.) in N.Asia1

Blue: Carbon capture on fossilderived hydrogen

0.2x
3.7-3.94
2.6 – 3.1

3

1.8-1.92

2.7 -3.1

Pre-IRA: US-produced blue H2 competitive
with but not cheapest source of cleanhydrogen for N. Asia consumption

2.9-3.3

2.4-2.5

0.6x
2.0 -2.1

Post-IRA: US H2 becomes the mostcompetitive option for N. Asia

1.2
1

0

Green: Renewable energy +water electrolysis

0.7

USA
post-IRA

USA
post-IRA

Middle USA
East pre-IRA

Green H2 (w/ IRA PTC)

Asia

Asia

Blue H2 (w/ IRA PTC)

S.America Middle EastBlue H2

USA
pre-IRAThe incentives shift competitiveness ofgreen vs. blue H2, and have long-reaching
global impacts that re-order supply
competitiveness of the US vs. others

Green H2

1. Median delivered cost shown where applicable; Note: Includes high-potential supply sources into N. Asia, not exhaustive; Middle East, S. America and Asia arerepresentative of individual countries in region; IRA includes $3/kg Production Tax Credit (PTC) for Green Hydrogen and $0.75/kg PTC for Blue Hydrogen;
Source: BCG Hydrogen Supply Model24

Closing thoughts: Far-reaching climate & energy legislation,
implementation is a huge effort

This legislation reduces the cost of low-carbon technologies, at scale, making many of them more competitive
than fossil-fuel based technologies by 2030 in many applications and sectors, with far-reaching impacts acrossthe economy, including those shared here
The incentives become more straightforward to access in many cases, but there are additional challenges to be
overcome for implementation:• Detailed rulemaking and regulatory clarity on specifics to access full bonus amounts• Regulatory support, e.g., simplified permitting, pending potential companion legislative action• Supply chain bottlenecks, to ensure adequate supply regardless of origin of components• Development considerations and constraints, e.g., water availability and land use concerns
There will be meaningful knock-on effects, both globally and at the state & local level, including similar laws inother countries, complementing state legislation (e.g., the recent climate bill in Massachusetts), etc.
Beyond its broad, industrial policy-like approach, the bill may also shape consumer perceptions, shifting the‘new normal’ for renewable energy, electric vehicles, H2, and other key components of a low-carbon economy

25

Further reading
Electric vehicles

Decarbonizing supply chains

NovemberJune 09, 2,
2022
2021

NovemberAugust 13,2,2022
2021

Electric Cars Are Finding
Their Next Gear

US Inflation Reduction Act
Implications for Auto
Industry

Energy transition

HydrogenNovemberJuly 04, 2022
2, 2021

An Inflection Point for the
Energy Transition

NovemberNovember 16,
2, 2021
2021

Value Creation in a
Decarbonizing Economy

November
October 27,
2, 2020
2021

Climate Disruption and thePath to Profits for
Machinery Makers

NovemberMay 23, 2022
2, 2021

The Climate Actions
Companies Should Take
Today

Carbon capture
November
April 12, 2,
2021
2021

The Green Tech
Opportunity in Hydrogen

NovemberJune 21, 2,
2022
2021

How to Meet the Coming
Demand for Hydrogen

September
November 2,
24,20212019

The Business Case for
Carbon Capture

September
November 2,
21,2021
2020

Think Small to Unlock
Carbon Capture's Big
Potential
26

BCG contacts

Tom Baker

Cornelius Pieper

MD & Partner
MD & Senior Partner,
Renewables & Decarbonization Sustainability in Industrial Goods
San Francisco
BostonBaker.Thomas@bcg.com
Pieper.Cornelius@bcg.com

Pattabi Seshadri

MD & Senior Partner,
BCG Global Leader - Energy
DallasSeshadri.Pattabi@bcg.com

Alex Dewar

Partner
Decarbonization
Washington DC
Dewar.Alex@bcg.com

Thomas Dauner

Nathan Niese

Partner & Associate Director,
Electrification & Transportation
ChicagoNiese.Nathan@bcg.com

Katherine Phillips
Project Leader
Decarbonization
New York
Phillips.Katherine@bcg.com

Hubi Meinecke

MD & Senior Partner,
MD & Senior Partner,
BCG Global Leader - Industrial Goods BCG Global Leader – Climate & Sustainability
Hamburg
Stuttgart
Meinecke.Hubertus@bcg.com
Dauner.Thomas@bcg.com
27

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