Executive
Perspectives

US Inflation Reduction Act:
Global Implications
December 2022

Introduction to this document

This document, the fourth in our series on the IRA, explores the bill's global implications. It identifies direct
and indirect benefits to non-US players, addresses potential changes to global supply chains, and highlights
initial reactions from private and public stakeholders.
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• Part 3 | US Inflation Reduction Act: Clean Tech Growth Opportunities and Value Pools

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While the US Inflation Reduction Act (IRA) aims to turbocharge domestic decarbonization, its impact will be
felt around the world. With $369B earmarked for climate and energy investments, the IRA catalyzes
opportunities for climate action, presenting both benefits and challenges for countries and companies. The
IRA lowers costs of emerging clean tech (e.g., hydrogen, carbon capture, grid scale battery storage) andexpands supply of critical raw materials and components. At the same time, emerging trade tension with key
US trading partners like the EU, Japan, and South Korea creates a more complex geopolitical environment forcompanies to navigate.

IRA provides global benefits by lowering cost and expanding supply chains•

How can
COUNTRIES
benefit?

•••2

Brittle supply chains coupled with US subsidies may disrupt global trade in short term•

What challenges
will they face?

••3

What challenges
will they face?

•
•
•
•

4

Supply chains: Despite long-term benefits, high geographic concentration of production and increasing demand will stressbrittle supply chains in the short term since majority of solar and EV supply chains are concentrated in China today
Market dynamics: IRA subsidies will give US advantage in green steel exports (i.e., US up to ~40% cheaper than representative
German green steel producer) among others, putting other potential exporters at disadvantage
Trade implications: EU, UK, Japan, Korea are concerned about the impact of US subsidies and may respond withcountermeasures; though some signals in December 2022 suggest a more constructive way forward ('race to the top')

Opportunities to invest in, sell to, and buy from US; further upside with tax credits•

How canCOMPANIES
benefit?

Accelerated cost declines: IRA expected to drive down cost for clean tech globally through added capacity deployment and higher
learning rates; incremental cost reductions of 1-25% by 2030, with greatest gains for CCUS, DAC, and hydrogen electrolyzers
Case for optimism: Historical cost declines (e.g., solar, wind) have far outpaced projections—progress on clean tech should not be
underestimated; US investments expected to drive down costs of emerging tech as did German subsidies for solar PV whilecatalyzing action abroad
Supply diversity: IRA will incentivize demand for EV critical minerals from free trade partners (20 countries worldwide) andcomponents manufactured in Canada and Mexico, diversifying supply chains in the long-term
Green sourcing: IRA's requirements amplify supply chain transparency trends, facilitating sustainable procurement for othernations and providing opportunities for those who offer solutions

Investment opportunities: US becomes attractive green market for non-US players with an incremental $1.3T of public andprivate investment in climate action and energy transition as a result of the IRA
Export opportunity: Companies can supply clean tech components to US market boosted by IRA incentives without origin
requirements, e.g., electrolyzers, electric commercial vehicles, heat pumps, smart grid components and software
Buying green from US: Clean tech incentives position US as a low-cost exporter (e.g., green and blue hydrogen)Tax credits: Transferability creates large new market with tax saving opportunities for US taxpayers in any sector
Early momentum: International businesses such as BMW, Panasonic, and Enel are already responding to IRA by entering the US
market and expanding their footprint; first movers include EV and solar industries

New competitive fault lines due to raw material scarcity and race to new strategies••

Raw material scarcity: Increased EV demand paired with FTA requirements exacerbate near-term critical mineral supply
scarcity (e.g., lithium, cobalt, manganese, and nickel)
Strategic response: Claiming IRA advantages will require comprehensive view of the value chain and ecosystem

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Implications
for
COUNTRIESCountry
benefitAccelerated cost declines | IRA expected to drive down cost for clean techglobally through added capacity deployment and higher learning rates

Capacity growth and innovation will
accelerate technology cost decline$/unitPre-IRA

Units$/unitPre-IRA

Units

Additional
global capacity
pushes technology
cost down
experience curve

Innovation changes
pace of cost decline(i.e., steepness ofthe curve)

Key drivers include incremental US capacity, additional global
deployment, and improvements in learning rates
Base case (post-IRA): accelerated US deployment in response to
IRA; global capacity forecast at pre-IRA levels

Faster global deployment: expected cost declines catalyze faster
deployment around the world

Improved learning rate: scenario in which early investments in
R&D, pilots, and demonstrations coupled with subsidies de-risks
deployment, increasing learning rates across mature and emerging
technologies for equipment costs and total installation costs

5

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1
Country
benefit

Projected impact | Incremental global cost reductions due to IRA range
from 1-25% by 2030, with greatest gains for CCUS, DAC, and H2 electrolyzers
Incremental percent change of unit cost in 2030 relative to 2022
See pg. 13 for US added capacity

2022 cost

0-20

OnshoreWind$1325/kW

0 -6 -1

OffshoreWind

Storage(Li-ion)$2858/kW$429/kWh

-22

-23

-2 -1

-5 -2

-40
-60
-80
-100

Solar

$857/kWCCUS$83/t CO2DAC

H2 (PEMElectrolyzers)1$600/t CO2$1770/kW

-39
-28

-31

-45

-3 -1

-8

-5

Business as usual (IEA STEPS/planned capacity)2-11-8

IRA: Increased US capacity only3

Learning rate effect of IRA: Incremental cost reduction due to derisked commercialization (US moving early) and innovation
OnshoreWind

0

Storage
Li-ion-22-23$1325/kW $2858/kWh $429/kWh

0 -6 -1

-20
up to
-66

Offshore
Wind

-7

-1

-6

-2

-40

Solar

CCUS

$857/kW

$83/t CO2

-31

-28

-2 -1

-5
-11

DAC

H2 (PEMElectrolyzers)1$600/t CO2-45$1770/kW

up to
-66

-11
-60

-3 -1

Business as usual (IEA STEPS/planned capacity)2
IRA: Increased US capacity only3-80

IRA: Increased global capacity (assumed 3x US increase)4
IEA Net-Zero scenario5

-100

-14
-10

-1

IRA: Improved learning rates6
IEA Net-Zero scenario5

Methodology
Capacity change

Wright's law

Learning rate

(cost decreases by learning rate
for every doubling of capacity)

Cost
decrease

Note: 2030 cost projections do not account for inflation or subsidies. 1. Results are based solely on PEM electrolyzers; learning from other electrolyzer types could influence final cost decline 2. Business as usual: 2030 capacity projections pre-IRA
based on IEA stated policy (STEPS) scenario (solar, wind) and planned capacity (all others); DAC capacity is based on 'advanced development' projects 3. US incremental capacity (post-IRA): BCG model of 2030 capacity for a 'deep green' scenario(see page 13) with added US capacity due to IRA 4. Global incremental capacity (post-IRA): Increase the global incremental capacity by 3x US incremental capacity from the prior scenario 5. Net-zero: IEA NZE 2050 scenario values for capacity
needed by 2030 and respective upper values for cost decline range; values not available for CCUS and DAC 6. Median learning rate from REFLEX report (see Sources) plus reported error ranges; installed capacity accounts for US incremental
deployment post-IRA; Source: IEA (projected capacities and NZE cost decline); historical learning rate values (median: ~6-18%; high: +1-5%) from "Technological learning in energy modelling–experience curves: Policy brief for the REFLEX project"
except for CCUS and DAC (based on BCG experts); BCG analysis

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Capacity effect of IRA: Incremental technology cost reduction due toadded US capacity (base case) and additional global deployment

1Case for optimism | Historical cost declines (e.g., solar, wind) have outpaced
projections—progress on clean tech should not be underestimatedCountry
benefit

Solar PV Example

Cost drops likely underestimatedas evidenced by trajectory for solar
Solar PV Installed Capacity
Capacity up 50% from 2020
forecast in most recent IEA
forecast (December, 2022)

ActualForecast
in 2020

2010

Case study: Impact of PV subsidies for PV solar in the early 2000s inGermany with subsequent uptake of technology across the world
Market share (%)
100

1,000s EUR/kWp
As solar PV cost declined, othercountries were able to scale up
deployment – e.g., China reached>25% market share in 2015

80

10

8

2010

2030

60

6

Solar PV Costs

40
Forecast
in 2008

Actual2011

Introduction of Renewable
Energy Sources Act (EEG)

20

4

2

2019
2010

2030

Historical cost projections have often underestimateddeployment and cost declines of clean tech
Sources: "Winning the Race to Net-Zero" (WEF & BCG); "Renewables 2022" (IEA)

0

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

0
7

Source: BNEF; Energy Transition: The Global Energiewende

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2002

Country
benefitSupply diversity | IRA will incentivize demand for EV critical minerals fromfree trade partners and components manufactured in Canada and Mexico

Free-trade partners, including several emerging economies, benefit fromcontent requirements for EV critical minerals and battery components…1
IRA eligibility criteria specifically for EV incentives1

40%
Criticalmineralssourced from or processed in
US or country with free
trade agreement2
Content requirement increases
by 10ppts per year up to 80%

Countries that benefit
Australia

Bahrain

CanadaChile

Colombia

Costa Rica Dominican Republic El Salvador

GuatemalaHonduras

IsraelJordanS. Korea

MexicoMoroccoNicaragua

Oman

PanamaPeru

Singapore

50%
Battery
components

of battery components
manufactured in US, Mexico,
and Canada 2,3Content requirement increases
by 10ppts up to 100%…and incentives have been
welcomed by key trade partners

MexicoCanadaThe Inflation Reduction Act (IRA) envisages
an enormous investment in clean technology.
Australia has an opportunity through greenhydrogen, through other innovations working
to gain jobs and economic opportunity.
- Anthony Albanese, Australian PM

We cannot do that without affordable,
cost-competitive renewables… From thatperspective, I very much welcome the Inflation
Reduction Act. For us, it's very much a signal
to the world, to our friends in Europe indeed
and to ourselves.
- Leila Benali,
Morocco's Minster of Energy Transition
and Sustainable Development

1. Does not apply to commercial vehicle tax credit of $40,000 2. IRA excludes minerals (raw, processed) and components sourced from foreign entities of concern (i.e., China, Russia, North Korea, Iran), preventing countries with free trade agreementsfrom sourcing from these foreign entities 3. Included recycling done in North America
Source: IEA, H.R.5376 – 117th Congress (2021-2022): Inflation Reduction Act of 2022

8

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1
Country
benefitGreen sourcing | IRA's requirements amplify global trends aroundsupply chain transparency and ethical procurement

Four key themes along clean tech supply chains

1 Mineral tracing

4 Early procurement• US mineral tracing will
expand with the IRA EV
battery minerals
requirement• Opportunities tostreamline processes (e.g.,
trade compliance) andexpand software solutions• In near-term, limited supply of
key inputs or decarbonizedcommodities creates
advantage for early movers

2 Labor due diligence• IRA and new US forced labor law1
has increased visibility for labor andhuman rights• US expectations, alongside othercountries, will drive industry
standards that extend throughout
supply chains
1. Uyghur Forced Labor Prevention Act | US Customs and Border Protection (cbp.gov)
Source: BCG analysis

3 Emissions reporting• US tax credits linked to emissions intensity(e.g., 45Q for hydrogen, SAF), alongside new
SEC requirements, will further expand theemissions reporting market beyond EU's
Carbon Border Adjustment Mechanism• New contracting approaches
may be necessary to spur
investment in incremental
green production (e.g.,advanced offtake agreements)• Skills will need to evolve asrole shifts towards strategic
engagement with suppliers ontechnically complex topics
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• Role of procurement must
broaden focus from cost-only
to strategic sourcing to ensure
access to scarce resources

Country
challenge

Supply chains | High geographic concentration of production andincreasing demand will stress brittle supply chains in the short term

Solar and EV supply chains arehighly concentrated in China

Increasing demand will place stress on supply chains facing
numerous challenges

Annual solar supply chain,
2021 (%)1

US solar PV demand (GW)3

4x
50

73%
Polysilicon

93%
Wafers

74%

68%

Cells

Modules

Annual EV supply chain,
2021 (%)2

42%

77%

77%

Materials Components Batteries
processing

55%
EVs

1 Regulations that reward domestic
content and will restrict products
from countries of concern

12
2021
RoW
APAC
India
EuropeUSA
China

Challenges to developing supply
chains sufficient to match demand

2027

US EV demand (M vehicles)47x

2 Long lead times to initial

production, especially for EV
batteries and materials

3 Industrial policy that further
consolidates supply chains

5.0

4 Structural advantages fromhuman and knowledge capital in
legacy regions

0.7
2021

2027

1. 4-year average 2017-2021. International Energy Agency, Special Report on Solar PV Global Supply Chains. APAC refers to Asia Pacific region excluding India and China; Rest of World (RoW) refers to all countries not listed 2. 2021 values. International
Energy Agency, Global Supply Chains of EV Batteries. Materials processing average of Li, Ni, Co, Gr processing percentages. Components average of cathode and anode production percentages 3. SEIA, Solar Market Insight Report 2022 Q3
4. Bloomberg New Energy Finance, Electric Vehicle Outlook 2022

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2

Country
challenge

Market dynamics | IRA subsidies will give US advantage in green steel
exports among others, putting other potential exporters at disadvantage

For example, tax credits for US green steel could provide up to ~40% savings comparedto Germany in the international market…
Cost of green steel in the US and Germany in 2030, $/t crude steel1
BF-BOF (baseline)
80% HM, 20% scrap

Green-powered EAF
90% scrap, 10% merchant DRI

380

355

390

BF-BOF w/ CCS
80% HM, 20% scrap

530

2030 view3

Tax credits

H2 DRI + Green-powered EAF2
80% HM, 20% scrap

-43%

-42%

-1%

-7%

CAPEX + OPEX

640

367

310

385
530

440

640

-130
Germanyt CO2 / t CS
Scope 1 & 2 onlyUSA

Germany

2.00
0.15

USA

GermanyUSA

Germany

0.50

0.15

1 Policy response:

anti-subsidy action may
lessen effects of US tax
credits in certain markets,
especially EU

of incentives:
2 Durability
current IRA credits have a560

tenure of 10 years compared
to steel industry capex lock-inof 20-25 years-193

of inputs:
3 Availability
supply constraints for scrap,USA`… but a few factors maychange the economics

DR-grade iron ore, DRI plan-t
makers, and transport &storage of Hydrogen
deployment: large
4 CCS
scale adoption, feasibility andcost competitiveness of CCS

Note: EAF = Electric Arc Furnace, BF-BOF = blast furnace - basic oxygen furnace, CCS = carbon capture storage DRI = direct reduced iron, DR-grade = direct reduction grade
1. Cost assumptions do not represent current 2022 market prices (e.g., per unit costs of scrap = $225, DR pellets = $119, coking coal = $100-120, etc.) 2. Onsite H2 production with renewables, no storage cost, and $3/kg credit 3. Costs may vary basedon transport distance and location, availability of key inputs, etc.
Source: GCCSI 2021 Technology Readiness and Costs for CSS; IEA; BCG analysis

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2

2
Country
challenge

Trade implications | EU, UK, Japan, and South Korea are concerned about
the impact of US subsidies and may respond with countermeasures

As of 9 December 2022

Localized supply chains cut out
competition, especially for passenger
battery electric vehicles
Incentives shift OEM manufacturing toUS; subsidized products enter market

Cheap alternative fuels (H2, SAF)
undermine growth of global industry

Japan, South Korea, UK, and EU have raised concerns
about "discriminatory" trade implications of IRA; France
estimates €8B hit to economy from IRA as it stands

Countries are considering counter-measures
Regulation

Industry interest groups, such as the EU's largest
hydrogen lobby (Hydrogen Europe) have pushed forchanges in local regulation in response to IRA

Trade status

EU, Japan, and South Korea are in discussions with
the US seeking preferential trading status for EVs
and batteries on par with Canada and Mexico1

On-shoring

EU is considering regulation that would requirethat all airlines serving EU airports buy sustainableaviation fuel in the EU

Subsidies

Nova Scotia has lobbied the Canadian government
to match US incentives, and Canada has expandedsome incentives on CCS

WTO action

Countries may raise a dispute at the World Trade
Organization as a last resort if unable to findresolution"We need to strengthen our own competitiveness in response…
by creating really excellent conditions for investment in Europe.”– German finance minister Christian Lindner, Financial Times 2022
12

1. As of 1-Dec-22 Biden and Macron discussed widening the IRA beneficiaries to include allies in addition to free trade agreement countries Source: Reuters; Forbes; Financial Times; BCG analysis

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Despite shared climate goals, trade partners areconcerned that IRA diverts jobs, investment to US

Country
challenge

Trade implications | However, some positive signals may also suggestthat IRA catalyzes action for countries to "race to the top"
Not exhaustive

As of 9 December 2022

International cooperation for
decarbonization

Direct policy response to IRA
Canadian IRA response package1
Nov 3, 2022 | Canada

A comprehensive suite of policy andfinancial instruments—including $15B
(CAD) Canada Growth Fund—for cleantech, decarbonization, manufacturing,critical minerals, scaling companies,
improving supply chains, & more.
New investment tax credits (ITC) up to
30% for clean tech (net-zero and lowcarbon) and battery storage and up to
40% for clean H2.

EU coordinated response2

Oct 10, 2022 | Indonesia3

Upcoming disruptive EV subsidies in 2023

Partnership for Accelerating CleanEnergy5
Nov 2022 | UAE & US

Nov 24, 2022 | Philippines4

Dropped import duties on EVs for 5 years$100B in financing and support to deploy 100 GW ofclean energy by 2035 in emerging economies aroundthe world

EV subsidies try to keep pacewith IRA

Just Energy Transition Partnership6

Nov 29, 2022 | Germany

Germany plans to award 15-year subsidy
contracts to energy-intensive industries
for decarbonization

Nov 2022 | Japan, US, & International Partners
Group (IGP)$20B in public and private financing over
3-5 years to retire coal and accelerate
decarbonization of Indonesia

Dec 5, 2022 | European Union

EU is working on a "structural answer" in
response to IRA, with a focus on adapting
state-aid rules to encourage local clean
tech investment, utilizing existing funds,
increasing financial support to maintain acompetitive advantage, and considering
local content requirements.

Oct 27, 2022 | France & Germany

EU to promote and protect national auto
industries via extension of subsidies for
EVs and plug-in hybrids; while a US-EU
task force works to settle concerns of IRA
requirements

Indo-Pacific Economic Framework
Nov 2022 | India, Australia, Japan, Republic ofKorea, Indonesia, Canada, & others

Expanded cooperation on shared economic issues
and a boost to trade and climate finance

1. Canada Fall Economic Statement 2022, announced but not yet funded; further responses planned for 2023 budget 2. Politico 3. Bloomberg 4. Reuters 5. White House 6. White House; IGP is co-led by US and Japan and includes Canada,
Denmark, EU, France, Germany, Italy, Norway, and UK.

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Implications
for
COMPANIES

3

Investment opportunities | US becomes attractive green market for non-US
Company players with ~$1.3T deployed in next 10 years from private and public sources
benefitNot exhaustive

IRA accelerates deployment of decarbonization technologies…

…and catalyzes significant capital

Utility-scale solar

On/Offshore Wind

Non-residential Storage

Installed Capacity (GW)

Installed Capacity (GW)

Installed Capacity (GWh)

+500%

+130%

+4,850%

249

307
125
68

125

Hydrogen (H2)

1

81

221

252

Onshore28

35

Offshore

Carbon capture

Thousand tons H2 per year
Electrolyzer installedcapacity would reach
10-20 GW by 20301

287

Million tons CO2

99

Over 8 years

2
Direct Air Capture (DAC)per year2• Expected total investment by federal
funding, including $1.2T from technologyspecific funding and $165B from nontechnology specific funding• Estimates assume investment occurs
between enactment and 2030

Million tons CO2 per year

+750%
3,219

170

1,692 2,248
Green H2
1,000
971 Blue H26922020 volume

16

84
20

2030 volume, base case3

502030 volume, optimistic

Incremental $170B annually• Combined annual rate of private
investment ($129B) generated by federal
fundingAnnualized rate of investment to exceed recent annual spending
by U.S. utility (~$133B) or O&G (~$60B) industries

1. Assuming a 1 Mtpa Green H2 to 10 GW ratio 2. Does not include direct air capture (DAC) 3. BCG scenarios with varying assumptions on growth, rates of qualification for incentives, nuclear penetration, and energy efficiency 4. Including nuclear,transmission, energy efficiency, EVs and EV infrastructure, and SAF/biofuels in addition to listed examples 5. Includes IIJA funds and indirect effects, see previous editions of Executive Perspectives on IRA. Source: BCG analysis

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408$1.3T in total investment5

3

Investment opportunity example | US solar module production newly
competitive in domestic market, but unlikely to displace suppliers globally

Made in US for domestic market: with IRA credits,
domestic modules ~20% less than delivered price ofSEA-modules

$/W

$/W
0.5
0.4
0.3

-22%
0.35
0.04
0.04

0.0

0.38

0.10
0.10

0.2
0.1

Made in US for exports: US exports are expected toremain ~15% more expensive than Chinese/SEA
products

0.19
0.12

0.25
0.04
0.04

0.07

0.19

0.27
0.17

China/SEA
Pre IRAIRA

China/ US Pre
SEA
IRA
Post
IRA

IRA

Note: The costadvantage dueto IRA
incentives may
not be durable
as policies ontariffs shift,logistic costschange, andincentives
eventually expire

IRA investment tax credits4

Section 201 tariff

IRA manufacturing credits

Shipping cost

Module spot price

0.42
0.04

0.4
0.3

0.31
0.04

N/A

0.1

0.07
0.07

0.31
0.04

0.2

0.0

US Post
IRA

+15%

0.5

0.38
0.27

China/SEA
Pre IRA

0.31

0.27

IRA

China/ US Pre
SEA
IRA
Post
IRA

Shipping cost
Module spot price

0.35
0.04

IRA

US PostIRA

IRA manufacturing credits

1. InfoLink spot price 2. 14.75%; tariffs exempted for 24-months from June 2022 on solar modules imported from Cambodia, Malaysia, Thailand, and Vietnam 3. 30%; Investment tax credits (ITC) can range from 6% to 70% depending on bonus
incentives – 6% base, 30% if prevailing wages and apprenticeship, additional 10% domestic content bonus, additional 10% energy community bonus, additional 20% low-income bonus 4. 30% ITC + 10% domestic content in US example 5. InfoLink spot
price 6. EU currently has no tariffs on module imports 7. Germany used as an illustrative example of a potential export market
8. Assumption of shipping costs is conservative
Source: InfoLink; BCG analysis

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Company
benefit3
Company
benefit

Export opportunity to US | Companies can supply equipment >$4T1 US
market boosted by IRA incentives without origin requirements
Not exhaustive

U.S. market potential for green components$ estimates for machinery only (2021-2040)$3.4T2$0.8T3$0.4T4$0.1T5

Carbon-free energy

Transportation

Clean tech

Manufacturing• Building and residential
equipment– Heat pumps– Induction stoves– Building automation• Power sector equipment– Wind turbines andcomponents– Long-duration energy
storage systems– Smart- and micro-gridcomponents– Long-distance transmission• Electric vehicle
infrastructure– Charging station equipment– Meters and charge
management systems• Commercial fleets– Urban transit, e.g. buses– Long- and short-haul trucks• Hydrogen equipment– Electrolyzers– Storage and transportation• Emerging technology– Fuel cells– DAC systems• Digital systems– Supply-chain tracking tools– Smart grid software• Heavy industry
decarbonization equipment– Electric arc furnaces forclean steel• Advanced chemical
production– Polysilicon– Synthetic graphite• Small modular nuclear
reactors– Heat pipes– High-temp, corrosionresistant metals & alloys

1. Estimated revenue potential for OEMs in US for clean tech machinery 2. Renewable energy, energy storage (stationary batteries), grid investments, green building (building automation, heat pumps) 3. Energy storage (Off-highway electricvehicles, battery manufacturing equipment), EV equipment, biofuels for transport 4. Alternative fuels (except biofuels for transport), hydrogen, fuel cells, carbon removal 5. Renewable heat (heat optimization & recovery, electric arc furnaces)
Source: BCG analysis

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Example Equipment

3

Buying green from US | Clean tech incentives position US as a low-cost
exporter (e.g., green and blue hydrogen)

IRA subsidies expected to make blue and green hydrogen competitive withincumbent technologies for most applications by 2030
2030 view

US role in the market will dependon the following policy decisions

What level of subsidy is needed to compete with fossil-fuel based alternatives?

Will subsidy deployment be constrainedby bottlenecks?
• Tax equity and credit transferability
market will need to remain robust andefficient to enable subsidy deployment
at pace with development ambition$/kg H28

6

4Blue H21

For example: to replace grayhydrogen in chemical production,
blue H2 requires a subsidy up to$0.75, or green H2 between $0.35$2.25. Given PTC, both blue andgreen H2 are cost-competitive.
2.25

Green H2

6.19

5.78
4.69

4.28

4.44

4.44
2.25

2.94

$3/kg
3.20

2
0.75
0

$0.80/kg

0.75

Blue H2
PTC

0.73
0.00

0.35

Base chemicals2

Green H2
PTC

0.00
Steel production(DRI)

Heavy-duty
vehiclesMaritimeshipping

How will H2 carbon intensity becalculated to align with emerging global
standards?
• Global green H2 use will requirecertification bodies to verify carbon
intensity; subsidies will need to trackchanges to standards• PTC3 applies to production with noadditional conditions
How will other nations respond?
• As countries angle to be exporters, they
may engage in a subsidy-race with US
or raise tariff barriers to US imports,
buoying global market

Note: Incumbents defined as gray hydrogen (O&G, ammonia, specialty chemicals) and natural gas (methanol, steel), and ICE (heavy duty vehicles, maritime-shipping). Light duty vehicles excluded due to BEV dominance projections.
1. Blue Hydrogen range based on a $1.5/gk differential to green hydrogen costs. 2. Chemicals include methanol, ammonia, and oil and gas refining. 3. PTC = Production Tax Credit
Source: BCG analysis

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Company
benefitCompany
benefitTax credits | Transferability creates large new market with tax saving
opportunities for US taxpayers in any sector
New policy could create a total of $172B in transferable tax credits
for businesses with US presence1
Interested parties will need to navigate uncertain market creation

Tax credit market over 10 years
after IRA
215

$B

Monetize credits

Facilitate transfers

Save on US taxes

Developers can sell excess
credits or fulfill
immediate cash needs

Tax credit brokers andaccountants may facilitate
sales at a discount in an
emerging marketplace

Institutions purchasecredits and save on taxes(e.g., large businesses,
banks, insurancecompanies)

Tax equity is expected to remain a common method of renewableenergy financing because of benefits of accelerated depreciation

Total
expected tax
credits (ITCand PTC)2

5-10%

Total tax
savings of$5-17B

115-172

104-163

Expectedmonetized
credits3

Market valueof monetizedcredits

Rules• Investment Tax Credit (ITC) up to 70%, andProduction Tax Credit (PTC) with up to 20% boost4• Credits may be sold once, with tax-free income
and expense

1. Tax-exempt entities excluded 2. Congressional Budget Office, Estimated Budgetary Effects of Public Law 117-169 3. Lower bound calculated as 39% of $180B (CY2020 tax equity market $18B, over 10 years, 39% of solar projects under 20MW) plus
80%*$58B ($46B) in non-clean energy credits; upper bound calculated assuming ~80% of projects will benefit from monetized credits. Source: Norton Rose Fulbright, Tax equity snapshot; BCG Analysis; US EIA Preliminary monthly electric generator
inventory 2018 4. Part 1 | IRA Executive Perspective. Transferable PTC and ITC are available to projects producing wind and solar electricity, carbon capture, technology that reduces emissions, clean hydrogen, zero-emissions nuclear power, and clean
manufacturing

19

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

3

3

Early momentum | International businesses are already responding to IRA
with US expansion; first movers include EV and solar industries

Company
benefitNot exhaustive, as of December 2022

States with expanded
clean tech manufacturing"Audi considers 1st U.S. assembly plant
amid new EV tax credits

MT
OR

ME

ND

ID
WY

WI

SD

NY
MI

IA

CA

NH
VT
MA
RI
CT

MN

NV

"EV announcements snowballing post
Inflation Reduction Act" [KS, NC, TN]- September 12, 20222"Mission Solar announces 1 GW made-in-USA
solar panel manufacturing expansion

WA

Oliver Hoffmann of Audi says the Inflation
Reduction Act tax incentives have the German
brand considering localizing EV production in
the U.S."- October 09, 20221

EV

Solar

NE
UT

CO

KS

IL

PA
OH

IN

MO

VA

NJ
DE
MD
DC
WV

KY
AZ

NM

OK

SC
MS

TX

AL

GA

LA
FL

EV
"BMW plans to invest $1.7 billion in
U.S. to produce electric vehicles" [SC]- October 19, 20223

EV, Batteries"Hyundai breaks ground on$5.5 bln U.S. EV, battery plant" [GA]- October 25, 20224

Solar"Enel to build massive solar panel factory in U.S.

NC

TN

AR

The company plans to add 300 MW of production
capacity immediately and targets 1 GW of annual
production expansion by 2024." [TX]
- November 1, 20226

Batteries"Panasonic to start building Kansas
battery plant next month"- October 31, 20225…Planning a factory that can initially produce 3 GW—
and ultimately as much as 6 GW—of solar panels...The planned factory would also make solar cells, a
key part of the supply chain not currently produced in
the U.S."- November 17, 20227

Solar"Nine gigawatt solar manufacturing facility
being scouted for Qcell module manufacturing"[GA, SC, TX]- August 15, 20228

20
1. Automotive News 2. S&P Global Market Intelligence 3. CNBC 4. Reuters 5. Reuters 6. PV Magazine 7. Wall Street Journal 8. PV Magazine

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

EV

4
Company
challenge

Raw material scarcity | Increased EV demand paired with FTA requirements
exacerbate near-term critical mineral supply scarcity2030 view

US(615)
FTA Supply
2030

Demand2030

Global22.4

Note: US FTA lithium
sources supply otherregions; e.g., EU gets mostof its lithium from Chile

Nickel: Evolving long-term dependency risk from Indonesia;
class 1 Ni bottlenecks expected in the medium-term

Nickel (kt)4,040

Global(4,010)675

Global Supply
2030

FTA Supply
2030

US
(875)

Demand2030

Cobalt (kt)1,025

Global Supply
2030

70%
FTA
15.6

1,455

Global(330)

Known reserves (mt)215

Global Supply
2030

Known reserves (mt)
22%
FTA
1.7

20

US
(70)

FTA Supply
2030

Demand2030

Global7.6

Manganese: Concentration risks for high-grade ore and processing;
US & Europe driving to diversify & localize supply
29,570Known reserves (mt)
17%
FTA
23.3

Global95.4

Known reserves (mt)

Manganese (kt)

LCE (kt)

Global(2,865)

Cobalt: Risk due to high-single country exposure (DRC); recycling
and new deposits softening but not solving the concentration risk

2,040
Global Supply
2030

Note: FTA = Free trade agreement countries; LCE = Lithium carbonate equivalents; DRC = Democratic Republic of Congo; Units in kilo- or megatons (kt, mt)
Source: S&P Capital IQ; USGS Mineral Commodity Summaries; BCG analysis

FTA Supply
2030

Global(24,285)US(5,290)

18%
FTA
275

Global
1,492

Demand2030

21

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

Lithium: FTA reserves growing and diversifying, but short-termtightness expected due to lead time for deposit developmentsCompany
challenge

Strategic response to scarcity | Claiming IRA advantages will requirecomprehensive view of the value chain and ecosystem

Companies need to movequickly due to long lead times
for…
Permitting and financing acrosslarge, high-CAPEX projects required
for land use, resource extraction,material processing, project
development, power delivery, labor
standards, and construction
Key resource scarcities emerging
from multiple fronts, including raw
material availability, market access,regulation, production
capabilities/labor, infrastructure,
and/or production economics,
necessitating portfolio response

Eight portfolio responses that companies can consider as part of acomprehensive strategy to address sustainability scarcity
1

2

3

4

Secure the supply

Own the origins

Force innovation

Extract Value

Select and contract with
suppliers to mitigate a shortage
and create a more resilient
supply chain

Acquire suppliers or invest incompanies developing
alternative resources

Innovate alternatives toaddress scarcities orbottlenecks

Capture value through pricepremiums, or build new
businesses to fill a need

5

6

7

8

Broaden the market

Seed the market

Arbitrage the options

Act collectively

Advocate for public policy thatenables technology innovation,
expands supply, or incentives
alternatives

Invest in early-stage
technologies and newcompanies that address
scarcities

Create value from different
supply and pricing dynamics
across geographies

Participate in industry andcross-sector coalitions toaddress supply constraints

22
Source: BCG Henderson Institute article "Solving the Puzzle of Sustainable Resource Scarcity" (2021); BCG analysis

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

4

Further reading

November 4, 2022

Strategies for Scaling
Africa's Green Ventures

EV and batteries
October 18, 2022

Five Ways CEOs Can TakeOn the Climate
Challenge

Critical minerals
Aug 23, 2022

The Lithium Supply
Crunch Doesn't Have to
Stall Electric Cars

September 15, 2022

How the US Can Win in
Six Key Clean
Technologies

June 3, 2022

Achieving Energy Security
in the EU

Supply chain
Sept 14, 2020

The Case for a Circular
Economy in Electric
Vehicle Batteries

October 14, 2022

Gauging the Risks of
Raw-Material Volatility

Oct. 12, 2021

How Governments Can
Solve the EV Charging
Dilemma

Aug 23, 2022

The Lithium Supply Crunch
Doesn’t Have to Stall
Electric Cars

Investment flows
July 20, 2022

June 17, 2021

November 3, 2021

How Technology Can
Tame the EU Carbon Tax
on Imports

A Tectonic Shift ofCapital Is Just Beginning

The Net-Zero Opportunity
in Consumer Lending

23

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

Clean tech and renewables

Rich Lesser

MD & Senior Partner,
BG Global Chair
New York
lesser.rich@bcg.com

David Young

MD & Senior Partner,
Social Impact &Climate &Sustainability
Bostonyoung.david@bcg.com

Cornelius Pieper

MD & Senior Partner,
Sustainability inIndustrial Goods

Pattabi Seshadri

MD & Senior Partner,
BCG Global Leader –Energy PracticeDallasTom Baker

MD & Partner
Renewables &Decarbonization

Alex Dewar

Marielle Remillard

Partner
Decarbonization
Washington DC

Principal,
Climate & Sustainability
BostonBostonpieper.cornelius@bcg.com

sheshadri.pattabi@bcg.com

San Francisco
baker.thomas@bcg.com

dewar.alex@bcg.com

remillard.marielle@bcg.com

Tim Figures

Ken Carlstedt

Lucyann Murray

Bryann DaSilva

Katherine Phillips

Principal,
Metals and Mining
DenverPrincipal,
Social Impact &Climate &Sustainability
Washington, D.C.

Project Leader,
Decarbonization
New York

Associate Director,
EU & Global Tradeand Investment
Londonfigures.tim@bcg.com

Associate Director,
Global Trade andInvestment
Bostoncarlstedt.ken@bcg.com

Murray.Lucyann@bcg.com

phillips.katherine@bcg.com

dasilva.bryann@bcg.com

24

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

BCG contacts