By ODDO BHF AM
In this new monthly Fund Insight on ODDO BHF Green Planet, we want to discuss the vote in the US Senate in early August, followed by the House of Representatives, on the Inflation Reduction Act, which focuses on energy and health. Thus, $369 billion of the $437 billion total will be devoted to domestic low-carbon energy production and to reducing carbon emissions by around 40% by 2030. While Democratic Senator JoeManchin had blocked the Senate vote on the previous plan at the end of 2021 ("Build Back Better"), this time he surprised everyone by lending his support and allowing a 50/50 vote plus the vote of Vice President Kamala Harris , resulting in the adoption of the project. This is a milestone for the US commitment tomeeting its climate goals.
INCREASED MOMENTUM AND VISIBILITY FOR GREEN TECHNOLOGIES IN THE US
In a first approach, this new law combined with existing US climate change policies could lead to a reduction of about 40% of CO2 emissions over the period 2005-2030. The main sectors supported to reach this target are energy, transport and buildings.
- Clean energy: The main support for clean energy is in the form of investment tax credits (ITCs) and production tax credits (PTCs) worth around $160bn. Existing tax credits for solar and wind power are extended as they are until 2025 and new ones will be introduced for all low-carbon power generation technologies from 2025 to 2032 (solar, wind, nuclear, hydrogen, energy storage).
- Transport: An envelope of approximately $36billion is allocated to transport, including $12billion in tax credits for the acquisition by individuals of an electric vehicle (tax credit of $7,500 for a new vehicle and $4,000 for a used vehicle). The rest of the envelope is devoted to investments in heavy transport, in port infrastructures (zero-emission equipment), in the fleet of vehicles of federal civil servants, and in support for the development of green paraffin for aviation.
- Buildings: Support for the purchase of heat pumps will be introduced via a 50% reduction in the cost of the equipment for middle-income households, and up to full coverage for the lowest income households. The energy efficiency tax credit will be extended by 10 years, and tax incentives will also be introduced for commercial buildings.
It should also be noted that part of the sums committed will be conditional on the development of domestic value chains (solar, wind, batteries) with particular attention paid to suppliers.
Overall, this law should bring a new dynamic in terms of future growth to the sectors concerned in the United States (renewable energies, electric vehicles, electric networks, heat pumps), and above all provide companies with medium-term visibility in terms of the tax environment.
OUR EXPOSURE TO US COMPANIES BENEFITING FROM THIS NEW LAW
We are currently present in four companies well positioned to benefit from the effects of this new law:
- Enphase, a company manufacturing solar energy production and storage solutions for domestic use;
- Tesla, world leader in 100% electric vehicles, the group is also developing in energy storage;
- Quanta Services , a medium-sized group specialising in the design, installation and maintenance of electrical infrastructure. Quanta Services has a 60% market share of major power transmission and distribution projects in the US;
- Johnson Controls , a company specialising in the production of heat pumps and intelligent building management.
