19 Apr The US is preparing for an energy revolution

According to a recent study by Goldman Sachs, the US Inflation Reduction Act IRA will generate approximately $3 trillion in investment in renewable energy that could produce twice as much as the energy produced during the shale revolution some 15 years ago.

The previous shale boom enabled the US to generate affordable and efficient energy, but as reserves of natural gas and oil decline, renewable energy can allow the US to maintain its position in terms of energy prices.

Shale remains a valuable asset, but according to many energy experts, the US cannot depend on this resource to maintain its competitive advantage for the future. The country requires another energy revolution to maintain its position in energy cost leadership. Industry leaders believe the next phase will focus primarily on electrification while investing in clean hydrogen and carbon-capturing systems will gradually increase.

Recently legislation could prove critical in driving the new stage of an energy revolution in the US. Critical funding is forecast to come directly from the IRA, generating a predicted $1.2 trillion of incentives by 2032. The IRA incorporates incentives that enable clean tech systems to be profitable at scale. Research by Goldman Sachs estimates that the IRA impact could encourage $11 trillion of total infrastructure investments by 2050. Analysts believe that by 2032 there will be $2.9 trillion of cumulative investment opportunities across multiple industries. As a comparison, this figure represents over two times the total investment secured during the US shale revolution.

One of the biggest predicted impacts of the IRA is within the transportation industry. Adapted tax credits for new EC will reduce costs for clean transport alternatives, and the extension of biofuel credits and planned development of sustainable aviation fuel will strengthen this further. 

There are still some questions that need addressing. One refers to how many EVs are eligible for tax incentives, and the other relates to the onshoring required for battery and solar structures. Many businesses are still at the beginning of determining capacities following the IRA. 

Clean energy investments will be vital to enable the renewable energy revolution, considering that power generation made up 30% of US carbon emissions in 2021. Power infrastructure will play an important role in electrification patterns in transport, industry, property and green hydrogen. Research by Goldman Sachs predicts that national power demands will increase 2.5 times by 2050 compared to 2021 levels, requiring $6.6 trillion in renewable power investment.

According to research by Goldman Sachs, renewable energy sources (excluding nuclear and hydro) are forecast to grow by 9% annually until 2050, representing 44% of cumulative generation capacity by 2030 and 80% by 2050. Researchers believe the first five years of the new energy revolution will primarily focus on electrification, via the expansion of renewable power sites, transmissions, storage and building upgrades. Meanwhile, the national hydrocarbon sector will continue to decline, depending on the rate of energy transformation. Natural gas is predicted to drop after 2030, but consumption is expected to be more resilient than oil and gas.

As the share of electric vehicles continues to rise, the demand for oil, of which 70% is for transportation, will decline considerably after 2030. The push for electrification and clean energy will also create a rising demand for natural resources like aluminium, copper, lithium and nickel, used for EVs, batteries and manufacturing.