As the Inflation Reduction Act of 2022 (IRA) turns one year old, companies in the renewable energy sector are seeing their growth “turbocharged,” fueled by increased demand for products and services that supply greener sources of power. We’re seeing significant shifts in consumer behavior, whether driven by altruism, climate concerns, or sheer practicality.
As Americans have endured one of the hottest summers on record, all eyes have been on the stability of the energy supply. After experiencing a catastrophic failure during freezing temperatures in 2021, Texas’s grid operator was able to comfortably meet record demand during a recent heat wave using abundant power supplied by wind and solar plants.
Even in the heart of coal country, clean energy is winning over residents because of its attractive financial benefits. One Kentucky family installed solar panels in their home when they learned about a 30% discount via a tax credit. Businesses and commercial real estate owners are also taking advantage of the tax incentives for “going green,” such as installing electric vehicle charging stations, energy-efficient heating and cooling systems, and improvements using recycled building materials.
As more individuals and businesses become aware of the tax breaks and incentives for clean energy-based systems, there will be even higher demand and payoffs to businesses providing the products and services that Americans need.
The Renewable Energy Opportunity
The renewable energy sector shows great promise for investors. Even before the IRA was passed, renewable energy was generating significantly higher total returns than traditional fossil fuels. In 2021, the Centre for Climate Finance at Imperial College Business School and the International Energy Agency analyzed 10-year returns for global markets portfolios in two categories – fossil fuel and renewable power – plotted against the MSCI All Country World Index (ACWI.) They reported that 10-year returns for investments in renewable power were 422.7% against 59% for fossil fuels – more than seven times the return.
The IRA and other federal programs are driving an exciting surge in investor interest. According to the American Clean Energy Association, $271 billion of private investments in domestic clean energy projects and manufacturing facilities has been announced over the past 12 months. This number exceeds clean energy investments made over the previous eight years combined.
Opportunities for Businesses to Invest in Renewable Energy
Businesses looking to expand through new business ventures or start-up opportunities may want to consider the tremendous potential of renewable energy. As a business advisory firm, S.J. Gorowitz Accounting & Tax Services has the resources and experience to equip you for growth opportunities, whether you are integrating, selling, or acquiring a business. We offer complete outsourced CFO and accounting services to growing renewable energy companies, as well as advice to any business interested in investing in renewable energy as a tax planning tool.
If you have questions about opportunities in the renewable energy space, we invite you to contact us for a consultation at 770.740.0797.