As the benefits available under the 2022 Inflation Reduction Act (IRA) begin to be unpacked, it is becoming clear that they will be an important catalyst for a clean energy economy in the U.S. With more than 20 new or enhanced tax incentives stacked on top of new or enhanced grant and loan programs administered by various federal agencies, some estimates tally up to more than a trillion dollars in available funding.

Broad Impact Coming

The main point to recognize about the IRA is that many of the incentives are likely to have broad-based impacts that reach across multiple sectors.

For example, biorefineries that incorporate some elements of carbon capture into hydrogen production could positively benefit the carbon intensity (CI) scores of their renewable fuels, which in turn could boost overall margins. Likewise, an ethanol production facility could incorporate carbon capture, which will lower the CI of the feedstock and get the incentives to convert ethanol to jet fuel.

Renewable Power Benefits

The oil, gas and chemical (OGC) industry is now incentivized to reap a range of economic benefits from adding renewable power to certain process operations. Section 48E of the IRA — the Clean Electricity Investment Credit — provides a 10-year extension to the Solar Investment Tax Credit (ITC) and the Production Tax Credit, giving industrial facilities an opportunity to evaluate their existing electricity production/consumption and determine if there is an opportunity for decarbonization through alternative power sources.

Renewable power incentives are only one of the avenues likely to be carefully examined by the OGC industry. Additional benefits could also become a reality for these sectors: renewable and sustainable fuels; clean hydrogen production and carbon capture; and critical minerals and metals.

Renewable and Sustainable Fuels

Renewable diesel production had already gained traction prior to passage of the IRA, thanks to the existing federal Renewable Fuels Standard (RFS) and California’s Low-Carbon Fuel Standard (LCFS). Those standards have resulted in a system that incentivizes production from a range of renewable feedstocks. Because of programs such as the RFS and LCFS, we have seen additional renewable diesel projects over the past five years.

Both sustainable aviation fuel (SAF) and renewable diesel compete for the same fats, oils and greases (FOG) feedstocks when utilizing the hydrotreating pathway. These feedstocks generally encompass soybean oil (currently providing more than half of the feedstock for renewable diesel), canola oil, distillers corn oil, beef tallow, white grease, poultry fat, yellow grease and used cooking oil. All these feedstocks are subjected to the same hydrotreating process whether producing renewable diesel or SAF, though additional kit is required to produce SAF. With the new incentives under the IRA, SAF has an additional range of credits available that could incentivize implementing the additional kit.  In addition to shifting from renewable diesel to SAF, exploring new pathways like converting alcohol to jet fuel offer the opportunity to diversify the SAF inputs. The IRA raises the previous blenders’ tax credit from $1 per gallon for SAF and renewable diesel to between $1.25 and $1.75 per gallon for SAF, while maintaining the $1 credit for biodiesel and renewable diesel. Achieving the higher threshold for credits will depend on how successful a producer is at producing near zero CI.

As the airline industry grows and decarbonizes, demand for SAF will increase and IRA incentives will help make it more economically viable to produce a whole range of renewable and sustainable fuels. It will also incentivize SAF over other biofuels.  Weighing how the new incentives will impact variables like feedstock and SAF pathways — and how these variables impact the CI of fuels — will require a thorough techno-economic analysis.

Hydrogen and Carbon Capture

Hydrogen has long been a key element of many industrial process applications, including fertilizer production and oil refining. Though it is the most abundant element in the universe, pure hydrogen must be obtained through chemical processes that until now have generally involved the most economical processes of steam methane reforming of natural gas and gasification of coal. Though hydrogen itself emits no carbon dioxide (CO2) during production, these conventional production processes generate comparatively large volumes of CO2.

Hydrogen produced carbon free — commonly called green hydrogen — is a process utilizing renewable energy sources to power an electrolyzer that separates water into its constituent molecular elements of oxygen and hydrogen. Though the core technologies for this process have been widely known for some time, the process is both capital and energy intensive.

Under Section 45V of the IRA — the section addressing clean hydrogen — tax credits are available for production of clean hydrogen that may help to improve the economics of producing lower carbon hydrogen. These incentives specifically attempt to overcome the additional costs that occur when renewable power is utilized to convert water to green hydrogen, or when the process is configured to recover carbon dioxide and/or utilize biogenic feedstocks. Several companies are currently evaluating the economic benefits of green hydrogen production processes, the use of biogenic feedstocks, installing carbon capture equipment, or a combination of approaches. These evaluations typically try to maximize incentives while minimizing capital and feedstock costs.

Similarly, Section 45Q of the IRA — the Credit for Carbon Oxide Sequestration — creates a new range of incentives that will offset some of the currently high capital costs for direct air capture facilities and point source carbon capture units. Point source carbon capture units can be particularly lucrative to production facilities with a fairly concentrated stream of CO2, such as ethanol facilities, hydrogen production plants and certain chemical facilities.

Critical Minerals and Metals

As we see increased demand for electric vehicles (EVs) and utility-scale energy storage facilities, the demand for lithium-ion batteries and the critical minerals and metals needed for their production is rising proportionally.

Shortages of critical minerals like lithium as well as metals like copper, aluminum, nickel and cobalt have resulted in rapid price spikes in 2021 and 2022, and increased lead times for production.

Included within the IRA is a commitment to increase the domestic U.S. supply of critical minerals and metals as a step toward bolstering supply chains that will in turn support development of more onshore battery manufacturing facilities as well as their raw material supply chains. The Clean Vehicle tax credits enacted under the IRA apply if minimum percentages of critical minerals and battery components are sourced from the U.S. or from nations that have free trade agreements with the U.S. The IRA tax credits also extend to utility-scale battery energy storage facilities that utilize certain percentages of domestic components.

This increased demand for critical minerals and metals battery components is also advancing development of battery recycling technologies.

Look For Ways to Leverage Benefits

The IRA addresses several clean energy sectors, primarily utilizing the U.S. tax code as a mechanism to encourage and reward steps taken to reduce overall CO2e emissions.  

Unlocking the benefits of the IRA will incentivize owners and producers to look beyond the typical projects for each industry and evaluate how they can gain the maximum benefits available as they layer credits and incentives, while reducing CO2e emissions.  


Though producing renewable fuels could become even more rewarding, there are still several considerations that could affect the feasibility of such projects.

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Kameryn Furman is in business development supporting renewables initiatives in oil, gas and chemicals at Burns & McDonnell. Kameryn has spent her career supporting projects across the energy sector including power generation, cogeneration, NGL fractionation, renewable fuels and chemicals projects.