In this post I’m going to use some (relatively simple) math to give a sense of how great the Biden Administration has been for America. I’m doing this because I’m enraged that so few people know or give credit for what Biden has accomplished, and I’m seeing the impact firsthand in the work of my nonprofit, Capital Good Fund. In the interest of not burying the lead, the following chart gives a sense of the scale of Biden’s impact in just one area: spending on domestic manufacturing.

To give a very specific example of his policies, let’s look at just one small part of the Inflation Reduction Act (“IRA”), Biden’s signature climate legislation: the Domestic Content adder.

To understand this adder, we need to first understand that Biden’s goals vis-a-vis climate were not just to reduce greenhouse gas emissions, but to do so in a way that creates good-paying jobs in the U.S., particularly clean-energy manufacturing jobs, and addresses environmental injustice. On the latter point, one of his first Executive Orders established the Justice40 initiative, which “directs 40% of the overall benefits of certain Federal investments – including investments in clean energy and energy efficiency…to flow to disadvantaged communities.”

On the former point, all three of Biden’s largest legislative achievements–IRA, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act–contain numerous provisions to ensure federal dollars support American workers and businesses. These include requiring that certain federally funded projects use U.S.-sourced materials (Build America Buy America) and that they pay prevailing wages (Davis Bacon and Related Acts).

A key feature of the IRA is an increase in the tax credit for investment in clean energy such as wind, solar, battery-storage, and geothermal from 26% to 30% and to extend the credit for 10 years. To receive that 30%, though, larger projects have to use U.S.-made iron and steel and to comply with prevailing wage and apprenticeship requirements–a boon to union jobs. But the IRA also established a number of tax credit “adders” that can increase the tax credit to as high as 70%.

Now let’s take a look at the Domestic Content (“DC”) adder. The DC adder says that if a clean energy project includes a certain percent of U.S.-made materials, then it qualifies for an additional 10 percentage points in credits, i.e., a $100,000 project that would otherwise get a $30,000 tax credit would instead qualify for a $40,000 credit. Democrats in Congress and the White House understood that there is, at present, limited domestic manufacturing, so they set an initial threshold of 40%, which slowly ratchets up to 55%. This means that, to qualify for the adder today, 40% of the components in a project must be U.S.- sourced and / or manufactured.

The DC adder is essential because, at least for now, U.S.-made solar modules, inverters, and other equipment are more expensive than foreign materials. The beauty of the policy is that, in many cases, even though the equipment costs more, the adder makes the overall project more economically viable. As a result, companies are scrambling to open production lines in the U.S.–some of them being the same companies that have for decades said they had to move overseas to remain economically competitive. But don’t take my word for it. Here are how the project economics shake out on an actual solar lease we might originate for a low-income homeowner in Georgia through our Georgia BRIGHT program.

First, note the below table, which shows the different ways in which a rooftop solar array that uses micro-inverters can hit the 40% DC adder threshold:

So for example, if a project uses U.S.-made solar cells (21.5 points ), front glass (2.2), module backsheet / backglass (2.1), and inverter printed circuit board (16), then you get 41.8 percentage points, clearing the required 40% and earning the DC adder.

We have been in talks with an inverter maker and a rail (racking) company, both of which are getting ready to begin a U.S.-based production run so that projects can hit the 40% (35.6 for inverter and 8.6 for rails). Note that were it not for the adder, these companies would not be doing this: it’s only because companies like Capital Good Fund want to get the adder that they are reshoring manufacturing. Moreoever, there are a number of U.S.-made solar modules, for instance from Qcell and Silfab, but pre-IRA they were struggling to compete due to their cost premium.

Of course, the key question here is, does that cost premium over foreign equipment justify the extra tax credit?Well, let’s imagine a 10-kilowatt solar array that would normally (i.e., using foreign materials) cost $26,000 before tax credits. Foreign-made modules cost about $.35 / watt, so on this project they would cost a total of $3,500 ($.35 * 10,000 watts). And foreign-made racking costs about $.15 / watt, for a total of $1,500 ($.15 * 10,000 watts). The rest of the project consists of labor, conduit and wiring, fasteners, inverters, permitting fees, etc. In short, $5,000 of the $26,000 project is the direct cost of the modules and racking.

In this example, to access the DC adder we will be using solar modules that are 100% U.S.-made (meaning they earn 38.6 points) and rails (8.6 points).

Now let’s suppose that the domestic solar modules cost $.55 / watt and the domestic racking is $.25 / watt (I’m still working on more exact estimates, but these are in the ballpark). The cost of the modules increases from $3,500 to $5,500 and the cost of racking goes up from $1,500 to $2,500, for a total cost increase of $3,000. As a result, whereas previously the project would cost $26,000, now it’ll come out at $29,000. However, the cheaper project was only eligible for a $7,800 tax credit (.3 * $26,000) while the more expensive one is eligible for an $11,600 tax credit (.4 * $29,000). In other words, net of tax credits, the project incorporating 40% U.S. materials costs $800 less (see table below). So not only is the project better for American workers, businesses, and the economy, it makes more economic sense for the project developer and user of the power! And of course costs will come down as these factories achieve economies of scale.

This is where the rubber actually meets the road when it comes to policy moving the needle in the real world. Companies around the country–manufacturers, financiers, installers, distributors, developers–are doing this exact math every time they make a decision about where to build a clean energy system or production line, whether to put up financing, etc. The IRA is riddled with smart, nuanced policy such as this: things that the average voter would never come across or understand because it’s so technical, but which will ultimately result in hundreds of billions–if not trillions–of dollars in investments in projects that slash carbon pollution and air pollution, create jobs, and remake America for the better.