Congress Passes the Inflation Reduction Act

Announcements

August 24, 2022

After over a year of political uncertainty, we were so happy to see the Inflation Reduction Act (IRA) finally cross the finish line and be signed into law. This bill authorizes $369 billion in spending towards policies and programs that will help address inflation by reducing energy costs, support America's equitable clean energy future, and create thousands of high quality jobs. There is a lot of exciting legislation for the renewable energy industry to unpack, but let's start with the updates to the federal solar Investment Tax Credit (ITC). Here are some of the highlights:
  • 10 year extension of the ITC at 30%: Before the IRA was signed into law, the ITC was at a 26% rate with a schedule to step down and eventually sunset in 2024 at 0% for residential customers and 10% for commercial customers. Under the IRA, the ITC has been extended at the 30% rate for residential and commercial customers through 2033, and will be retroactively applied to any projects completed in 2022. The new step down schedule is to drop to 26% in 2033, 22% in 2034, and 0% in 2035. 
  • ITC for storage: Customers who retrofit their solar system with battery storage or install a stand alone storage system are eligible for the 30% tax credit.
  • Tax credit carryover: Customers with insufficient tax liability to take advantage of the full 30% in one year can carry over the tax credit through the next ten years.
  • Direct pay option: Tax exempt entities such as non-profits, schools, state or local governments and tribal governments are eligible to receive a direct refund of the tax credit.
  • Transfer of credits: Taxpayers are allowed to transfer all or any portion of their credit to another taxpayer. For example, an individual or a business that does not have enough tax liability to take full advantage of the tax credit could sell it for cash instead.
  • Commercial ITC and PCT:  Commercial projects can opt to either use the ITC or the production tax credit (PTC) which is currently at $0.026/kWh. Both the ITC and PTC have potential for added credits if they meet certain requirements such as meeting domestic content standards, being located in a former "energy community" (brownfields or locations associated with fossil fuel extraction) or serving a low-income community. 

Some more resources on the IRA from Solar Power WorldSolar Energy InternationalSolar Energy Industries Association, and PV Magazine.         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
The IRA will create thousands of high quality jobs
The IRA will create thousands of high quality jobs
The IRA helps to ensure America's clean energy future
The IRA helps to ensure America's clean energy future

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