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What Does the Inflation Reduction Act Mean For Me?

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There has been a lot of buzz over the last six months about the Inflation Reduction Act (IRA), but you may be wondering: what does it actually mean for me?  The IRA was signed into law on August 16, 2022 and includes the largest clean energy investment ever passed by Congress.  The IRA directs nearly $400 billion in federal funding to clean energy and emission-reducing technologies, which will be delivered through a mix of tax incentives, grants, and loan guarantees. This historic law will deliver lower household energy costs, lead to healthier communities, create tens of thousands of domestic clean energy jobs, and make unprecedented progress in reducing carbon emissions.


The IRA also includes $60 billion specifically for environmental justice.  What does clean energy have to do with environmental justice?  Households with incomes at or below 80 percent of their area median income spend a higher percentage of their income on their electricity and heating costs -  collectively known as their “energy burden”.  Rising energy prices hurt households with higher energy burdens the most despite these same households having lower average CO2 footprints.  However, high energy burden communities also suffer disproportionately from pollution, particularly from fossil-fuel power plants, and natural disasters.  Only 20% of households in high energy burden communities across the country have installed solar on their homes.  PosiGen is committed to changing that through our “Solar For All” mission because everyone should be able to benefit from solar and energy efficiency. 

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With a law as far-reaching and complicated as the Inflation Reduction Act, there is a wide range of when the new programs, tax credits, rebates, and grants will become available. Some changes went into effect immediately, such as increasing the investment tax credit for solar projects back to 30% of the system’s costs and changes to the electric vehicle tax credit. Others took effect January 1, 2023 such as the new Section 25C tax credits for installing heat pumps or making energy efficient upgrades. And then there are programs and benefits which may take up to a year or more to set up, including additional “bonus credits” for solar or the grants from the Greenhouse Gas Reduction Fund. PosiGen has been involved in every step of the process and is also working closely with important clean energy and environmental justice advocates such as the Solar Energy Industries Association. PosGen believes the IRA will be critical for the transition to an energy economy that benefits all Americans, and we look forward to working to make its intentions a reality.

The IRA created new “adders” or “bonus credits” to the Investment Tax Credit, which has been the primary economic driver for financing solar projects.  These new adders are intended to achieve the important policy objectives to increase access to solar in underserved communities, drive economic development in historically fossil fuel communities, and to increase American manufacturing of clean energy technologies. Importantly, these adders can be stacked, meaning a “perfect” project could qualify for up to a 70% investment tax credit. The IRA also created a new mechanism called “Direct Pay” which unlocks the benefits of these tax credits for certain tax-exempt entities.  The details on how projects will qualify for these adders is still being worked out through the Department of Treasury and IRS, and if done right, will accelerate clean energy in the United States. 

In short, there is a lot of behind-the-scenes work taking place to make sure the IRA is implemented in a way that delivers on its promises to the American people.  So while some of the tax credits and programs are available now, we expect to get more information on others this spring. The Inflation Reduction Act has laid down a foundation for many programs that will benefit all of us for decades to come. 



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