Update 8/7/2022: The Inflation Reduction Act passed the Senate and now moves to the House and is expected to pass by the end of the week, according to The New York Times.
On July 27, Senators Joe Manchin and Chuck Schumer announced a reconciliation deal they’re now calling the “Inflation Reduction Act of 2022” that includes about $370 billion in energy and climate spending, according to Politico.
The Inflation Reduction Act includes a 10-year extension of the solar ITC at 30% and includes direct pay for nonprofit and governmental entities. According to ROTH Capital Partners, the ITC could reach 50% for larger projects depending on domestic product use and project location. The U.S. Energy Information Administration released a report today that found extending the ITC through 2050 would increase solar generation by 10%.
The reconciliation bill also introduces a 30% ITC for standalone storage, which the industry has been pushing for to reduce the cost of this crucial technology. Manufacturing credits for solar cells (4¢/W) and modules (7¢/W) made the cut too.
Some in the industry were disheartened that the bill doesn’t include residential solar refundability — meaning homeowners without tax liability could still get a check for the refund amount, with the aim of making solar more affordable for lower-income individuals.
“We are disappointed that refundability for 25D was not included in the current version of the Inflation Reduction Act,” said Karla Loeb, a founding member of Residential Renewables for All, an ad hoc coalition that has worked to push refundability. “However, there may be other opportunities to establish policies that promote equitable solar access for Main Street Americans, which will be accelerated by the generational clean energy wins captured in this legislation.”
Overall, though, the solar industry reacted jubilantly to the news.
“If the Inflation Reduction Act of 2022 passes with the 10-year extension of the investment tax credit (ITC) and a separate credit for standalone energy storage, it will benefit our community solar projects in several ways,” said Aaron Halimi, founder and president of Renewable Properties, a San Francisco-based owner and developer of community solar projects in 14 states. “First, it will give us solar project finance certainty, enabling Renewable Properties to plan and develop community solar projects without worrying about next year’s deadline. Second, a more predictable future for financing will also allow us to develop more projects in more community solar states. Third, with the energy storage ITC, we’re now able to accelerate the development of energy storage, helping to stabilize the grid for utilities and for local residents where we may have not been able to develop before. This legislation, if it passes, is truly a triple win for the environment, for utilities, and for the communities where we will build our projects.”
Advocates are encouraging Congress to quickly pass the bill.
“Inflation and energy are top of mind for Americans, and we have maintained that lawmakers must stay at the negotiating table and cut a deal on federal clean energy investments to help bring down the cost of electricity for homes and businesses,” said SEIA president and CEO Abigail Ross Hopper in a statement. “With long-term incentives for clean energy deployment and manufacturing, the solar and storage industry is ready to create hundreds of thousands of new jobs and get to work building out the next era of American energy leadership. This is a crucial window of opportunity that we cannot miss, and now Congress must seal the deal and pass this legislation.”
The bill is expected to reach the Senate floor next week.
Updated on July 29.