This month marks one year since the Inflation Reduction Act was passed into law. The landmark legislation included dozens of incentives to boost solar energy deployment and bring manufacturing back to our shores. Since then, the Dept. of the Treasury has been working feverishly to release guidelines on all the provisions included in the legislation and allow developers, installers, businesses and homeowners to take advantage of these new tax credits.
Solar Power World talked to SEIA’s director of regulatory affairs to get a sense of where the IRA stands one year in and what’s still needed for the solar industry to capture all the benefits intended by the law.
This interview has been edited for clarity.
Solar Power World: So we’re coming up on the one-year anniversary of the IRA. What has been done, and what are we still waiting on?
Ben Norris, senior director of regulatory affairs at SEIA: It’s kind of crazy to think that we’re already coming up on the one-year anniversary. In many ways, it feels like a lot longer than that, just based on how much work we’ve had coming in our door and how much outreach we’ve been doing to our members. And yet, on the other hand, it does feel like we still have quite a bit of ways to go.
I’ll talk first about the biggest items we are anticipating through the end of the calendar year. One of the items that’s still outstanding that has really strong interest among our membership, which includes manufacturers, is guidance on the 45X provision. This is the production tax credit for certain clean energy inputs, including a number of enumerated solar energy components, so things like modules and cells, torque tubes, etc. (The production tax credits manufacturers can receive for producing American-made products.)
We have a lot of members that are really interested in utilizing this credit. And this is, I think, sort of a “twofer” in solar. Not only does it mean more U.S. manufacturing jobs, but it also means a more robust supply chain for clean energy projects.
45X is a really critical piece of the IRA and it is an area that we have been talking to the administration about a lot lately. We’re really excited to hopefully get some guidance for some proposed rules in the next couple of months here.
We know it’s a big undertaking — the domestic content bonus credit provisions, for example, can be really technically complex. So we’re gratified that the Treasury Dept. is working closely with the Dept. of Energy on these very detailed, very technical elements of the IRA.
We think that by the end of the year, we will see some proposed rules on both the energy communities provision and the domestic content bonus credit provision. Some initial guidance was released on energy communities back in April, and then on domestic content back in May. But the notices that the IRS released were just initial guidance on both of those programs, so we’re looking forward to seeing those programs codified in rules.
Can you explain Treasury’s process in every one of these provisions?
Norris: Treasury, like any other agency, has some discretion on how to approach specific issues. They’ve actually taken slightly varying approaches on some of these matters already. To give you one example, on the prevailing wage and apprenticeship provisions, Treasury was very forward-leaning on getting initial guidance out, and has since noted that they intend to issue proposed rules at a later date.
However, if you look at something like domestic content, what Treasury technically did there was issue what’s called a Notice of Intent. That coupled initial guidance with a more concrete promise to issue proposed rules at some point in the future. And these all have the effect of sending some signals to the market about timing and sequencing, and what we could expect more information on at some point in the future.
So there are basically two phases, where they’re proposing some guidance and then getting feedback and coming back with final rules?
Norris: I think that’s the general overlay that we are looking at, but I also don’t want to suggest that “Step 1: Proposal, Step 2: Final Rule” is going to be the end-all-be-all for the Inflation Reduction Act. Even if we’re talking at this time in 2024, and let’s say we have new final domestic content rules, the Treasury Dept. would be free at some point thereafter to undertake a supplemental rulemaking process. There may be changes in the marketplace, or there may be changes in supply chains or in international trade that would counsel in favor of adjusting those rules. Agencies do that all the time.
When we think about IRA implementation, we’re definitely not just thinking about a year or two of regulatory activity. We’re really looking at this over the span of about a decade, which covers the life of some of these credits, but is also just, I think, part of good government. We know that this administration wants to get these things right. And that may mean three or four or more rulemakings and other sub-regulatory items.
Would you say that developers and installers have what they need at this point to utilize most of the provisions?
Norris: I think we are trending in that direction. I wouldn’t say that we have everything we need. 45X is a good example of where there is no guidance yet. And depending on how that guidance comes out, that could really drive or not drive investment in some of the key components enumerated in the text of the statute.
I’ve mentioned it a couple of times, but the domestic content bonus credit is proving particularly challenging for both developers and manufacturers to understand and utilize. We know that it’s initial guidance on a bonus credit, and if you’re going to get a bonus, you probably need to be going a few extra steps to enjoy the benefits. But now that we’re eight or nine weeks post-initial guidance, we’re still seeing some real challenges in developers actually being able to claim that.
It’s our hope that there may be some near-term action on amending that guidance, or perhaps even moving very quickly to a proposed rule stage. We don’t want to see this credit go unutilized for a significant amount of time, and at least to my knowledge, it is unutilized at this point. So we’ve been working with the administration to express some of our thoughts on how the credit can be made more usable and more generally understandable. It’s a complex piece of guidance, and I don’t envy the Treasury Dept. at all. It was drafted in a way that forced Treasury to make some hard policy choices.
We want to make sure that at the end of the day, we are actually on-shoring our domestic supply chain through the use of the credit, and not leaving behind U.S. workers and the value that they add to the manufacturing that is occurring here and that will occur here as a result of all of the other provisions of the IRA working in concert.
How safe is the IRA, after there have already been two attempts by the House of Representatives to dismantle it?
Norris: It’s a great question, and I won’t pretend to be the government affairs expert here. We have a lobbying team here that is working on this issue every single day; we have actually stood up a campaign to expressly defend the IRA from exactly the types of rollbacks that you’ve mentioned.
We are confident based on the manufacturing investments all over the country, including in both Democratic and Republican districts, that there should be bipartisan support for preserving the IRA. But if we were having this conversation in December 2024, and control of the Congress and the White House has flipped, the IRA would likely be at the top of the list for a new government to re-examine.
We don’t want to be in that scenario. Regardless of who’s in power, we want to make it clear that the IRA benefits all Americans; it benefits our entire economy; it benefits the global supply chain. And that’s what we’re going to be focusing on all the way up to and through the 2024 elections — to make sure that as much of it is preserved as possible.