Sunworks : Surge of new solar projects predicted, following the passage of the IRA

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With the passage of the Inflation Reduction Act (IRA), the US solar and renewables industry is expected to grow 40% more than previously projected, according to research by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. But why this exceptional growth and what does it mean for organizations that want to go solar?

Put simply, SEIA and Wood Mackenzie expect increased growth in the solar and renewables market for a number of reasons including the news that 1) better incentives are available for more types of projects, and 2) more organizations are eligible to claim those incentives. And while there are some new requirements for larger renewable installations, IRA's incentives generally make solar and storage overall more accessible and affordable, especially for businesses, nonprofits, and utilities.

Better Incentives Are Available for More Types of Projects

The first way the Inflation Reduction Act encourages investment is by increasing incentive amounts and diversifying which projects can qualify. This two-pronged strategy for "opening up" incentive benefits will hopefully prompt more organizations to make a transition to clean energy.

One key benefit expanded by the IRA is the Solar Investment Tax Credit (ITC). It has been around for years, but the IRA increased the ITC from 26% to 30% (SEIA Inflation Reduction Act: Solar Energy and Energy Storage Provisions Summary).

The ITC now also covers standalone energy storage, EV charging, and microgrid projects. Previously, only solar energy systems or solar systems with storage were covered. Diversifying what kinds of projects receive tax benefits has the potential to increase the amount of solar installed overall. Subsidies for energy storage are especially exciting given batteries' potential to help stabilize energy demand in peak hours and at night.

Finally, solar customers can potentially leverage the IRA further by claiming tax credits for projects that are built with domestic hardware, sited in former fossil fuel-producing areas, and/or sited in priority areas like tribal lands, low-income census tracts, and energy communities. Certain projects can potentially claim all of these incentives, for combined tax credits of up to 60%.

More Organizations Are Eligible for Incentives

The Inflation Reduction Act also encourages renewable energy by expanding what kinds of organizations can benefit more directly from solar. Specifically, manufacturers and tax-exempt organizations may be able to expand their solar efforts thanks to this new legislation.

For example, the ITC can benefit tax-exempt organizations, like governments and nonprofits, more directly now. Previously, the ITC was distributed only as a true tax credit. Because they often don't report a profit, tax-exempt organizations purchased solar energy systems through Purchase Power Agreements (PPAs), wherein businesses bought the tax credits, financed and owned the solar projects, and then leased or sold the projects back to tax-exempt organizations. Now, it is easier for tax-exempt organizations to own their projects outright by obtaining direct tax credits on their projects. This should be a significant decrease in red tape for this sector.

Domestic manufacturers stand to receive better solar-related benefits as well. The IRA incentivizes US-made solar hardware through the Ossoff Manufacturing Credit. Companies will be able to apply for credits for everything from solar cells to inverters. Hopefully, this will help start a new wave of domestic manufacturing and ease current supply chain pressures. Either way, the credits represent a move to get the US behind its domestic manufacturers again, particularly for renewables.

Navigating These New Choices

All these new incentives mean more choices for organizations looking to go solar. This may seem a bit overwhelming, but more incentive options mean more opportunities for business, governments, and nonprofits. And thankfully, experienced solar providers should be used to navigating the ins and outs of government solar incentives.

The key for organizations interested in solar is to find a partnership that's a good fit. These organizations have multiple factors to consider in the partnership. As a longtime provider, we suggest that organizations consider hiring a company that:

-is experienced in installing energy production and storage systems
-is technology-agnostic and willing to source from multiple suppliers in order to leverage domestic hardware credits
-is familiar with laws and processes in the project location to ensure success in priority communities

Most importantly, though, is feeling like the solar company is a true team player. Getting to know a potential solar partner through consultation meetings can be a great way to get a feel for this.

In short, the IRA's new incentives have businesses, governments, and nonprofits across the US positioned to save an unprecedented amount on solar. Entities that work with a compatible solar partner, to create a solid plan to site, source, and build solar conscientiously stand to save the most.

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