There’s no question that inflation significantly affects the cost of solar energy. Fortunately, the Inflation Reductions Act (IRA) offers welcome relief to homeowners, manufacturers, and other stakeholders.
For starters, this online NJ resource can help reduce the upfront cost of going solar. What’s more, you could be eligible for free solar panels in the state – check out the link for the inside scoop.
The IRA allows you to deduct a percentage of interest and energy charges from federal taxes. This means you can save money on long-term investments in solar energy. If you own a business or home, you might wonder, “how does the Act impact solar energy?” Well, here’s our take on the strides we can make in light of the law’s enactment:
1. Promoting Solar Deployment
Among the goals of the IRA is to create a supportive environment for the sustainable production of renewable energy – including solar. We’re talking about jobs, more efficient energy production, reduced tax burden, and an improvement in the balance of trade (in the grand scheme).
Manufacturers can access Production Tax Credits (PTC) thanks to the IRA. These incentives are designed to help reduce the cost of producing solar energy. In short, your firm can receive tax credits when your system generates power. This implies you stand to gain, in the future, from the investment you make.
What’s more, even non-profits can maximize the tax credits the government offers through the IRA. For instance, they can transfer credits to other firms or individuals to help them finance their solar projects. Alternatively, they can opt for direct pay arrangements, which work well for organizations with little or no taxable income.
2. Encouraging Solar Research And Development
This is a domino effect of the Act. It implies stakeholders can experiment with new technologies, products and materials necessary to make solar energy more efficient. And by so doing, they can develop new and more cost-effective solar products. Well then, who stands to gain from quality solar equipment? You guessed it – everyone involved in the industry.
3. Increased Subsidies
The Investment Tax Credit (ITC) was due to drop to 22% from 26% in 2023. But thanks to the IRA, the timeline has been extended to 2032 – after which the rate will drop to 26% in 2033 and 22% afterward.
The increase to 30% allows qualifying homeowners and businesses to incur reduced taxes for their solar investments. Basically, the ITC is a dollar-for-dollar reduction in taxes for expenses related to solar energy systems.
Similarly, firms can enjoy a 10% Domestic Content Bonus. Even so, they must use U.S. steel or iron to produce their products to qualify. Similarly, a specific percentage of the components used should be crafted from materials mined in the country. Such an initiative supports home-grown businesses while letting them take advantage of the latest solar technologies around the globe.
The ITC also covers standalone components – batteries, inverters, trackers, and back sheets. Previously, such facilities were included in the federal tax credits only if they were charged (up to 75%) by a qualified renewable energy facility.
Firms can also earn credits (bonuses) up to 10% if they start projects in communities impacted by the shift from traditional to renewable energy sources. Thus, the IRA plays a vital role in helping to alleviate the pressure on communities – whether due to job losses or other challenges.
Even homeowners are likely to gain from the IRA. For instance, the Energy Efficient Home Improvement Credit (EEHC) has been extended to cover solar energy sources. As such, you can reduce your annual tax bill by at least 30% by installing solar panels or other energy-saving equipment in your home.
4. Meeting Energy Product Goals
The U.S. solar industry strives to produce 50 gigawatts of power in the coming years. To achieve this goal, we must ensure all the elements are aligned. The IRA will be instrumental in realizing this objective – as it helps reduce the cost of solar energy, creating a more supportive growth environment for developers. Thus, manufacturers can ramp up production to meet the demand for solar energy in the coming years.
5. Reducing Carbon Emissions
The IRA act of 2022 promotes the current administration’s 2035 decarbonization goal. So, as we work toward achieving a carbon-free future, the tax credits and other incentives offered in the IRA can help reduce carbon emissions significantly. For instance, projections show that the IRA, in conjunction with other laws, will lower emissions by 2030 to pre-2005 levels.
The IRA is a boon to the solar industry, as the pointers above clearly show. As such, we stand to gain immensely from the Act. Hence, let’s maximize this opportunity and work toward making solar energy more accessible to all.
