What Does the Inflation Reduction Act Mean for Clean Energy?

The inauguration of Joe Biden as president of the United States sparked auspicious investment into revitalizing renewable energy industries and helping make Americans’ lives more sustainable. That begins with the Inflation Reduction Act and clean energy.

This blog will briefly talk about the Inflation Reduction Act, its passage, why it is of such importance for the clean energy sector and how “you” can benefit from the Act.

Background On the Inflation Reduction Act

President Joe Biden signed the Inflation Reduction Act on August 16, commencing a $739 billion program which aims to significantly lower inflation over the next 10 years. The aim is for the U.S. to become more energy-efficient as a nation and reduce greenhouse gas emissions by 40% by 2030.

In a nutshell, the Inflation Reduction Act includes:

  • Lowering healthcare costs: Reduced prescription costs with a $2,000 cap for Medicare recipients, and the Affordable Care Act extended for 3 years.
  • Federal funding for climate change mitigation: $369 billion contribution to clean energy through tax credits, grants and loan guarantees. The electric vehicle industry will also see significant investment in infrastructure development.
  • Redistribution of taxes: A 15% corporate minimum tax rate, in particular amongst the country’s wealthiest.


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What the Inflation Reduction Act Means for Clean Energy

The Inflation Reduction Act (IRA) marks the largest investment into clean energy in American history. The $369 billion investment package aims to tackle the climate crisis and achieve the Biden Administration’s goal of a net-zero economy by 2050.

The Department of Energy’s policies consist predominantly of investment tax credits, grants and loans for clean energy industries to upgrade or replace existing energy infrastructure and clean energy technology, and households will benefit from tax incentives.

The graph by McKinsey shows the distribution of funds across clean energy industries:

Inflation Reduction Act

American households will also receive a total of $43 billion in IRA contributions to the cost of home energy.

Domestic solar panel installation, EV purchases, home batteries, heat pumps, biomass stoves and boilers will become more affordable for lower-income communities, thus catalyzing wider adoption of clean energy and boosting the renewables market. These are just a few of the ways the Inflation Reduction Act impacts solar.

How the Inflation Reduction Act Supports Solar Energy

The IRA’s clean energy incentives will accelerate solar energy industry growth. Infrastructure, manufacturing and supply chain investment will create many new job opportunities and lay the groundwork for a long-term sustainable green economy.

“For renewable energies like solar, the bill couldn’t have come at a better time. We’ve seen record levels of consumer demand within the past year; the proposed tax credits for solar panels will drive even greater interest among consumers, marking the dawn of the next stage of growth.” – Omnidian

Below are some of the ways the Inflation Reduction Act supports solar energy with the following incentives:

Residential solar installations will receive 30% tax credits through the energy-efficient home improvement credit, residential clean energy credit, new energy-efficient home credit, and the energy-efficient commercial building deduction.

Inflation Reduction Act Supports Solar Energy

  1. Residential battery storage projects receive 30% tax credits for projects over 3 kWh.
  2. Commercial solar projects receive 30% tax credits in energy generation incentives. Depending on the project size, there may be apprenticeship and wage metrics to meet to benefit from the full amount.
    These include the production tax credit, investment tax credit, zero-emission nuclear credit, clean electricity production credit, clean electricity investment credit as well as the low-income community addition to the investment tax credit.
  3. Commercial battery storage receives 30% tax credits (for projects over 5 kWh). There may also be apprenticeship and wage targets to meet to take advantage of the full amount.
  4. New solar projects can capitalize on transferable tax credits, usually reserved for large solar projects. This new incentive will encourage private investors to invest in small-scale solar and nonprofits.
    Historically, solar nonprofits must liaise with banks or developers to finance their projects, which can hinder tax credit applications that were usually only reserved for larger-scale portfolios. A power purchase agreement (PPA) will be paid to the bank or developer for the solar energy over an average 25 years.
  5. Manufacturing credits such as the advanced energy project credit and manufacturing production tax credit will fund solar components, including solar panels, inverters and battery storage, increasing manufacturing capacity for the solar industry and its supply chain.
  6. EV purchase credits, otherwise called clean vehicle credits or electric vehicle tax credits, can be applied when purchasing a new or used electric vehicle.
  7. $11.7 billion loan investment by the Loan Programs Office will provide utility-scale solar PV projects loan guarantees as incentives to boost the long-term sustainable development of solar projects and batteries.

How You Can Benefit From the Inflation Reduction Act’s Green Energy Incentives

Clean energy corporations will receive approximately $216 billion in tax credits designed to boost private investment in clean energy manufacturing, infrastructure and transport. Here’s the who, what, when, where and why you need to know about IRA incentives:

  • WHO can claim?
    For information about who can apply for clean energy tax credits under the Inflation Reduction Act, the Energy Star website has more information and links for how to apply.
  • WHAT am I entitled to?
    The White House published this article going into a little more detail about the amounts and what you can be entitled to.

Inflation Reduction Act’s Green Energy

  • WHEN can I apply?
    Unfortunately not all incentives for EV, battery storage or solar projects are not available until 2023/24. Read this guide to find out when you can claim them.
  • WHERE can I start the process or find more information?
    You can claim using the 5695 form when submitting your tax return to the IRS to claim tax credits. Download the 5695 Form here.
  • WHY?
    The Inflation Reduction Act will help the United States lead a clean energy economy. Read more about the benefits of the Act here.

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With financial boosts coming to the renewables sector and plans for further tapping into solar, get the most from your upcoming renewable energy projects with 60Hertz Energy’s CMMS. Streamline data management, operations and maintenance, and more, with a single offline-ready platform that’s easy to use.

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