Long-term ITC extension, standalone storage and direct pay: What’s in the IRA
The Inflation Reduction Act gives the solar + storage industry long-term incentives and market certainty. Here’s what’s in it.
Residential
Residential solar ITC: 30% until stepdown starts in 2033
Residential storage ITC for batteries over 3 kWh: 30% until stepdown starts in 2033
Commercial
Commercial solar projects: 30% ITC until 2025. Credits in 2025 and later are contingent on whether the Dept. of Treasury determines carbon reduction goals are met
Prevailing wage and apprenticeship requirements to receive full 30%
These requirements take effect for projects that begin construction 60 days after the Dept. of Treasury defines the metrics
These requirements do not apply to projects under 1 MWAC
Commercial storage ITC for batteries over 5 kWh that are placed in service after 2022: 30% ITC until 2025. Credits in 2025 and later are contingent on whether the Dept. of Treasury determines carbon reduction goals are met
Prevailing wage and apprenticeship requirements to receive full 30%
These requirements take effect for projects that begin construction 60 days after the Dept. of Treasury defines the metrics
ITC adders available
10% for domestic content usage
10% for siting in “energy communities”
Up to 10% for projects smaller than 5 MWAC located in low-income communities or tribal lands
Up to 20% for projects smaller than 5 MWAC that qualify as low-income residential building or economic benefit systems
Projects under 5 MWAC can receive ITC for interconnection costs
Commercial solar projects can choose whether to receive the PTC or ITC
PTC is currently at $0.026/kWh for 2022 and rises with inflation
Credits are transferable after 2022, potentially allowing individuals to invest in projects
Direct pay
Available for nonprofit entities, state or local governments, the Tennessee Valley Authority, rural electric cooperatives or tribal governments
No direct pay available to residential projects
Manufacturing
Incentives for solar panels, trackers, inverters, batteries and critical minerals
Clean Vehicle Credit
Available until end of 2032
Used electric vehicle: $4,000 tax credit or 30% of sale price
Vehicle model must be two years earlier than calendar year in which you’re buying
Vehicle must be less than $25,000
Annual income requirements:
Joint tax return <$150,000
Head of household tax return <$112,300
Single taxpayer return <$75,000
New electric vehicle: $3,750 tax credit for North American-made vehicles
Vehicle cost requirements:
Vans <$80,000
SUVs <$80,000
Pickup trucks <$80,000
Cars <$55,000
Annual income requirements:
Joint tax return <$300,000
Head of household tax return <$225,000
Single taxpayer return <$150,000
The Inflation Reduction Act, packed with incentives for the solar + storage industry, was passed by the House of Representatives on August 12 and is expected to be signed by President Joe Biden in the coming days. Solar advocates believe the sector will boom thanks to the long-term certainty provided by this law.
“The changes to the ITC are monumental. They are things that will create a longer runway for clean energy growth in America,” said SEIA president and CEO Abigail Ross Hopper. “The ITC, as we know, is the No. 1 policy driver in the solar industry and has helped us build the industry to what we have today.”
Here’s what’s in the IRA.
Residential solar incentives
The personal income tax credit for solar power is raised to 30% and extended by 10 years, with stepdown beginning in 2033. Standalone residential batteries over 3 kWh, purchased after December 31, 2022, are also eligible for the 10-year, 30% ITC. There is no direct pay option for residential projects.
Commercial solar incentives
Commercial solar incentives in the IRA fall into two categories based on project size.
Commercial projects under 1 MWAC can receive the 30% ITC with no prevailing wage or apprenticeship requirements to receive the full benefit.
Commercial projects over 1 MWAC can receive the 30% ITC if prevailing wage and apprenticeship metrics are met. These labor requirements will take effect for projects that begin construction 60 days after the Dept. of Treasury defines the metrics. Companies that begin construction before the 60 days are over are exempt from meeting the requirements to reach the full 30%.
After the 60-day period, commercial projects over 1 MWAC will receive a 6% base credit, with 24% more available if projects meet those additional labor requirements to make a total of 30%.
Both prevailing wage and apprenticeships are closely based on union labor. A prevailing wage is set by states and is the basic hourly rate of wages and benefits paid to a number of similarly employed workers in a given geography, according to The Center for American Progress. Some states do not have established prevailing wages, according to Pari Kasotia, senior director of policy
