(C) Daily Kos This story was originally published by Daily Kos and is unaltered. . . . . . . . . . . Why the Inflation Reduction Act Gives Me Hope [1] ['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.', 'Backgroundurl Avatar_Large', 'Nickname', 'Joined', 'Created_At', 'Story Count', 'N_Stories', 'Comment Count', 'N_Comments', 'Popular Tags'] Date: 2023-04-23 The White House's Guidance Book Happy Earth Day Weekend! I had a fifteen-year career in solar, energy efficiency and other carbon free technologies (my first career was in an unrelated field though its lessons serve me well in solar). In retirement I volunteer for two non-profits in the same field. It’s too important to stop and I have a good set of skills to share. Sadly, the focus of prospective customers, particularly commercial customers, is on the money with little regard to valuing the environment. So the solution must be about the money. We determine cost of the project, any applicable federal, state, utility, local incentives, energy bill savings, thereby how long it takes for the system to pay for itself. Anything over five years and the building owner isn’t interested. If the project is financed, include amortization with an interest rate and term to see whether it can be cash flow positive- the incentives and savings exceed the payments over the term of the loan. The economic case for solar has been strong and getting stronger, so the industry has made a lot of progress. We routinely beat fossil fuels. But it is taking far too long. I’ve trained many people, from 20- to 60-somethings in solar, and told the young trainees I am sorry, they are completely screwed. Given the barriers the utilities continue to throw up there was no way we can deploy enough carbon free power systems to stem the worst of what’s coming. I’ll be dead but they’ll have to face the growing climate catastrophes. Before the Inflation Reduction Act (IRA), according to Department of Energy statistics the fossil fuels industry was receiving seven times more federal subsidies that renewables got. And the renewables subsidies, which had been relatively consistent since established by The Energy Policy Act of 2005 (P.L. 109-58), were sunsetting next year. Beating Fossil Fuels Since Congress launched those solar incentives in 2006 the federal “investment tax credit” (ITC) for all solar projects was 30% of project cost. It’s a credit off owed taxes, not a deduction from reported income. For a home system that costs, say, $18,000 (in 2007 when I started in solar the same system size cost $74,000), that credit off owed taxes saves paying the IRS $5,400. Local incentives, either in a cash rebate or solar production-based carbon credit value, helped. The solar industry has constantly evolved, by being mostly small companies and nimble, living on tight margins to compete with cheap electric & gas rates. State and local incentives were launched, adding to federal incentives, to support growth. The utilities have aggressively increased rates, making it more and more important to produce your own power on your rooftop for, after the installation cost, for five decades of useful life. I have two solar PV systems, one for home and one added later for two electric cars, and a solar thermal system. Most of the year my utility bills are just the gas and electric meter fees, about $22/month. I don’t track what gasoline costs. Net Metering (NEM) rules have been key. NEM mandates the utilities credit you for kilowatt hours (kWh) your solar PV system pushed to the Grid, aided the expansion. About 40 states have such rules, though the utilities are constantly pushing to degrade them. California just crushed theirs. Fortunately the cost of batteries has constantly reduced. Include sufficient storage and you won’t have to Net Meter. Plus your system will continue producing power every day if the Grid is down. Solar panels themselves came down in wholesale price from 2007 at $4.20 per watt of potential production to, now, 60¢ (lower for large projects). The incentives worked. For nearly two decades, with only the Great Recession causing a downturn, solar panel manufacturing skyrocketed worldwide and costs came down. Residential projects’ total all-in cost for an average house now cost well under $3.00/watt in most parts of the country. This means the combination of the federal tax credit and savings on electricity bills can more than cover the monthly payments throughout a credit union’s Home Equity Line of Credit 20-year term loan. BTW I wouldn’t borrow anywhere else. But that 30% tax credit was sunsetting. In 2024 it’d have been gone. The IRA restored the tax credit for every solar project to 30% for a full decade, providing a decade of stability to the industry. In this time advances will continue to be made that further improve the case for everyone getting solar. This can and will be an example to the world. Commercial Projects Receive Huge Federal Subsidies Commercial systems, which are typically a lot larger than a home system and thereby reduce carbon emissions far more, now get a massive amount more. Any commercially operated system, so for commercial buildings and for residential systems where an investor builds the systems and charges for the power or some flat monthly payment. Like if you own a rental house and install solar on it. The system will pay for itself in a few years or less. The commercial 30% ITC now has the potential for 10% Adders, to make it 40%, 50% even 60%. One is if the contractor pays Fair Wages, another if the project has at least 40% US content. These are both doable. Solar’s Bonus Depreciation has always been worth a lot. Depending on the investor’s tax rate it’s worth an average of 22% in tax savings (details get to about that number). This means upwards of 72%, even 82%, of project cost can come back in the first year. Tribal lands, deservedly, get a big set of additional incentives. As do low-income new construction, zero carbon buildings, “energy communities” and brownfields. Federal guidance on these, to nail down which projects qualify, is still being released but most are now well defined. 10% here and 20% there and you’re getting toward 100% of project cost. This is part of the worksheet I built for modeling projects: FEDERAL TAX INCENTIVES See D28- PDF for SEIA Chart & Definitions Percentage of Total Cost ITC 30% Adder - Fair Wages <1MW 10% Adder - Energy Community 1MW 10% Adder - LIHTC- Low Income housing 4% Adder - Low-Income & Tribal <1MW 10% Adder - Domestic Content 1MW 10% Adder - Zero Carbon 10% Brownfields 20% Adder - Low-Income & Tribal Resi New Bldg 20% Adder - Low-Income & Tribal Eco Benefit 20% New Market Tax Credit based on CEE allocation 39% Bonus Depreciation 24% USDA REAP Grant 40% For the first time non-profits can earn the ITC. Since they don’t pay taxes they were ineligible. This includes multifamily HOAs. Now the Department of Treasury will pay cash for the ITC value- that 30, 40, 50 or 60%. They haven’t yet launched the web site to file for this Direct Payment program, but it’ll happen soon. My Team modeled a condo HOA in the mountains of Colorado recently where 50% of their $380,000 common meter project was Direct Pay. Or they can set up an LLC with the members and get 96% of the project covered, passed through to the participating members on their individual tax returns. If a business is in a rural location, and there’s a map on the USDA web site to pinpoint an eligible location, the longstanding USDA Rural Electrification aka REAP Grant, is increased from 25 to 40% of project cost, up to $1 million. Professional grant writers know the rules, so you’d pay one to write the grant to be reasonably certain it’ll be awarded. I’ve modeled some sample projects where the full cost of the project or more is covered. You’d have to pay & document what you spent then get it all back in the first year. eligibility.sc.egov.usda.gov/... As mentioned above, there are also incentives for low-income housing, building new housing that has carbon free energy production on site, and a variety of cash rebates available from Federal funding sent to the States. US manufacturing of solar equipment gets a bunch of these incentives, whether in the form of tax credits or ongoing production-based incentives. The Department of Energy has billions for loan guarantees to cause more US manufacturing of renewable energy equipment and for some types of projects. This is, obviously just a snapshot. Like everyone in the industry I haven’t nailed it all down yet. It’s Still About the Money, But... I now have hope, for the first time, that we can avoid the worst of the coming climate catastrophes. The USA will now lead by example, giving strength to the push for all nations to take decisive action. You can take action yourself. If you own property put solar on it and enjoy all the incentives. If you rent, advocate for the owners to do the same. The non-profit I founded, Zero Carbon Communities, advises pro bono. Get an electric car, regardless. That in itself reduces carbon emissions and other pollution. [END] --- [1] Url: https://www.dailykos.com/stories/2023/4/23/2165432/-Why-the-Inflation-Reduction-Act-Gives-Me-Hope Published and (C) by Daily Kos Content appears here under this condition or license: Site content may be used for any purpose without permission unless otherwise specified. via Magical.Fish Gopher News Feeds: gopher://magical.fish/1/feeds/news/dailykos/