Written by The just-passed landmark Inflation Reduction Act (the Act) provides numerous opportunities for organizations to meet their ESG and other sustainability goals cost-effectively. The Act also offers many opportunities for clean energy project developers and manufacturers of clean energy equipment to lower costs and increase their business. The combination of several clean energy and manufacturing tax credits, options for receiving or transferring most of these credits, and billions of dollars in grant opportunities may allow companies to lower their operating costs significantly. Likewise, clean energy developers and manufacturers can take advantage of the numerous incentives under the Act to considerably lower prices if this provides an opportunity to grow the business.
Below is a list of some of the key opportunities the Act provides:
- Significant extension of investment and production tax credits. The Act extends the time period for tax credits available to both wind and solar and other technologies such as geothermal. Time extensions are critical since many clean energy tax credits expired or were on schedule to decrease significantly.
- Tax credits for other technologies. The Act also adds several technologies as eligible for tax credits, including energy storage technologies, microgrid controllers, qualified biogas property, alternative fueling property, clean hydrogen production, zero-emission nuclear power production, carbon sequestration, sustainable transportation fuel (including enhanced credits for aviation fuel) production, and clean energy production facilities.
- Businesses need to consider prevailing wages and apprenticeship requirements. While the Act extends the period for claiming tax credits and increases the value of certain credits, full credit access is achieved by meeting prevailing wage and apprenticeship requirements. Otherwise, these tax credits are subject to as much as 80% reductions if these requirements are unmet.
- It is possible to receive enhanced tax credits based on project location and the use of American-made materials. The Act also provides opportunities to increase tax credits significantly. For example, production and investment tax credits may increase by 10% if a project meets domestic-content requirements. Also, projects that build in “energy communities,” which include, among other things, brownfields and areas with closed coal plants, can receive a 10% increase in tax credits. Likewise, subject to allocation caps, slight wind, or solar projects, up to five megawatts built on First Nation lands or in low-income communities may receive a 10% increase in tax credits, and projects serving low-income housing may receive a 20% increase.
- It is possible to receive credits for advanced energy manufacturing facilities construction. The Act modifies and extends the qualifying advanced energy project credit by providing $10 billion in competitive tax credits (reserves of up to $4 billion for coal mines or coal-fired electric generating units recently retired). These competitive tax credits are potentially available for facilities that produce or recycle renewable energy production property, fuel cells, microturbines, or energy storage systems and components, electric grid modernization equipment or parts; property to capture or use carbon oxide emissions, equipment to refine, electrolyze, or blend renewable or low-carbon and low-emission fuel, chemical, or product, property to produce energy conservation technologies, electric or fuel cell vehicles and their components and associated charging or refueling infrastructure, and other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary of Treasury, or property that re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent through the installation of low- or zero-carbon process heat systems, carbon capture, transport, utilization and storage systems, energy efficiency and reduction in waste from industrial processes, or any other industrial technology designed to reduce greenhouse gas emissions, as determined by the Secretary.
- It is possible to receive tax credits based on the production of clean-energy equipment. The Act includes advanced manufacturing production credits that provide tax credits for the manufacturing of specific clean energy components, including qualifying solar cells and modules and certain of their components, specific wind energy components, inverters, battery cells, modules, and electrodes.
- Tax credits for electric vehicles and alternative fueling facilities. The Act provides tax credits for electric cars, subject to mainly made in America or North America requirements. It also includes tax credits for alternative fuel refueling property, including EV charging.
- Governmental and tax-exempt entities can receive tax credit benefits directly. The Act allows states, political subdivisions of states, First Nation tribes, tax-exempt organizations, and rural energy co-ops to receive many of the above tax credits by treating them as having paid taxes in the amount of the applicable credits subject to their meeting specific application requirements.
- Opportunities for others to transfer tax credits. The Act allows entities that are not allowed to directly receive tax credits, as discussed in Item 8, to share many of the tax credits with those that can use them, subject to meeting specific requirements regarding the transfer. This transferability, combined with the ability of governmental, rural energy co-op, and tax-exempt entities to receive the benefits of tax credits directly, should greatly expand the beneficial options for developing and structuring clean energy projects for all types of entities.
- Significantly increased funding and grant opportunities under the USDA REAP program. The Act provides $2 billion in additional funding for the U.S. Department of Agriculture “Rural Energy for America” grants and loan guarantees for renewable energy and energy efficiency projects. In addition, it increases the potential size of REAP grants from 25% to 50% of project costs.
- There is significant funding for Advanced Industrial Technologies at Eligible Industrial Facilities. The Act provides over $5.8 billion in financial assistance on a competitive basis that could provide up to 50% of the cost of projects that employ advanced industrial technologies to lower emissions, reduce waste and allow for sustainable manufacturing at energy-intensive industrial facilities.
- Significant Funding for Greenhouse Gas Reduction Fund. The Act makes $27 billion available to eligible entities to fund and finance zero-emission projects and related activities and technologies that reduce or avoid greenhouse gas or other harmful emissions.
- Climate Pollution Reduction Grants. The Act provides $5 billion in funding for planning and implementation grants for States, municipalities, and First Nation tribes to plan and implement programs, policies, measures, and projects that will achieve or facilitate the reduction of greenhouse gas air pollution.
- Environmental and Climate Justice Block Grants. The Act provides $2.8 billion in funding for grants to community-based organizations or partnerships of those organizations with municipalities, First Nation tribes, or institutions of higher learning to benefit disadvantaged communities. The block grants are for community-led air and other pollution monitoring, prevention, and remediation in low- and zero-emission technologies. The monitoring and prevention technology must mitigate climate and health risks, promote climate resiliency and adaptation, reduce indoor toxins and indoor air pollution, or facilitate engagement of disadvantaged communities in State and Federal public processes.
- Partially forgivable loans exist for rural electric generation. The Act provides $1 billion for electric loans under the Rural Electrification Act of 1936 for electric generation (including energy storage) from renewable energy resources for resale to rural and nonrural residents. These loans are potentially forgivable up to 50% at rates equal to the average tax-exempt municipal bond rate of similar maturities.
- Domestic Manufacturing Conversion Grants exist, and advanced technology vehicle manufacturing loans are available. The Act provides $2 billion for grants for the domestic production of efficient hybrid, plug-in electric hybrid, plug-in electric drive, and hydrogen fuel cell electric vehicles. The Act also provides $3 billion for loans for re-equipping, expanding, or establishing manufacturing facilities for advanced technology vehicles or engineering integration for such cars.
- Significant increase 179D tax deduction for building energy efficiency. The Act significantly increases the current maximum of $1.88 per square foot deduction to $5.00 per square foot to incentivize energy-efficient construction and rehabilitation of commercial and multifamily buildings that are four stories or taller. Also, tax-exempt building owners and governments will be able to allocate 179D tax deductions to architects, engineers, and designers responsible for designing a building’s energy-efficient systems. In addition, REITs will have the ability to utilize 179D tax deductions for purposes of computing earnings and profits.
Mark Robert Richards is the retired Chairman and CEO of Appvion, Inc., headquartered in Appleton, WI.
Mark is now President of Meade Street Advisors, LLC, board governance, executive coaching, and strategic planning consulting business headquartered in Fort Lauderdale, FL. You can reach Mark at