Thought Leadership

What the Inflation Reduction Act Means for the Renewable Energy Industry

U.S. President Biden recently signed the most significant climate legislation in American history: the Inflation Reduction Act. The Act will invest in domestic energy production and manufacturing, and, by 2030, aims to reduce carbon emissions by roughly 40 percent.

The legislation will set aside $369 billion over ten years to support renewable energy, pollution reduction, and environmental justice. It includes a comprehensive list of tax breaks for electric vehicles, heat pumps, batteries, nuclear power, clean hydrogen generation, wind and solar energy, and much more.

What the Climate Bill Means for Solar & Wind Energy

One of the most substantial departures from the previous tax credit legislation includes a 10-year extension of the Production Tax Credit (PTC) and Investment Tax Credit (ITC) programs, which have been the backbone of the nation's solar and wind power growth to date. This change would mark one of the most significant boosts for wind and solar power in the country.

Offshore wind turbines

According to the provisions of the bill, solar projects would be able to access the PTC for the first time. The PTC provides tax credits based on the power produced over ten years, as opposed to the ITC, which enables project investors to claim a one-time tax credit of 30% of a project's value. Given that the cost of solar projects is decreasing relative to the value of the power they will provide over time, this might give solar projects a more lucrative tax credit value.

Off-shore wind power projects also have incentive tax credit provisions in the Inflation Reduction Act. 

Investing in Facilities, Renewable Energy Manufacturing, and Energy Storage

The Inflation Reduction Act also aims to support the growth of new domestic manufacturing capacities and, presumably, offer relief from tariffs and future duties imposed on PV modules and other equipment, mainly those imported from China. 

This includes a $10 billion investment tax credit to build clean technology manufacturing facilities, including factories for wind turbines, solar panels, and electric vehicles (EVs).

The measure also grants the energy storage sector access to the ITC for stand-alone energy storage investments, ranging from battery projects to thermal energy storage systems — something the sector has been requesting for years. Only batteries directly charged by solar installations have been eligible for the ITC up to this point, which has restricted the federal government's ability to fund a technology crucial to integrating fluctuating wind and solar power into the grid.

Other Investments in Decarbonization and Zero Emissions 

Other industries may also soon see the benefits to shifting to low carbon or carbon neutral energy sources. These benefits range from investing in reducing emissions from some of the largest emitters like chemical, steel, and cement plants, to grants to convert to clean commercial vehicles in all parts of the transportation sector.

So, what can you do to ensure your existing or new renewable energy project can benefit from the available resources?

The Recipe for A Successful Renewable Energy Project

This bill will undoubtedly mean that we can expect renewable energy to grow significantly in the coming years. In this regard, during the extremely high rate of development and construction of new renewable energy projects, it is vital to remember the overall success of such a project depends on the care, detail, and planning done during the initial stages. For example, a risk assessment can ensure the project’s long-term reliability and stability.

Renewable energy sector environmental and climate engineering services

Ways to ensure a successful project in the planning stage and during operation include:

  • Assessment of sites selected for the construction of projects
  • Environmental impact assessments
  • Climate studies and assessment of all associated risks
  • Study of the impact of weather factors on the operation of a solar or wind power plant and the assessment of all related risks
  • Testing equipment used in renewable energy projects for wind and snow loads
  • Measuring noise levels from existing equipment, as well as noise generated during construction

Ultimately, working with an experienced consultant in order to correctly assess the technical and economic feasibility before starting to implement the respective project will increase the chances of success. To learn more about improving the planning and operational elements of your renewable energy project, visit our renewable energy page.