If you keep up with national politics, you likely heard that Congress just passed a landmark piece of legislation called the 2022 Inflation Reduction Act (IRA). The large spending bill has a ton of implications for renewable energy and its role in combating climate change, including for the solar power industry.
Addressing climate change, in fact, is one of the main priorities of the legislation, alongside healthcare and tax reform.
Let’s discuss the intricacies of the IRA and how it will impact solar panel owners and the economy and environment more broadly.
Federal investment in tackling climate change
Critics of the US government have rightfully lamented its slow response to climate change.
Via the Inflation Reduction Act, Congress has invested more than $300 billion in climate reform and clean energy, the largest-ever investment of its kind. Activists had originally proposed $555 billion in such spending, but that figure took a haircut through the negotiating process.
Of the $300 billion allocated to dealing with climate change, $60 billion is allocated to advancing and building clean energy infrastructure, including wind and solar power.
Potential cost savings to energy consumers + reduced greenhouse emissions
Some analyses of the impact of the Act, including by the New York Times, have indicated that it has the potential to cut greenhouse gas emissions by as much as 40% by 2030, which would bring levels down to below 2005 output.
The White House promised in a formal statement that these investments would “lower families’ energy costs by hundreds of dollars each year. “
Across the nonprofit sector and energy industry, analysts are bullish on the beneficial long-term prospects for energy independence fostered by the provisions in the Act.
Abigail Ross Hopper, CEO of the Solar Energy Industries Association, summarized the optimistic outlook:
“Today is a monumental day for America’s clean energy progress and global climate leadership. With the passage of the Inflation Reduction Act in the Senate, solar and storage companies are one step closer to having the business certainty they need to make the long-term investments that decarbonize the electric grid and create millions of new career opportunities in cities and towns across the country.”
Inflation Reduction Act extends investment tax credit (ITC) for solar panel owners
The Inflation Reduction Act contains extensive incentives for property owners to install solar panels at their residences and businesses.
Specifically of interest here is the extension of Section 48 of the US Tax Code covering the investment tax credit (ITC) for solar panel owners in the United States, which allows homeowners to write off a sizable portion (about a quarter) of their solar panel investment on their federal taxes.
The impact of the ITC is hard to overstate. Industry groups estimate that “since the ITC was enacted in 2006, the U.S. solar industry has grown by more than 10,000% – creating hundreds of thousands of jobs and investing billions of dollars in the U.S. economy in the process.”
Accordingly, the solar ITC has positive reverberating effects throughout the economy, not just for individual property owners. That’s why advocacy groups were so adamant that it be extended.
The ITC was previously set to expire in 2023, so homeowners now have more time (until the end of 2024) to get started on their project and save money on their taxes.
Lobbying groups initially proposed and promoted an ITC extension into 2026, but the end date of 2024 was the compromise position.
Add the federal tax credits onto the potential to sell back your excess energy to the power grid via net metering, as well as 100% state property tax exemption on solar power products and the potential boost to your property value, and installing a solar panel system in your Florida home or business makes a ton of financial sense.
Learn more about how the ITC applies to Florida property owners who install solar panels.
Economic impact of the Inflation Reduction Act
The benefits of the Act extend beyond the cost savings to solar panel owners and the climate. There are larger implications for the economy as a whole, with the BlueGreen Alliance estimating the creation of 9 million jobs in the renewable energy sector over the next decade.
In addition to the ITC, the IRA also extended the production tax credit (PTC) rate of 1.5 cents/kWh, another important tax incentive program. The PTC applies to companies that generate energy from renewable sources, including solar.
Given the economic impacts of COVID-19, the gas crisis driven by the Ukraine War, and other factors, we can use all the economic boosts we can get. The IRA delivers the goods.
Environmental impacts of the Inflation Reduction Act
The aforementioned Abigail Ross Hopper, president and CEO of Solar Energy Industries Association (SEIA), has publicly declared her organization’s aim to make solar power account for 30% of all US electricity production by 2030 – a lofty goal helped along substantially by the IRA.
Experts cite the transition to renewable energy resources, away from conventional carbon-based fuels like coal and gas, as essential to prevent the worst impacts of man-made climate change.
Factoring the renewed ITC tax credit savings into the other financial benefits of solar panel systems
At Compass Solar, we were closely monitoring the legislative process as the Inflation Reduction Act moved through Congress. We were specifically focused on the ITC tax credit extension, as it impacts all of our customers and is one of the bill’s primary financial benefits related to solar power.
Accordingly, we were thrilled to see the extension pushed through – both for the affordability of our products and for the massive environmental benefits that we’ll reap as a society.
With the passage of the IRA, solar panels remain one of the best investments a homeowner or business owner can make. Learn more about how solar systems compare to other popular investments
Compass Solar offers 0% financing to both business owners and homeowners who qualify, so you don’t have to worry about the burden of a high upfront cost. Read more about our financing programs:
To reiterate a previous point we hit on earlier, you can also put your solar panel system to work for you. If your solar panel system generates excess energy (which often occurs in the Sunshine State), you can potentially generate income selling your unused excess energy back to the electrical grid
Arguably, the single greatest benefit of solar panel systems is that your power will never run out as long as the sun rises – the sun being the Earth’s only renewable energy source.
Learn more about potential cost savings from Compass Solar
We’re always eager to share the potential cost savings – and other benefits – of solar power for small businesses and homeowners in the Northwest Florida area. To learn more, contact us.
In the meanwhile, have a look at our top reasons to go solar.