Some of the items in this bill, like certain tax credits, go into effect retroactively upon passage. For example, if you installed solar on your roof anytime in 2022, you would be eligible for the 30% tax credit instead of the current rate of 26%. Other items in the bill are drawn out over the next 10 years, like the extension of the Production Tax Credit. We should start to see more information about taking advantage of this bill in the coming months as it is interpreted by the states, agencies, businesses and individuals entitled to the benefits.
What the Inflation Reduction Act means for Minnesota’s clean energy future
What is the Inflation Reduction Act?
The newly passed Inflation Reduction Act of 2022 makes a historic down payment on deficit reduction to fight inflation, will bring down consumer energy costs, increase American energy security, and reduce carbon emissions by roughly 40 percent by 2030.
This $370 billion clean energy investment represents the single biggest climate investment in U.S. history. The bill also includes two new, major tax provisions impacting the IRS and corporate taxes and includes modifications to healthcare, including bettering the care for Medicare recipients and extending Affordable Care Act (ACA) premium subsidies to 2025.
This bill was passed on August 12, 2022 and will be signed into law by the President in the coming weeks.
What energy provisions are in this bill?
- $9 billion in consumer home energy rebate programs, focused on low income consumers, to electrify home appliances and for energy efficient retrofits.
- 10 years of consumer tax credits to make homes energy efficient and run on clean energy, making heat pumps, rooftop solar, electric HVAC and water heaters more affordable.
- $4,000 consumer tax credit for lower/middle income individuals to buy used clean vehicles, and up to $7,500 tax credit to buy new clean vehicles.
- $1 billion grant program to make affordable housing more energy efficient.
- Tax credits for clean sources of electricity and energy storage (10-year extension of the ITC and PTC & energy storage now qualifies) and roughly $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity.
- Both the ITC and PTC are transitioning to becoming tech-neutral in 2025. The bill also makes some changes to the formula, including making an up to 40% credit available if items such as prevailing wage, apprenticeship and location-specific criteria are met.
- Tax credits and grants for clean fuels and clean commercial vehicles as well as to reduce emissions from industrial manufacturing processes.
- $27 billion clean energy technology accelerator to support deployment of technologies to reduce emissions, especially in disadvantaged communities.
- Production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing, estimated to invest $30 billion.
- $10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels.
- Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country.
- $2 billion for National Labs to accelerate breakthrough energy research.
- $3 billion for Environmental and Climate Justice Block Grants to invest in community led projects in disadvantaged communities and community capacity building centers.
- $3 billion in Grants to Reduce Air Pollution at Ports that support the purchase and installation of zero-emission equipment and technology at ports.
- $1 billion for clean heavy-duty vehicles, like school and transit buses and garbage trucks.
- More than $20 billion to support climate-smart agriculture practices.
- $5 billion in grants to support healthy, fire resilient forests, forest conservation and urban tree planting.
- Tax credits and grants to support the domestic production of biofuels, and to build the infrastructure needed for sustainable aviation fuel and other biofuels.
- $2.6 billion in grants to conserve and restore coastal habitats and protect communities that depend on those habitats.
What does the bill mean for Minnesota?
Analysis from national business group Advanced Energy Economy (AEE) finds the Act, when combined with last year’s bipartisan Infrastructure Act, will deliver $68 billion in clean energy and transportation for Minnesota—an eight-fold return on the dollars in this Act. The analysis also shows the job creation potential is vast – creating tens of thousands of good-paying jobs in clean energy, transportation, and manufacturing. It will also save Minnesotans roughly $3.2 billion on energy and transportation costs, combating inflation.
- Between now and 2030, Minnesota is expected to receive $8.5 billion in investments for large-scale sustainable electricity generation and storage, according to the White House.
- Solar uptake projections estimate that 180,000 Minnesota households will install rooftop solar panels as a result of the no-income limit solar installation tax credits.
- Grants to help local governments adopt latest building energy codes will save the average new homeowner in Minnesota 9.1% on utility bills.
- 860,000 homes and businesses, primarily in rural areas, will benefit from the direct-pay clean energy tax credits for Minnesota’s electric cooperatives, boosting resiliency, reliability, and efficiency.
What does it mean for our clean energy businesses?
Specific elements in the plan will deliver direct and tangible benefits to energy efficiency and clean energy businesses, and increase their ability to create jobs and spread economic growth across the state.
These elements include a range of tax credits including the extension of the ITC and the PTC, along with the expansion of those credits to include new technologies including battery storage and green hydrogen.
Consumer tax credits and grants to encourage the purchase of home energy efficiency products and upgrades including rooftop solar will likewise have a positive effect on Minnesota energy efficiency and clean energy businesses.
CEEM continues to monitor this legislation and will update members when more information about how to capture some of these funds becomes available.