One Year Later, The Inflation Reduction Act Is Powering a Green Energy Revolution
As we approach the one-year anniversary of President Joe Biden signing the Inflation Reduction Act (IRA), we are reminded that we are working with the most expansive and significant climate legislation in US history.
Among other economic priorities, the bill aims to expand renewable energy production, fund the development of technologies to remove carbon dioxide from the atmosphere, and provide incentives for electric vehicles and clean energy.
Since its signing, IRA has been touted as the most meaningful federal investment into developing and expanding the domestic green economy. It includes numerous climate-focused initiatives that allocate hundreds of billions of dollars to help usher in a green energy future.
Now, as states and companies look to allocate these resources in the most effective and impactful manner, the real work begins.
Unpacking the Act: Investment and Production Tax Credits
For environmentally-conscious consumers and companies, the key provisions of interest within IRA are the Investment and Production Tax Credits that help incentivize the development and deployment of renewable energy technologies. For qualifying companies, these can offset taxes owed by investors and manufacturers, dollar-for-dollar, on their tax filings.
The Investment Tax Credit allows taxpayers to claim a percentage of a project’s costs on their returns, drastically lowering the price of a renewable energy project, while the Production Tax Credit allows companies that produce renewable energy to get a credit on their taxes based on how much power they produce. These credits reduce the taxes they have to pay, which helps them save money and makes it easier for them to continue producing renewable energy.
Together, these tax incentives make renewable energy solutions more affordable and accessible when we need them most.
Notably, IRA tax incentives play a crucial role in addressing the persistent supply issue in the US, reducing our dependence on imports, particularly from China. While importing from China was once an effective, even encouraged, strategy when our trade relations were more harmonious, recent geopolitical tensions and forced labor practices are prompting governments and companies to cultivate supply elsewhere.
At the same time, IRA aims to revitalize the middle class through investment in local communities by creating new well-paying jobs requiring a range of skills from installation and maintenance of renewable energy systems to roles in administration and project planning. This development brings much-needed employment to low-income communities and opens avenues for skills development and upward mobility.
Even before the IRA was signed into law, the green energy sector added more than 300,000 jobs in 2022, which will continue to increase as renewable energy becomes more accessible to more people.
For instance, Caelux is proud to be able to build a domestic manufacturing company right here in Los Angeles, where we leverage the power of local investments to make a global impact.
As renewable energy providers expand their operations under IRA's provisions, they bring sustainable energy sources and substantial employment opportunities. These jobs, from renewable system installation and maintenance to administrative and planning roles, can meaningfully stimulate the local economy, provide opportunities for skills development, and enhance social mobility.
Taken together, IRA is an expansive bill, bringing urgent financial investment and other incentives that can help the US usher in a green energy future that benefits the country, communities, families, and individuals.
State and Local Implementation: A Complicated Puzzle
As part of a comprehensive strategy to address inflation and promote energy equity, IRA is a crucial policy instrument on the national level. However, successful implementation and impact will vary based on state and local government actions, as well as the private sector's willingness to accelerate investments and lead the charge on innovation.
Local government support in implementing IRA involves creating favorable regulatory environments, creating state-level funding opportunities, providing complementary incentives, and ensuring efficient processing of permits and other administrative tasks. Meanwhile, municipal agencies and private sector companies alike are tasked with preparing their workforce to capitalize on these new opportunities through initiatives such as vocational training programs in renewable energy fields.
State and local governments can foster partnerships between renewable energy providers, community organizations, and educational institutions to ensure that the renewable energy sector’s growth is aligned with local needs and capacities. Because it is critical to ensure that the benefits of IRA are deeply rooted in communities, more stakeholders should be brought to the table from the outset to help guide strategy development and implementation.
The Future for Caelux and the Solar Sector
At Caelux, we pride ourselves on being proactive. Today, as we stand at the threshold of an exciting new era in renewable energy, this quality is more critical than ever. IRA presents an “all hands on deck” opportunity that can only achieve its full potential when businesses, governments, and communities unite and shape a future where energy is sustainable, affordable, and equitable. The renewable energy industry is entering a rapid growth stage, and these expanded opportunities will come with new challenges that companies will have to address for the first time.
To this end, Caelux is committed to contributing innovative ideas, sharing our expertise, and harnessing the trends and levers at our disposal. We are already hard at work, making strides towards a greener future. This is, however, a journey we must undertake with others if we want all to benefit from the IRA.
We look forward to working closely with policymakers and key stakeholders in growing our business and building out our renewable energy programs.