2022 Inflation Reduction Act and Impact on Solar Customers

November 19, 2022

2022 Inflation Reduction Act and Impact on Solar Customers

As we now understand the impact global warming can have on our planet, the race is on across the world to come up with a cleaner, more sustainable option for powering daily life. For many years there has been an increased focus on clean energy across the U.S, and in some respects, solar energy has very much led the way. The implementation of solar panels in both residential and commercial roof space has been encouraged by the American government in the form of clean energy tax credits, which has seen rooftops with both solar panels and battery equipment installed receive an amount of relief come tax season. However, with the increased pressure on all countries to adopt as many cleaner energy alternatives as possible, the Biden administration has pledged to take American efforts even further across the board.

2022 Inflation Reduction Act and Impact on Solar Customers

As we now understand the impact global warming can have on our planet, the race is on across the world to come up with a cleaner, more sustainable option for powering daily life. For many years there has been an increased focus on clean energy across the U.S, and in some respects, solar energy has very much led the way. The implementation of solar panels in both residential and commercial roof space has been encouraged by the American government in the form of clean energy tax credits, which has seen rooftops with both solar panels and battery equipment installed receive an amount of relief come tax season. However, with the increased pressure on all countries to adopt as many cleaner energy alternatives as possible, the Biden administration has pledged to take American efforts even further across the board.

What is The New Act and Why Did It Take Place

On August 16th 2022, the United States Inflation Reduction Act was made law. The largest clean energy investment in American history, this act invests a huge $369 billion in spending to reduce technology costs and barriers associated with developing and deploying renewable energy, strengthening energy resilience, and reducing emissions by 40% across the United States by 2030. But with such a large-scale aim, the potential implications for renewable energy are wide-reaching. This is a  law that sees not only current criteria being extended to further encourage but also new additions to make sure all areas of clean living is more cost effective for use in everyday life but does it go far enough and how have they specifically supported those looking to make the change to a renewable energy source for their homes in the form of solar panels. 

Initial estimates from American Clean Power have previously predicted that the new regulations could increase clean power to the U.S by 525-550 gigawatts. And create around 500,000 clean energy jobs across the United States helping to fight unemployment.

Incentivizing domestic production of clean energy within the U.S is one of the main priorities set out by the Reduction Act, and this will be encouraged by increasing the benefits available for those installing solar panels and battery equipment on their properties.

Major Changes and Caps Placed on Tax Payers When Claiming

Before this law came into place, the current solar investment tax credit of 30% was due to be reduced from 26% in 2022 to 22% in 2023 before disappearing entirely after that point. This law brings with it a new assurance that, effective immediately, it is back up to 30% for all solar projects installed from 2022 to the end of 2032. Therefore, residentially and commercially installed solar panels can reap a 30% tax benefit on installed solar and battery storage equipment. The provision will then decrease to 26% in 2033 and 22% in 2034. 

That said, if you’ve been thinking about installing a set of solar panels to your rooftop, you are likely looking at an installation date in 2023 due to the involved planning and scheduling that will be required from both the company and local government. Therefore, your household will automatically benefit from the increased percentage of tax relief come next tax season. It is also worth knowing that there is no limit on the amount that can be claimed and the majority of costs from equipment to installation and fixings can be claimed for at the end of the process. Further information can be gained by an independent advisor before you agree to the work being carried out. 

This increased incentive to install solar panels will also indirectly affect all consumers throughout the U.S. For instance, any market that experiences improved equipment, technology, and sustainable energy will be future-proof and not impacted by rising fossil fuel costs. 

Although we are still a fair way off eradicating fossil fuels from our country’s power sources entirely and still require the support of fossil fuels, this law should go much further in helping the United States. to achieve the specific target set out in the Paris Agreement (50% on greenhouse gas emissions reductions by the year 2030) while also having a positive impact on those looking to enter the solar energy market.