October 21, 2022

How the Inflation Reduction Act Affects Solar Energy

The Inflation Reduction Act of 2022 has been signed by the president and is now law after an expedited journey through the House and Senate. The act, which is the largest of its kind, directs almost $370 billion toward energy security, clean energy incentives, and climate change-related programs for the next 10 years. The plan aims to reduce U.S. reliance on high-emissions gas and oil infrastructure by reducing the cost of renewable energy through tax breaks.

The act is unprecedented in scale and will have a profoundly positive effect on the solar energy industry — from manufacturers all the way to end consumers. Let’s examine the top three biggest impacts from the Inflation Reduction Act and break down what this means for anyone looking to go solar in California.

Extended Tax Credits

For most home and business owners considering an investment in a solar energy system, the first question about the IR Act is what it means for tax incentives. The most important thing to know is that prior to the act, the federal investment tax credit was in limbo. For systems installed by the end of 2022, the ITC was formerly 26%, and the program would have ended the same year. Thanks to the IR Act, the solar ITC has been bumped up to a full 30%. Additionally:

  • The ITC will remain at 30% through 2032.
  • The higher ITC rate is retroactively applicable to any system installed after 2021.
  • The new ITC expressly applies to solar batteries, even if not completed at the same time as system installation.

This is a huge development for the industry as a whole because it eliminates the uncertainty many solar customers have been facing when it comes to incentives. Thanks to the extended tax credit, Simply Solar will be able to continue saving our customers thousands on their solar energy systems in the decade to come.

A full 30% tax credit on solar energy systems is going to bring solar within reach of millions more home and business owners and will be a significant component in the push to reduce the nation’s emissions.

Expanded Solar Panel Production

The Inflation Reduction Act also contains an Advanced Manufacturing Production tax credit that extends to manufacturers of clean energy products and tech — going so far as to extend incentives to their supply chains. In terms of solar energy, the tax credit allows up to $35 per kWh for each battery cell and $10 per battery module. There are also credits for solar modules, including:

  • Solar cells
  • Solar wagers
  • Solar grade polysilicon
  • Polymeric backsheet
  • Solar modules

Inverters also receive credits for components including:

  • Central inverters
  • Utility inverters
  • Commercial inverters
  • Residential inverters
  • Microinverters

Torque tubes and structural fasteners required for racking also receive credit. Offering tax credits for the key components of solar panels, racking components, and inverters is expected to supercharge the domestic manufacture of solar panels. In addition to ensuring better quality and reducing reliance on imported panels, more robust domestic manufacturing will bring prices down for the end consumer.

Electrification Incentives

A significant focus of the Inflation Reduction Act is reducing emissions by offering home energy rebate programs to incentivize the purchase of electric appliances, and offering discounts at the point of sale for new and used electric vehicles. When paired with a solar energy system and battery backup, electric appliances and EVs become even more appealing. If you could get money back to switch from a gas boiler to an electric one powered by your home’s solar energy system, wouldn’t you? Likewise, who would say no to an affordable EV they could charge using their home’s solar-powered battery storage system?

It’s also worth noting that most electric HVAC systems, water heaters, and heat pumps are covered by the ITC, so going all-electric and powering your home with solar is the most effective way to take advantage of the Inflation Reduction Act’s savings while reducing your energy bills at the same time.

Seize the Opportunity With Simply Solar

The Inflation Reduction Act is poised to revolutionize the solar industry in the United States by making solar energy an affordable investment for millions. Prospective residential and commercial solar customers in California are poised to benefit from multiple incentives in 2022, including:

  • Solar storage tax credit of 15%, up to $1,000.
  • Exemption from property taxes on additional value of solar installation.
  • SMART program incentives for installing battery storage alongside a solar energy system.
  • Net metering with time-of-use tariff.
  • DAC-SASH program offering low-cost solar to low-income families.
  • Self Generation Incentive Program (SGIP) for systems smaller than 10 kW.

There has never been a better time to save money and gain energy independence with a solar energy system thanks to the Inflation Reduction Act. If you’re interested in solar energy for your California home or business, Simply Solar is ready to take on your project with professionalism, skill, and the highest quality components on the market.

Call us today at (707) 285-7037 or contact us online to set up a solar energy assessment and find out just how much you can save with available incentives.

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