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Solar Installation Cost CT: What You Need to Know About the Inflation Reduction Act
On August 16th, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. With a budget of $700 billion, it is the most significant investment to combat climate change and can save on energy bills for millions of American homeowners and businesses. This article outlines everything you need to know about the IRA and its clean energy benefits.
Inflation Reduction Act (IRA)
The IRA is designed to reduce the nation’s deficit and decrease inflation, with provisions for domestic manufacturing investment, prescription drug cost reduction, an expansion of the Affordable Care Act, and a historic investment in combating climate change. About $369 billion are invested in clean energy and climate action initiatives.
Existing and new clean energy initiatives, including tax credits and rebates, will be improved and altered through the IRA. Therefore, the bill benefits those who want to decrease their reliance on the grid, reduce their carbon footprint, and save money.
Clean Energy Benefits of the Inflation Reduction Act
The extended federal Solar Tax Credit, now known as the Clean Energy Credit, is potentially the most significant win for the solar industry and homeowners. The IRA extends the tax credit to 2035 and restores the 30% incentive for qualified solar installations until 2033.
Solar Panel Installations
The new Clean Energy Credit structure under the IRA includes:
- 2022 – 2032: 30% tax credit
- 2033: 26% tax credit
- 2034: 22% tax credit
- 2035: tax credit expires for residential solar energy systems
Energy Storage Systems
Stand-alone energy storage systems now qualify for the tax credit, irrespective of whether they are paired with solar panels or not. Battery storage systems are subject to the same incentive schedule as solar panel installations. Therefore, any energy storage system installed before the end of 2032 qualifies for the tax credit, equivalent to 30% of the installation costs. The tax credit decreases to 26% in 2033 and 22% in 2034 before expiring in 2035.
Commercial property battery storage projects will receive the full 30% tax credit when their size exceeds 5 kWh and must fulfill the same wage requirements as commercial solar projects. On the other hand, commercial solar projects will receive a 30% tax credit until 2025, after which its tax credits continuation will depend on how successfully the US Department of Treasury reaches a 75% emission reduction below 2022 levels.
Under the IRA, commercial solar projects can also qualify for the production tax credit (PTC), which was previously only available for wind projects. This credit is based on production levels rather than the system’s upfront cost, which benefits owners of solar projects that generate a lot of energy but are relatively inexpensive to build.
Financing for Commercial Solar Installations
Before the IRA’s passage, organizations could not claim the ITC tax credit unless they had sufficient tax liability. However, the IRA offers a direct payment option for commercial solar installations. This will improve the affordability of tax-exempt entities’ installations once efficiency standards are defined more specifically.
Clean Energy Benefits Summarized
Overall, the IRA aims to reduce greenhouse gases by approximately 40%, save an average family over $1000 of annual incentives, and create millions of jobs. The White House estimates that 7.5 million families can install solar panels on their properties. The future looks brighter for homeowners, businesses, non-profit organizations, and the environment.
At Solar Energy CT, we’re committed to improving the way you power your home or business and maximizing your solar savings. Contact us today for a free customized quote.