Inflation Reduction Act 2022 Now A Law

US President Joe Biden Takes ‘Most Aggressive Action Ever’ & Signs Inflation Reduction Act Into A Law

Inflation Reduction Act 2022 Now A Law

The above table specifies different rates for various products under production credit. Manufacturing production credits are also eligible for direct pay for 5 consecutive years, according to the SEIA. (Source: SEIA Summary of Inflation Reduction Act (H.R. 5376))

  • President Biden has officially signed his government’s flagship IRA Act 2022 into a law
  • It will bring in $369 million worth of investment in clean energy and confront crisis brought on by climate change
  • The law also includes SEMA to support domestic production of solar PV manufacturing and create jobs

It is official: US President Joe Biden has signed the Inflation Reduction Act of 2022 (IRA) into a law after it was passed by the Congress paving the way for 950 million solar panels, 120,000 wind turbines to operate in the country by 2030 along with 2,300 battery plants to store clean energy.

In his speech at the signing, Biden stressed that among its other benefits, the IRA will provide up to 30% tax credit to people for rooftop solar and also lead to the creation of solar factories in the Midwest and the South, as well as clean hydrogen projects and more.

“The Inflation Reduction Act invests $369 billion to take the most aggressive action ever — ever, ever, ever — in confronting the climate crisis and strengthening our economic — our energy security,” added an emphatic Biden.

The President and CEO of the Solar Energy Industries Association (SEIA), Abigail Ross Hopper stated, “The bill also includes Senator Ossoff’s Solar Energy Manufacturing for America Act (SEMA), which will support domestic solar production through new tax credits, lay the groundwork for thousands of new manufacturing jobs by the end of the decade, and usher in a new era for solar manufacturing in the United States.”

The SEMA Act was introduced by Democratic Party Senator Jon Ossoff in June 2021, recommending tax credits for local producers at every stage of the supply chain. Following this, the SEIA announced a 50 GW annual domestic production capacity by 2030 goal (see US Senator Wants Tax Credit For Local Manufacturers).

A happy Ossoff put out a statement saying that SEMA will ‘strengthen American energy independence, reduce dependence on Chinese imports, and reinvigorate the US industrial sector — creating American jobs and accelerating the transition to renewable energy’.

SEIA has put together a very helpful Inflation Reduction Act: Solar Energy and Energy Storage Provisions Summary, according to which:

  • Personal income tax credit for solar asset installation of 30% will see a step-down beginning in 2033 to 26%.
  • Standalone energy storage is also eligible for the credit for batteries with at least 3 kWh capacity.
  • For utility scale, commercial, industrial, non-profit, government, etc., the investment tax credit (ITC) is extended to 30%, but for projects that have started or will start construction before the end of 2024. Then the credit becomes available to stand-alone storage.
  • Solar also becomes eligible for the production tax credit which is currently at $0.026/kWh for 2022 and rises with inflation. After 2024, the credit transitions to a “tech neutral” structure.
  • For manufacturing, there are 2 kinds of credits: 30% ITC for eligible investment costs in facilities and equipment under Section 48C, and manufacturing production credit for certain components based on the volume of product manufactured. However, manufacturers can only opt for one. Credits are based on application and award process.
  • There are different production credit rates for various products as modules, cells, wafers, polymer backsheets, inverters, batteries, among others.
  • A budget of $500 million is reserved under the Defense Production Act, some of which may be used for solar manufacturing.
  • An additional $1 billion will be provided for rural renewable energy electrification loans and expansion of the program to include storage.

The complete summary can be viewed on SEIA website, while an in-depth analysis is available for SEIA members.

Reactions from the industry

The US solar industry is of course in a jubilant mood. Companies are releasing statements to show their support and optimism with the passing of the act.

CdTe solar module manufacturer First Solar’s CEO Mark Widmar called it a ‘once-in-a-generation’ opportunity to achieve energy security and create jobs. “And finally, it will facilitate the cycles of innovation necessary to ensure our country’s leadership in clean energy technology, ensuring that the next generation of solar technologies is developed and made by America,” he added.

Another North American solar module maker Silfab Solar applauded the administration and Congress for enacting the IRA along with passage of the Solar Energy Manufacturing in America Act (SEMA). “Silfab Solar will continue our US manufacturing expansions, incorporating the most-advanced solar technologies and meeting the industry and customer demand for leading edge solar products designed and manufactured in the United States,” said Silfab CEO Paoli Maccario.

8minute Solar Energy Founder Dr Tom Buttgenbach, after the passing of the bill by the Senate, said it will ‘unlock the tools and funding the renewable energy industry needs to re-assert American leadership in clean energy and climate action globally, allowing us to reduce inflation, dramatically lower energy costs here and abroad, and break our reliance on fuels vulnerable to price swings based on violence and geopolitics’.

About the same time as 8minute, Mary Powell the CEO of Sunrun opined, “The Inflation Reduction Act will combat inflation, lower energy prices and help our country meet its climate goals. It will boost US manufacturing, create millions of good-paying jobs, expand access and equity for those who need it most, and improve grid stability and resilience.”

President and CEO of the American Council on Renewable Energy (ACORE), Gregory Wetstone too added, “With this legislation, America can finally move beyond years of on-again, off-again renewable tax credits to a long-term clean energy tax platform that will provide renewable companies with the stability they need to do business,” and added that there is more work to do, particularly around transmission.

Gunter Erfurt, CEO of Swiss-German HJT solar cell and module manufacturer Meyer Burger, which has announced to expand production to the US, commented on LinkedIn, “Now it’s law and the US can become a leader in renewable energy. I’m curious to see when the European Commission and the EU member states will stop setting only nice goals and just as pragmatically procure the tools for implementing the energy transition in and for Europe.”

Indeed, the law is expected to bring solar growth in the US to the next level, boosting the technology more than any other, according to Jesse Jenkins, Professor at Princeton University, who heads the Zero Lab and shared preliminary analysis of the bill from the Rapid Energy Policy Evaluation and Analysis Toolkit (REPEAT) Projec. According to the analysis, the act will turbocharge annual additions of utility scale solar PV that were around 10 GW in 2020, to 49 GW per year in 2025-2026, about 5 times the 2022 pace, and its deployment will further increase thereafter, up to 129 GW per year in 2031-2032, much more than for any other technology. For wind energy, annual installations are expected to jump up from 15 GW in 2020 to an average of 39 GW annually during in 2025-2026 (see Huge Solar Boost Expected After US Senate Passes Climate & Clean Energy Bill).

About The Author

Anu Bhambhani

SENIOR NEWS EDITOR Anu is our solar news whirlwind. At TaiyangNews, she covers everything that is of importance in the world of solar power. In the past 9 years that she has been associated with TaiyangNews, she has covered over thousands of stories, and analysis pieces on markets, technology, financials, and more on a daily basis. She also hosts TaiyangNews Conferences and Webinars. Prior to joining TaiyangNews, Anu reported on sustainability, management, and education for leading print dailies in India. [email protected]

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