New fed law offers big clean energy incentives

Businesses should jump on investment tax credits

THE INFLATION REDUCTION Act has over $300 billion in incentives for clean energy–solar and wind, geothermal and green hydrogen, batteries, and heat pumps–incentives that mean businesses that invest in clean energy can reap substantial financial benefits. But a tip to businesses thinking about making the move to clean energy–act fast. There is a massive advantage to businesses that jump in on clean energy now versus waiting even six months. If a business waits until several neighboring businesses also make the move, it can significantly increase the clean energy project’s cost.

Here’s what the Inflation Reduction Act, or IRA, has in it for businesses:

For Massachusetts businesses that own their building or land, the best move is to either have solar installed on-site or lease your land or roof for solar and/or storage. The IRA provides commercial solar projects a 30 percent InvestmentTax Credit (ITC) until 2025; after 2025, projects will be contingent on whether the Department of Treasury determines the nation’s carbon reduction goals are met. Similarly, the IRA provides a 30 percent ITC for battery storage projects until 2025. Tax credits for both solar and storage can increase if the project uses domestic materials or is in a particular strategic area.

The ITC is great for a business with enough taxable income to take the entire ITC at once. On the other hand, what are you supposed to do if you own a business with a low tax burden? A simple solution is to host a clean energy project someone else owns and experience the savings realized from cheaper energy sold to you by that third party.

The incentives couldn’t have come at a better time.

Unfortunately, many businesses across Massachusetts probably received their highest energy bill of the century at the end of August. The double whammy of high fossil fuel prices and a sweltering summer have meant bills that are double or triple their normal levels.

This summer, businesses with solar had a considerable advantage–cheaper, reliable solar energy. World events or international cartels do not impact the cost of the fuel for solar power.

Now, thanks to the passage of the IRA, these clean energy benefits are open to businesses of all sizes. With the government paying for 30 percent of the clean energy project, you can be sure that millions of new businesses will be jumping into clean energy–and that is why it is so important to act fast.

While these new incentives will usher an influx of solar onto the grid, there is only so much capacity that the existing grid can handle at a given time. That is why waiting until your neighbors invest in solar could reduce your benefit. Once a certain amount of solar energy is added to a given area, the local grid and transmission capacity will have to be expanded. The last businesses to go solar will have to help fund the needed upgrades. These upgrades can add significantly to the cost of a system–and, for most projects, it will mean they don’t pencil.

Meet the Author
Businesses in the Commonwealth wanting to take advantage of the new federal incentives in the IRA will have to act fast to reap the maximum benefits while their local grid has available capacity. There’s no better time for businesses to jump into clean energy than today.

Gabriel Phillips is founder and and CEO of Catalyst Power.