With the Inflation Reduction Act signed into law, businesses are preparing for a rush of new opportunities for installing solar in Arizona, not to mention electric vehicles and chargers and other energy projects aimed at reducing carbon emissions.
The law provides a 10-year extension on the federal tax credit for solar, setting it at 30%. The credit is 26% this year and was set to decline more without the act, which retroactively will bump it to 30% for 2022.
The IRA also includes changes to the solar tax credit that make it possible for municipalities, Native American tribes and other entities without federal tax liability to receive a direct payment rather than a tax credit, making renewable-energy projects more financially appealing to those entities.
Advanced Energy Economy, a group that works to support a transition to 100% clean energy, evaluated the anticipated economic benefits of the IRA combined with the recently passed Infrastructure Investment and Jobs Act, and calculates Arizona will see $11 billion in federal investments through both laws.
“That covers everything from large clean energy generation to electric vehicles and everything in between,” said Shelby Stults, a principal at AEE. And that is only the federal incentives, with the actual investments being significantly larger.
“Looking at the impact that could have amplified throughout Arizona’s economy, it could be as high as $162 billion, so about a 15 times return on investments,” Stults said.
Solar industry sees stability
Joy Seitz, president/CEO of American Solar and Roofing in Phoenix, said the solar tax credits in the law are expected to give businesses like hers stability after years of the tax credits facing elimination after brief extensions.
“As a business owner for the first time in 13 years I don’t have to pay attention to a cliff every two years. I don’t have to keep warning my sales team that a cliff is going to happen and have a conversation of job security with the sales team members,” she said. “I don’t have to talk to my construction guys in the field and say they may or may not be needed.”
That allows her to focus more on running the business and getting solar on customers’ homes, giving solar a consistent tax policy enjoyed by other power sources like coal and nuclear energy, she said.
She also said her business should benefit from new tax credits for upgrading home electrical panels, which is required for some larger solar installations.
“Consumer financing for solar should get cheaper,” she said. “This is helping average Americans invest in their home, which is their most important asset.”
Supplier sees potential in Arizona
Suzanne Leta has spent the last seven years working at SunPower, a California-based solar company, for whom she now serves as head of policy and strategy. Her company is massive, serving over 440,000 customers and working with over 700 companies to sell and install solar. In Arizona, Sun Power employs over 100 people, from installers to operations managers and customer service representatives. And they work with over 20 local solar companies in the state.
Leta said the IRA will accelerate growth for solar business, particularly because of the increased demand expected from consumers from the new tax credits in the law. They’ll make solar installation more affordable and attractive — and that’ll bring in business.
“It essentially makes the technology more accessible, affordable to people,” Leta said. “There’s (electric vehicle) incentives, there’s EV charger incentives, there’s storage and solar incentives, and there’s even incentives for things like heat pumps, which actually save people more money when they combine it with rooftop solar.”
Leta and her team have pushed for the clean energy credits in the Inflation Reduction Act since before the 2020 election. They worked with consumer and environmental groups to lobby senators on the benefits that come with long-term stability for tax credits, and were in contact with staffers for Arizona Democrats Kyrsten Sinema and Mark Kelly.
The decade-long provisions accounted for in the law fit that bill; Leta projects massive growth both for her organization and the Phoenix marketplace.
“In every instance where we have seen a substantial policy like what we’re seeing at the federal level, but certainly much more recently at the state level that helps consumers adopt the technology, we see the business growth and the job growth come along with it,” Leta said. “Every step of the way.”
The whole home approach
Greg Fasullo has been the CEO at Elevation, a Chandler-based home energy efficiency company, since 2020. At Elevation, IRA-based demand increases are linked to the ways the new law makes energy efficiency more lucrative for consumers.
For the next decade, consumers can claim a 30% income tax credit, up to $1,200, on the cost of home improvement projects aimed at energy efficiency. Those savings, Fasullo said, will help remove the barrier to entry for homeowners looking to make the switch to renewable energy power. For Elevation, that means massive increases in business.
“We’re excited,” Fasullo said. “If the IRA hadn’t come out, and the investment tax credit had gone away, I think solar would have had a pause in the U.S. And it would’ve declined. And we avoided that fate.”
At Elevation, homeowners have an app that in real time shows how they are using power inefficiently in the home. And it gives suggestions: wash dishes at night, set air conditioning at a specific level. Fasullo said that usually translates to a 10% reduction in consumption for homeowners.
From there, Elevation engineers analyze a home’s inherent energy inefficiency. They perform an audit on the duct work, the insulation, the doors and windows. Only then do they look at new technology, things like solar panels and EV chargers.
“The analogy we use is like a gas tank,” Fasullo said. “If your gas tank has a leak in it, would you rather fill it up more often? Or first thing you do, would you want to stop that leak?”
The Inflation Reduction Act, Fasullo said, brings consumers closer to a world where switching to renewable energy is both economically and environmentally the right decision.
“I think at the end of the day, most homeowners are probably deciding to invest in solar and innovative technology because it’ll save them money, and it does. Increasingly, and especially with the younger generation, who are a little bit more self-aware. And honestly, with all of us as climate change becomes ever more of a challenge, people like to do the right thing.”
Utility could now own solar
Another benefit of the IRA is that Salt River Project, a public electric and water utility serving central Arizona, can now own its own solar and wind facilities.
SRP buys energy from a variety of solar and other renewable power plants, but doesn’t own facilities because of the previous limitations on the tax credit. Because the new tax credits can be used through a direct payment or transfer, the company now plans to begin building its own facilities.
The first will likely be at the Copper Crossing solar plant in Florence. SRP owns the site but buys power from another company that built the solar farm there. SRP General Manager Mike Hummel and other executives told their board members that the company now plans to build its own solar and battery facility at the site next to the existing solar farm.
“It’s a huge win for public power after trying to do this for decades,” Hummel said.
The American Public Power Association, which represents public utilities like SRP, supported the IRA.
“Making federal energy tax incentives available to all utilities, including public power and rural electric cooperative utilities that serve nearly 30% of all U.S. retail customers, will ensure that American energy stays affordable, reliable, clean, and secure,” APPA President/CEO Joy Ditto said when the act passed the Senate.
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