President Joe Biden's Inflation Reduction Act is touted as the most significant legislation to address climate change in the history of the United States, according to a recent U.S. Department of the Treasury press release.
Companies have announced more than $115 billion in investments in the clean energy economy, primarily in communities with lower income and employment rates, according to the Treasury Fact Sheet. This surge in investment is part of what Treasury Secretary Janet L. Yellen refers to as modern supply-side economics, which aims to spur economic growth by boosting labor supply and productivity while also reducing inequality and environmental degradation.
The Treasury Fact Sheet highlighted the opening of the application window for the Low-Income Communities Bonus Credit under the Act. Within the first day, the program received 725 applications representing around 170 MW of capacity. This credit aims to give a 10 to 20-percentage point boost to the Investment Tax Credit for qualified solar or wind facilities in low-income communities. The program has allocated 1.8 gigawatts of capacity for 2023 across several categories and is expected to start awarding credits by year-end.
According to third-party estimates cited in the Fact Sheet, the Inflation Reduction Act's tax incentives could potentially support more than 1 million jobs in the energy and related manufacturing sectors over the next decade. The Act also incentivizes clean energy project developers to meet strong labor standards, including paying prevailing wages and employing apprentices from registered programs.
The Act extends and expands several tax credits aimed at reducing household and small business energy costs. For example, it offers up to $1,200 annually for installing insulation or efficient windows and doors. It also extends the Residential Clean Energy Credit, covering up to 30% of the costs of installing rooftop solar and battery storage through at least 2034, according to the Treasury Fact Sheet.
The Inflation Reduction Act allows state, local and tribal governments, as well as nonprofit organizations, to receive certain tax credits as direct payments, thereby widening the range of actors incentivized to invest in clean energy projects, according to the Treasury Fact Sheet.