The Inflation Reduction Act (IRA) was signed into law by President Biden in August of 2022, extending the investment tax credit (ITC) for clean energy. In this sweeping legislation, a range of incentives and tax credits aimed toward accelerating the production of emissions-free energy are present. Specifically, the IRA extends the investment tax credit to standalone storage projects, which support domestic battery manufacturing and supply chains.
Read: How Does the Federal Solar Tax Credit Work
Extension and Modification
Under the new legislation, the current ITC will be extended for an additional 10 years for projects that begin construction before 2025, including standalone energy storage with a capacity of at least 5 kwh. The IRA extends the ITC for up to 30% of the cost of installed equipment for 10 years, allowing for increased financial incentives for clean energy projects. The ITC will then regress to 26% in 2033 and 22% in 2034. Further, the existing energy ITC will be replaced by a tech-neutral, Clean Electricity Investment Tax Credit in 2025.
Read: How Investment Tax Credit Can Fund an Energy Project
What does this mean for the energy industry?
This expanded investment tax credit will have a significant impact on the energy industry, including a boost to domestic renewable energy construction and production. The previous ITC helped to push solar and wind power to the mainstream, and this investment tax credit will be extended for 10 years. The extension will impact projects that “begin construction” before 2025, including standalone energy storage projects with a capacity of at least 5 kwh. Further, the IRA also creates the Advanced Manufacturing Production Credit (AMPC), which applies to clean energy technology components produced in the United States and sold after December 31, 2022. Eligible components include:
- electrode active materials
- battery cells
- battery modules
- critical minerals needed to produce these components.
Read: How the Investment Tax Credit for Energy Storage Systems Over 5kWh Could Benefit You
Want to take advantage of the investment tax credit?
With the recently passed IRA offering many incentives for clean energy projects, now is the ideal time to begin your own energy solution project. For projects with construction started before 2025, many financial incentives are available including ITCs and direct-pay options. Partnering with EnergyLink will expedite the process of designing, building and funding energy solutions across multiple project scales for your organization. Get started by clicking the button for a free quote. Want to stay up-to-date on the latest energy industry news? Fill out the form below!
