That’s what most energy experts are calling the Inflation Reduction Act of 2022 signed by the President on August 17th. Chock full of tax incentives and rebates, most American households now qualify for thousands of dollars in new funding support to install solar power, home batteries, EV chargers and electric heat pumps. New and used electric vehicles also get generous rebates that will stay in effect for more than a decade – ending years of on-again-off-again tax treatment by Congress.
What really makes this a game changer for most households is the wide sweep of clean and affordable home electrification options that now qualify for these lasting financial incentives. By replacing fossil fuels, these electrical devices cut down significantly on household carbon emissions and shrink payback times for solar power when it’s used as a home energy generating source. By some estimates, average households taking full advantage of these new programs could save up to $1,800 per year in reduced fuel and electricity bills.
At the same time, the bill’s clean-energy stimulus – totaling $485 billion in new spending and tax breaks — could add 1.5 million new jobs in construction, manufacturing and service, while cutting the nation’s greenhouse gas emissions 40% below 2005 peak levels by 2030. The bill’s sudden approval marks a complete turnaround from just a few weeks ago, when federal climate legislation appeared dead. Now, households earning up to 150% of the median income in their area can claim a maximum of $28,000 in total clean-energy rebates through Sept. 30, 2031.
Here’s a quick overview of the climate and energy provisions of the Inflation Reduction Act of 2022:
Solar Power and Home Batteries
The Inflation Reduction Act restores a 30% tax credit for residential solar systems — making it applicable to solar Trackers and fixed panels installed this year – and extends the program to Jan. 1, 2034. Leased or purchased battery storage systems also qualify for this credit.
With electricity and gasoline prices doubling this year, these extended tax credits now offer families a way to get off the fossil-fuel inflation roller coaster. Once homeowners recoup their upfront investments, the electricity generated and stored in these solar-battery systems essentially comes for free, except for any maintenance or grid connection fees charged by a utility.
U.S. Electricity Demand Projections from Widespread Electrification
Electrification of the U.S. economy, especially in transportation, could cause a one-third increase in total electricity demand through 2050, according to the National Renewable Energy Laboratory.
The Inflation Reduction Act includes revamped consumer tax credits for the purchase of qualifying electric vehicles — $7,500 for new EVs and $4,000 for used EVs. Better still, the credit applies at the point of sale to instantly lower monthly car payments, rather than waiting for a tax refund later on.
The new EV credits replace a $7,500 credit that applied only to the purchase of new EVs. Now, a $4,000 credit has been added for the purchase of used EVs sold through dealerships at prices under $25,000. This used EV credit is available only for people who individually make up to $75,000 annually or $150,000 a year in jointly filed taxes. The income limit doubles to $150,000 for individuals and $300,000 for families that purchase new EVs with the $7,500 credit.
The EV component of the climate bill has a few other pieces of fine print. New, light-duty EVs — SUVs, pickup trucks and vans — need to sell for less than $80,000 to qualify for this credit, and the price cap on EV passenger sedans is set at $55,000. The bill also requires that, starting in 2024, 40% of the minerals in EV batteries need to come from the United States or a trade partner agreement.
Finally, the bill repeals a provision in the prior tax code that shut off the credit to auto manufacturers when they sold more than 200,000 EVs in the United States. That means EV models from Tesla, General Motors and Toyota once again will be eligible for the reconstituted $7,500 federal rebate. With the new income and price provisions added to this bill, automakers are expected to introduce more affordable models at the low and middle end of the car-price spectrum.
Source: Rewiring America
For clarity, note that in this chart, the “Current Household” bar includes over 80% fossil fuels as a percentage of overall power usage. The future “Electrified Household” bar shows a huge drop in overall power usage, but the average electricity usage will triple – meaning home electrical systems will need upgrading, as well.
Heat Pumps and Home Electrification
The Inflation Reduction Act also embraces the principle of “electrifying everything” in an effort to reduce a home’s energy bills and carbon footprint. Rebates are available for home heat pumps (up to $8,000), heat pump water heaters ($1,750), and high-efficiency induction stoves and heat pump clothes driers ($840).
Because many homes will need to have their electrical panels upgraded before such appliances can be installed, the rebate program also makes $4,000 available to complete this rewiring work. To round out the home electrification package, up to $1,600 is available for home insulation and sealing.
These home electrification provisions, to be administered by the states, will run through Sept. 30, 2031, during which time homeowners can collect a maximum of $14,000 in home electrification rebates. As with other qualifying provisions, household income cannot exceed 150% of the area median income.
Time to Get in the Game!
So, if you’re in the market for solar power, an electric vehicle, heat pump, or other home energy improvements, this legislation IS the game-changer you’ve been waiting for. While there is no longer the need to make a mad dash to go solar before existing tax credits expire in 2024, Solaflect is now taking orders for installations in 2023. And with the wicked heat waves we’ve been having this summer – and with climate records being shattered all over the globe – there’s no time to waste in turning down the Earth’s thermostat!
Solaflect Energy is your home energy management partner. We help you install clean and affordable solar electricity and home battery systems for a more resilient and climate-friendly future. To learn more, please email us or call (802) 649-3700.