Highlights from Demystifying the headlines: What the Inflation Reduction Act actually means for solar

Two industry experts dig deep into the new climate bill to understand its impact on resi solar
Author : 
August 22, 2023

Bodhi polled over 100 solar businesses and found that 62% of solar installers either don’t know anything about the Inflation Reduction Act, or feel like they only know the headlines. That’s why we teamed up with Sunlight Financial to dig deeper into the new climate bill and unpack its impact on resi solar.

The special event was moderated by Scott Nguyen, CEO of Bodhi.  Our panelists were:

Below, you’ll find one key takeaway from each panelist, as well as answers to the most common questions about the Inflation Reduction Act that we heard from installers.

Yoni Cohen, Sunlight Financial —  “The key question for solar installers is going to be:  Do you want to keep being a solar installer, or do you want to become a home electrification company?  That’s because the Inflation Reduction Act provides a lot of home electrification incentives.  Companies need to think about whether they want to help consumers tap those incentives.”

Katherine Hamilton, 38 North Solutions — “Climate bills in the past have been about individual policies, but the IRA is really about opening the market.  This is a really strong market signal that will give us 10 years of runway for all of these green technologies and move all of our investment in that direction.  This is the certainty that businesses needed to start making better decisions.”

What are some of the relevant sections of the law for solar?

Section 25 is the residential individual home credit. 

Section 48 is for commercial projects and utility-scale projects, but they’re also for projects that are third-party financed.  This means that, as a homeowner, if you have a company that is installing and financing your project for you, they’re going to be using Section 48 of the tax code instead of Section 25. 

Will people who installed last year be able to retroactively qualify for the Inflation Reduction Act’s 30%?

The Inflation Reduction Act applies for PV in 2022 and onward, but not for 2021. Storage only does not start until next year, 2023. 

A good way to think about it is that any incentives that had previously been in existence are going to go back to 2022, but 2023 January 1st is going to be when the clock starts on all of new incentives, including: 

  • Interconnection below 5mW (significant for folks installing community solar)
  • Energy storage only
  • Microgrids
  • Domestic content
  • Low-medium income communities
  • Prevailing wage

For all of these new programs, they still have to write the corresponding regulation, which is why they won’t begin until 2023.

Since the 30% tax credit won’t be applied for 2023, should installers wait for battery only installs until January 1st? 

You won’t start getting credit until January 1st, so if your business would like to leverage this incentive, the answer is unfortunately yes. However, you can start setting up your pipeline of those buyers.

Will the Inflation Reduction Act’s direct pay apply to businesses along with non-profits?

Unfortunately, direct pay does not apply for residential systems. The only exemptions are for non-profits and tribal and local communities. 

How does the domestic content adder apply? 

This is mostly for utility scale and commercial, depending on how it is financed. The thing to keep in mind is that it’s only when you’re taking section 48, not section 25D. It’s not individual homeowners, they don’t have any say over that. It’s those third party financing projects that are going to have to comply with domestic content and labor provisions.  The only scenario in which this could apply to residential is if it is done through a lease or a PPA-type of financing — it’s the third-party financing organization that needs to comply.

What are the details of the $4K rebate for electrical panels? 

The Inflation Reduction Act offers up to $4K for a main panel upgrade — and as many of us know, this is often necessary to install residential solar.  It also offers up to $2.5K for electrical wiring, which may be helpful for solar or EV. 

However, keep in mind that these two numbers — $4K and $2.5K — are the maximum amount, but the actual amounts will be determined by the states.  This means that it may end up being $4K in one state and $2.5K in another state. Income level will also play a role. We’ll have to wait and see for more details.

Are there any changes to the current solar module and inverter tariffs now that the Inflation Reduction Act has passed? 

These tariffs are on a completely separate tract, so we have to keep watching to see what happens here. 

To learn more, watch the recording of the panel below:

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