Inflation Reduction Act Breakdown

Inflation Reduction Act Breakdown

The world of clean energy received a monumental win earlier this month with the passage of the Inflation Reduction Act. The Inflation Reduction Act (IRA) will be the backbone of the United States’ effort to decarbonize our energy sector, spur clean energy implementation across all demographics, and significantly grow the clean energy economy.

Here is a breakdown of the bill’s elements:

Renewable Energy Generation

Investment Tax Credits

  • Residential Solar: 30% Investment Tax Credit (ITC) on project costs until the end of 2032, with a step-down of 26% in 2033 and 22% in 2034. Credits are retroactive for residential installations from 1/1/2022, meaning that homeowners who installed a solar array at any point in 2022 will qualify for the 30% ITC.
  • Commercial Solar: 30% ITC on project costs until the end of 2024 (ITC on commercial solar is also retroactive to 1/1/2022). Beginning in 2025, the ITC will be replaced by technology-neutral credits, with the following rules in place:
    • 6% base credit; bonus credits up to 30% of costs if the project meets union labor, prevailing wage, and apprenticeship requirements. These requirements do not apply to projects less than 1 megawatt (MW) in size.
    • 10% bonus credits if the project meets domestic content requirements.
    • 10% bonus credits if the project is sited in an “energy community” – a brownfield site or a community with a recent coal plant closure.
    • 10% bonus credits if the project is sited in a low-income community. This only applies to projects that are 5 MW and less.
    • 20% bonus credits if the project qualifies as directly serving a low-income residential facility or another economic benefit system.
    • Interconnection costs -for projects less than 5 MW- with the utility can be included in the credits.

Production Tax Credits

While the Investment Tax Credit applies to the upfront purchase of parts, materials, and labor, the Production Tax Credit (PTC) functions differently. This credit is a direct payment and applies to the production or output of the generation source. This generation source can be solar, wind, geothermal, biomass, and hydropower, to name a few. These credits are also retroactive from 1/1/2022.

Here is how the PTC breaks down:

  • Direct pay value: $0.026 per kilowatt-hour (kWh) starting in 2022; rate rises with inflation.
  • Bonus credit of 1.5 cents/kWh if union labor, prevailing wage, and apprenticeship requirements are met.
  • 10% bonus credits if domestic content requirements are met.
  • 10% bonus credits if the project is sited in an “energy community” – a brownfield site or a community with a recent coal plant closure.
  • The PTC is available for nonprofits, state and local governments, rural electric cooperatives, tribal governments, and/or other tax-exempt entities. These organizations previously did not qualify for the ITC.
  • PTC will also apply to utility-scale projects.
  • Credits are available for ten years after the project is placed into service.
  • Direct pay/PTC is not available for residential solar installations.
  • PTC is transferable after 2022; however not for individual taxpayers.
  • Commercial solar projects can choose either the ITC or the PTC.

 


Electric Vehicles

New EVs: (Effective 8/16/2022)

  • $7,500 tax credit to be divided into two separate credits:
    • $3,750 credit for electric vehicles with batteries produced in North America.
    • $3,750 credit for electric vehicles using a certain percentage of critical battery minerals extracted or processed in the U.S.
    • Vehicles meeting only one requirement will only be eligible for a $3,750 credit.
  • Vehicles must cost less than:
    • Vans < $80,000
    • Pickups and SUVs < $80,000
    • Cars < $55,000
  • Income requirements:
    • Joint tax return < $300,000
    • Head of household < $225,000
    • Single-payer < $150,000
  • Credit will eliminate the limit of 200,000 vehicles per manufacturer.

Commercial Clean Vehicles: (Effective 01/01/23)

  • Up to $40,000 tax credit for commercial electric vehicles.

Used EVs: (Effective 01/01/2023)

  • $4,000 tax credit or 30% of the vehicle’s sale price.
  • The vehicle’s model year must be at least two years older than the current “new” model year.
  • Vehicle cost must be less than $25,000.
  • Income requirements:
    • Joint tax return <$150,000
    • Head of household <$112,300
    • Single-payer <$75,000
  • Used EV tax credits will continue until the end of 2032.

EV-Charging:

  • Credits for EV-charging equipment and infrastructure will increase up to $100,000.
  • Equipment must be located in a qualified census tract, with similar bonus credits if prevailing wage and apprenticeship requirements are met.
  • A direct pay or PTC option is available for charging with transferrable credits.
  • Credits will be available until 2032.

 


Battery Storage

Effective as of 1/1/2023

  • 30% ITC for the cost of installation; credits last until 2033. To qualify, batteries must be larger than 3kWh for residential installations and larger than 5kWh for commercial installations.
  • Commercial battery credits have similar sliding scales as other ITC items: baseline of 6% with increasing credits for prevailing wage, labor, location, etc.
  • Battery storage systems will no longer need to be coupled with solar generation systems to qualify for tax credits.

Energy Efficiency and Electrification

Effective as of 1/1/2023

Federal Tax Credit

  • Heat Pumps: 30% of costs, up to $2,000
  • Electric Upgrades: 50% of costs, up to $1,200/year
Upfront Discounts
  • Incentive levels and eligibility are determined by income
  • Heat Pumps: rebates for up to $8,000
  • Electric Upgrades: up to $4,000 for breaker boxes/electric service; $2,500 for wiring, and $1,600 for insulation/venting/sealing

 


Manufacturing and Production

Effective as of 1/1/2023

  • $30 billion in PTC to manufacture solar panels, trackers, inverters, wind turbines, batteries, and other critical minerals.
    • Solar PV cells – $0.04/watt
    • Solar-grade polysilicon – $3/kg
    • Solar modules – $0.07/watt
    • Wind components – 10% of the sales price
    • Battery cells – $35/kWh
    • Critical minerals – 10% of the cost of production
  • $10 billion in ITC funding for building new facilities to manufacture clean energy products; $4 billion of these funds must be allocated to “energy communities.”
  • $500M for manufacturing heat pumps and processing of critical minerals necessary for heat pump production.

Other Items

  • Carbon Sequestration Credits (ITC or PTC) for facilities that begin construction before 2033 and provide direct air capture of carbon dioxide. Credits will be issued by a metric ton of carbon capture.
  • Clean Hydrogen – credits for production -by unit- of green and blue hydrogen that can be used to offset traditionally carbon-based fuels.
  • Sustainable Aviation Fuel – credits for SAF produced by unit (gallon) with increasing credits based on a percentage of greenhouse gas reduction.
  • Biodiesel/Alternative Fuels – production credits for fuels produced based on life-cycle emission levels.
  • Methane Fees – fees imposed by EPA for facilities that emit more than 25,000 metric tons of CO2 annually.

Additional Provisions

  • $500 million for the Defense Production Act, some of which could be used for solar manufacturing.
  • Greenhouse Gas Reduction Fund totaling $29 billion overseen by the Environmental Protection Agency.
  • Climate Pollution Reduction Grants to state and local governments totaling $5 billion.
  • Environmental and Climate Justice Block Grants: $3 billion for disadvantaged communities.
  • $2 billion in loan authority for new transmission construction in designated national interest corridors.
  • $760 million for the Department of Energy to issue grants to state, local or tribal entities to facilitate siting of high-voltage interstate transmission.
  • Additional $1 billion for rural renewable energy electrification loans and expansion of the program to include storage.
  • Additional $1 billion for Rural Energy for America Program (REAP), with total grants limited to 50% of the total cost of an eligible project.
  • $9.6 billion for loans and financing for rural co-ops to purchase renewable energy, generation, zero-emission systems, and related transmission, limited to 25% of total cost.
  • Incentives for build-out of electric vehicle charging networks.
  • Extension, expansion, and changes to electric vehicle tax credits, including a new credit for purchasing used EVs.

Conclusion

Much of the implementation and administration of the Inflation Reduction Act is still not understood. This document is meant to summarize the items in the bill that RENEW Wisconsin considers particularly important to the clean energy transition in our state.

For additional information, please utilize the following resources:

Please contact Sam Dunaiski (sam@renewwisconsin.org) with questions.

Clean Energy Works Profile – Akinlana Abdalla

Clean Energy Works Profile – Akinlana Abdalla

Akinlana Abdalla is tall and self-assured with a gentle, almost playful demeanor. He was “the kid who always got in trouble for taking his toys apart to see how they worked.” This curiosity and innate engineering mind make him particularly good at his job as a Wind Turbine Repair Specialist at Ingeteam in Milwaukee, WI, where teams of engineers and technicians specialize in supporting solar, wind, hydro, and other renewable energy products.

Akinlana was born in Milwaukee, where he now lives with his wife and children. He has an extensive background in commercial construction and is a Journeymen Carpenter by trade. His career took him from deep tunnel mining through Laborers’ Local 113 to building bridges for Zenith Tech, later starting a business with his wife, and eventually earning an undergraduate degree in general management. He was attracted to Ingeteam because he wanted to move away from management and get back to a more “hands-on” work environment aligned with his values.

Ingeteam is a global renewable energy solutions company. Their 140,000 square-foot state-of-the-art production facility in Milwaukee is the only place in the United States where wind turbines are built by an American workforce.

Ingeteam customers send wind turbine generators that cannot be repaired up the tower. Akinlana and his team perform mechanical and electrical diagnostics on the generators to determine their failure. Ingeteam then submits a report to the customer and a cost estimate for the needed repairs. If the customer decides to move forward with the repairs, Akinlana and his team “repair it and send it back to the customer like new,” adhering to the Code of Excellence established by IBEW 2150.

“You never know what you’re going to get,” Akinlana said. “There’s no monotony. Every day is something different. We could get the same [generator] models coming in on one truck, but all of them will have different issues. When we open it up, it’s just fun trying to get to the bottom of what the root cause of a failure is.”

While it seems as if Akinlana was born to do this work, he thinks his success is determined by having a positive attitude and complementing it with aptitude.

“If you have a good attitude, that’s 90% of it,” he said. “Developing your mechanical aptitude and other skills to complete a repair is something that can be taught. But it starts with just having a can-do attitude and just appreciating the opportunity to be able to do what you do.”

His passion for his work extends beyond his enjoyment of taking things apart and then putting them back together. Akinlana has a deep sense of the impact of his work.

“Ingeteam provides something imperative for preserving and conserving the future environment, not only for ourselves but for our children and generations to come,” he said. “Because we know that we have not learned to discipline ourselves from gluttonous consumption, we have to have green energy.”

“This job aligns with my personal social responsibility.” Akinlana continued. “It’s nice to work for an entity where you share a passion for ensuring that we preserve our environment. Being an avid outdoorsman, being out in nature with my children, fishing, and hiking, it’s important to me that I give back. To be able to work doing something that allows me to do that, I think is absolutely profound.”

His team appreciates his passion and skills. Garan Chivinski is the Human Resources Manager at Ingeteam and the one who introduced him to RENEW Wisconsin.

“He’s a wealth of knowledge,” Garan said. “We’re seeing a time when those units [wind turbine generators] are coming back in, and they need to be serviced. They need some love and care to renew themselves and not create excess waste that they weren’t intended to create. AK [Akinlana] has really led that here for us, to get absolutely every single last spin, every single last value out of that resource possible for our customers and for the community. That’s why when you asked about somebody who might be your boots on the ground, somebody who’s the future of the wind industry in Wisconsin, this is the guy.”

Akinlana IS a wealth of knowledge. He’s also the kind of person who considers his work and actions and their effect on the world. This kind of thoughtfulness and passion is inspiring, and it’s easy to see why he is so respected and valued at Ingeteam.

“It’s nice to watch Elon Musk trying to fly off into another part of space,” Akinlana added. “But ultimately, when you see them go up in the rocket, you’re just going into another part of where you already are. Interesting, right? The reality is that we have this one small globe to live on, and no amount of money will get you away from that reality. Even if you set up something on Mars, you would have to come back here to get resources to live off of there. We have this [Earth], and we have to take care of this. Our level of consumption without trying to curb the adverse effects is damaging for the future. So that’s why this work is really, really important to me. I enjoy it every day. It’s not even work, not work at all.”

RENEW Wisconsin Launches Two Communications Campaigns to Promote the Benefits of Wisconsin Clean Energy Investments

RENEW Wisconsin Launches Two Communications Campaigns to Promote the Benefits of Wisconsin Clean Energy Investments

RENEW Wisconsin has launched two state-wide communications campaigns to promote the benefits of clean energy investments in Wisconsin. The two campaigns, Clean Energy Works for Wisconsin” and “Clean Energy is Made in Wisconsin, include print and digital ads and shareable communications assets for partners and clean energy advocates. 

Wisconsin’s clean energy workforce is 70,000 strong, with good-paying local jobs like installing solar and electric vehicle charging stations, manufacturing energy storage systems, servicing wind turbines, and retrofitting buildings. Clean energy job growth is gaining momentum from state and federal clean energy and electric transportation commitments, federal funds to support these goals, and an increased interest in clean energy investments from the public sector. The “Clean Energy Works for Wisconsin” campaign highlights the job potential of continued investment in electric transportation and Wisconsin clean energy.

“Over the next five years, Wisconsin can expect to receive $79 million in federal funds from the bipartisan infrastructure law,” said Francisco Sayu, Emerging Technologies Director at RENEW Wisconsin. “Wisconsin will also have the opportunity to apply for $2.5 billion in competitive grant funding dedicated to electric vehicle corridors and community charging. Building a network of electric vehicle charging stations will reduce emissions, improve air quality, and create thousands of good-paying jobs and is a tremendous opportunity for Wisconsin residents.” 

In 2019, Governor Evers set a goal that all electricity consumed in the state will be 100% carbon-free by 2050, and in 2022 introduced Wisconsin’s first-ever Clean Energy Plan. Currently, renewable energy only accounts for 13% of all electricity sold in Wisconsin. According to the U.S. Energy Information Administration, Wisconsin consumes almost six times as much energy as it produces and spends billions on coal, oil, and natural gas every year. The “Clean Energy is Made in Wisconsin” campaign presents a vision of keeping more energy dollars in-state by investing in homegrown renewable energy.

“State and federal investments are moving us toward our clean energy goals, but we need to maximize the benefits of this energy transition for Wisconsin residents,” said Heather Allen, Executive Director at RENEW Wisconsin. “We will need an ‘all of the above’ and ‘all hands on deck’ approach to shape our clean energy future. This means smart investments in homegrown renewable energy and clean transportation.”

Print and digital ads are already circulating in media outlets across the state. To learn more and help amplify Wisconsin’s clean energy opportunities, please visit the “Clean Energy Works for Wisconsin” and “Clean Energy is Made in Wisconsin” landing pages.

Wisconsin Green-Lights Next Wind Power Project

Wisconsin Green-Lights Next Wind Power Project

A 28-turbine wind power project in Grant County will soon become a utility-owned source of clean electricity, thanks to a Public Service Commission of Wisconsin (PSCW) approval.

With this approval in hand, construction of the Red Barn Wind Energy Center should commence this spring and proceed quickly to completion before the year’s end. Once Red Barn’s 28 turbines begin generating power, Green Bay-based Wisconsin Public Service Corporation (WPS) and Madison Gas and Electric (MGE) will assume ownership of the project. WPS’s project share will be 90%, while MGE will own the remaining 10%.

With a generating capacity of 91.6 megawatts (MW), Red Barn is expected to produce approximately 300,000 megawatt-hours annually. That quantity of clean electricity will rival the annual output from Badger Hollow 1, a 150 MW solar farm located 10 miles east in neighboring Iowa County. WPS and MGE also co-own Badger Hollow 1, which began operating in December 2021.

“The evidence presented by both utilities and project supporters was powerful and unambiguous. Red Barn will be an economically attractive source of zero-fuel cost, zero-emission electricity that will produce savings for Wisconsin ratepayers and reduce power plant emissions, including greenhouse gases for years to come,” said RENEW Wisconsin Policy Director Michael Vickerman.

Red Barn’s original developer, Minnesota-based Project Resources Corporation (PRC), secured a conditional use permit from Grant County in July 2019. The siting permit granted to Red Barn was the first issued by a local government in this state since the Wind Siting Rule (PSC 128) took effect in 2012.

PRC subsequently sold the rights to develop Red Barn to ALLETE Clean Energy, another Minnesota-based energy company, which will build the wind farm before transferring it to WPS and MGE for an estimated $162 million.

Vickerman added: “RENEW commends Project Resources Corporation for blazing the trail here, working with willing landowners as well as accommodating neighbors and local officials to assemble and shepherd a wind power project from conception to siting approval, sparking no discernible opposition in the process.”

Red Barn will also be the first Wisconsin-based wind energy power plant to be added to the generation portfolio of any Wisconsin investor-owned utility since We Energies’ 162 MW Glacier Hills project started producing power in late 2011. Since then, only one utility-scale wind farm, the 99 MW Quilt Block project in Lafayette County, has come online. Quilt Block has been generating power for sale to Dairyland Power Cooperative since 2017.

Throughout Red Barn’s operating life, Grant County and the Towns of Wingville and Clifton will receive a combined $368,000 in utility local aids each year.

In 2020, wind projects located in Wisconsin accounted for 2.4% of the state’s electricity supply, according to the PSCW.

Renewable generation steps up during pandemic

Renewable generation steps up during pandemic

Wisconsin electric providers added significantly more renewable energy content to their electricity supplies in 2020 relative to 2019, according to a July 2021 report issued by the Public Service Commission. The annual report documents the amount of renewable electricity sold in Wisconsin and determines whether electric providers here comply with the State’s 15-year-old Renewable Portfolio Standard (RPS).  This year’s report can be accessed from the PSC’s website at Docket No. 5-RF-2020.

Overall, RPS-eligible renewable energy (or renewable energy that supplies all utility customers) accounted for 12.98% of Wisconsin electricity sales in 2020, increasing more than two percentage points from the 10.71% level recorded in 2019.

This was the most significant advance since 2013 when the State’s electric providers achieved full compliance with the RPS statewide goal of 10% renewable electricity.

As shown in the chart below, the jump in Wisconsin’s renewable energy percentage resulted from a combination of increased renewable electricity supplies and a reduction in electricity sales caused primarily by the coronavirus pandemic.

In late 2020, Wisconsin utilities placed two significant renewable electricity sources in service: the Two Creeks solar farm near the Point Beach Nuclear Plant and the Kossuth wind power plant in north-central Iowa.

Project Resource Capacity
 (in MW)
Location Utility owner(s)
Two Creeks Solar 150 Manitowoc County (WI) WPS, MGE
Kossuth Wind 150 Kossuth County (IA) Alliant-WPL

More wind generation imported

Wind power now accounts for 71% of the renewable electricity sold in Wisconsin, and approximately 75% of Wisconsin’s wind generation originates from out of state. Overall, out-of-state sources produced 60% of Wisconsin’s RPS-eligible electricity in 2020.

While Wisconsin-based solar power is growing, it still represents a small sliver of the renewable energy pie. However, by the end of 2022, in-state solar generating capacity should surpass in-state wind capacity, as the ongoing utility effort to replace older fossil plants with new renewable generation shifts into high gear.

The pattern of adding in-state solar and out-of-state wind continues to unfold this year. Wisconsin utilities will have energized two solar farms by year’s end: the 150 MW Badger Hollow 1 project in Iowa County and the 100 MW Point Beach installation, adjoining Two Creeks. In January, a South Dakota wind farm called Tatanka Ridge began generating electricity. Dairyland Power Cooperative purchases electricity from a 51 MW share of that project.

Uneven distribution of renewable content

As shown in the table below, the distribution of RPS-eligible electricity varies widely from one electric provider to another.  For example, Xcel Energy, whose territory covers much of Minnesota as well as western Wisconsin, has greatly expanded its renewable energy portfolio over the last three years, relying principally on wind power located west of the Mississippi River. As of today, one-third of Xcel’s electricity supply is renewably powered.

At the other end of the spectrum, the two WEC Energy utilities—Wisconsin Public Service (WPS) and Wisconsin Electric Power (We Energies)—remain stuck in the 5-7% range. That said, RENEW expects WPS’s renewable energy percentage to move higher in 2021, lifted by a full year of production from Two Creeks and five months of production from Badger Hollow 1.

The role of Wisconsin’s RPS – then and now

Today’s electric power industry is in a much different place than where it was in 2006 when the current RPS was adopted. Back then, renewable electricity was in its infancy, both in terms of cost and engineering performance. The purpose of an RPS, as conceived by clean energy advocates and sympathetic legislators, was to was kick-start utility deployment of renewable power sources, aimed at advancing several public policy objectives, among them resource diversity and cleaner air. Upwards of 10 wind power projects presently operating in Wisconsin and the region owe their existence to the RPS.

However, the RPS’s days as a mechanism for fueling new renewable power generation are long past. This year’s crop of solar farms and other renewable projects are the products of market forces and individual utility decarbonization plans, not the RPS. But it remains valuable as a publicly accessible information portal for tracking renewable power supplies flowing through the utilities’ bloodstream. Until the day the state legislature establishes a program for reducing carbon emissions economywide, complete with new metrics and indicators, we will continue to rely on these annual reports to find out how much progress Wisconsin electricity providers are making in their quest to decarbonize their power plants.

Texas shows we need more renewable energy, not less

Texas shows we need more renewable energy, not less

The unfolding situation in Texas remains dire. The grid operator, the Electric Reliability Council of Texas (ERCOT) first warned of rolling blackouts on Sunday, February 14, 2021.  The blackouts and widespread power outages lasted for days in the Lone Star state amidst some of the harshest winter weather in years.  Millions of people were left without power and dozens perished.

Now just ten days out from the onset of the crisis, water contamination and shortages (resulting from frozen and broken pipes) continue to threaten the health and welfare of Texas residents.

Immediately preceding the energy crisis, a powerful winter storm blanketed the southern Plains with freezing rain and snow, followed by record low temperatures.  Frigid temperatures had a stranglehold on the central U.S. for two straight weeks, extending from Canada to Mexico. Many parts of Texas and the South rely on electricity as their primary source of heat, as opposed to gas, propane, or wood, which are more commonly used in the northern United States. The prolonged cold snap created a high demand for natural gas, for both heating and electricity generation around the region, triggering an upsurge in electricity consumption.

Everything that could go wrong, did go wrong

As demand skyrocketed, supply plummeted. Even before the winter weather moved in ERCOT had nearly 14 gigawatts (GW) of electric-generating capacity offline for maintenance. As other generating sources were shuttered, ERCOT was left with as much as 34 GWs of electric production offline. This periodically amounted to 30-42% of ERCOT’s total electric capacity.

Unfortunately, the outages gave rise to a disinformation campaign that attempted to implicate frozen wind turbines as the principal cause of the power outages. This narrative is patently false. While some wind turbines were frozen and unable to produce electricity, the cold and ice had a far more disruptive effect on thermal plants.

Operators at ERCOT and researchers identified the critical failure of natural gas to generate electricity and heat during the crisis.  Nearly 50% of ERCOT’s natural gas generators were offline, either a result of frozen lines or diminished supplies as demand for the fuel soared.

Wind, natural gas, and other energy sources need to be weatherized

In fact, renewable energy generation facilities played a key role in keeping the lights on.  According to ERCOT, wind power output exceeded forecasted generation numbers during the blackouts, even with the icing of turbines. At times, solar generation has also exceeded output. Wind turbines would have done better if they had used heating technology as Sweden does, to prevent icing and keep turbines generating power in extreme cold.  Using heating carbon-fiber technology similar to aircraft, Swedish maintenance workers add a thin layer of material to the wings of the turbines that can be automatically heated can prevent ice before it forms.

The bottom line is that our electricity grid and all types of power generation are vulnerable to extreme weather events.  We need to plan for these events and invest in grid resilience and weatherization to prevent disasters like this from repeating.

There is no single cause for the situation currently unfolding in Texas, and no silver bullet for preventing a repeat situation. A combination of record demand due to the prolonged cold temperatures, and generators not equipped to function in very cold temperatures are responsible for the rolling blackouts now plaguing the state.

Planning and preparing for extreme weather has to be part of the conversation

Renewables are reliable sources of energy from Texas to Antarctica. Even during extreme weather events, wind and solar can function when traditional energy sources have gone offline. More renewable energy sources, in more locations, will diversify our grid and make it less susceptible to the forces of nature and the market.  Microgrids and energy storage are important tools to help shore up the reliability and safety of our grid.

Extreme weather events will continue to complicate our lives and strain our power grids over the foreseeable future. By incorporating more sources of renewable energy, we can reduce problems and increase reliability in our electric grid.