The Inflation Reduction Act: Federal investments available for energy and utilities

The Inflation Reduction Act was signed into law on Monday, which makes a significant investment in the clean and renewable energy market while also implementing several tax changes to help pay for that investment. 

What does this mean for the energy and utility industry? The Act includes $369 billion in renewable energy production to bolster domestic manufacturing, modernize the grid, increase resilience, and reduce carbon emissions by 40% by 2030. It also provides industry-wide incentives to boost the production, implementation, and adoption of clean energy generation and decarbonization technologies. 

Clean energy tax credits 

The Act includes a wide range of tax credits for manufacturers and consumers. The extension of production tax credits will spur market growth for solar, wind, batteries, and critical mineral processing with an estimated $30 billion—while an additional $10 billion in investment tax credits will help build clean tech manufacturing facilities. 

Microgrid controllers and other standalone energy storage facilities will also now be eligible for tech-neutral investment tax credits. What’s more, manufacturing credits will invest in U.S. supply chain production. 

Rural electricity development 

The Act includes $12.8 billion for deployment of decarbonization technologies and diversification of underutilized renewable energy in rural communities. Included in the $12.8 billion: Rural electric cooperatives are eligible for $9.7 billion in funding allocated for long-term resiliency, reliability, and affordability for rural electric systems, zero emission, carbon capture and storage, and deployment and efficiency improvements to electric generation and transmission systems. 

Electric transmission 

Federal funding of $2 billion will be made available via loans for the construction and modification of electric transmission. An appropriated $760 million will be allocated for grants to facilitate the siting of interstate electricity transmission lines, and an additional $100 million will be invested in interregional and offshore wind transmission planning, modeling, and analysis. 

Hydrogen 

The Act also includes clean hydrogen production credits and increased credit amounts for qualifying production facilities that meet lifecycle greenhouse gas emissions qualifications. It also promotes prevailing wage rates for the labor market. 

Residential energy efficiency 

$4.3 billion has been allocated for state energy offices to implement a home energy retrofit rebate program to increase home energy performance. State offices must submit plans to use or implement advanced measurement and verification (M&V) to qualify. 

Transportation electrification 

The buildout of electric vehicle infrastructure has been growing rapidly. With the Inflation Reduction Act expanding EV credits to now include used clean vehicles and remove limits on the number of vehicles eligible for credits per qualifying manufacturer, supporting physical and digital infrastructure will need to swiftly meet the demand. An estimated $2 billion has been appropriated for grants available to the auto industry to manufacture clean vehicle components while also ensuring these industry jobs stay in the communities that depend on them. An additional $20 billion in loans will also be available for the buildout of these facilities. 

The Act also includes $3 billion to electrify the U.S. Postal Service fleet and another $1 billion for clean heavy-duty vehicles—$400 million of which will be available to transition and replace eligible vehicles in communities experiencing hazardous air quality. 

Low-income focus 

Investments to address disproportionate environmental impacts and inaccessibility of clean technologies are interwoven into many provisions in the Act. Low-income and disadvantaged communities will receive $8 billion to mitigate local emissions through clean energy technology made available via the Greenhouse Gas Reduction Fund. Another $3 billion will invest in local and community-led projects to tackle emissions, reduce environmental pollutants, and increase climate resiliency. 

Catalyzing industry shifts 

What makes this Act particularly significant is the number of direct consumer-facing benefits that are projected to shift substantial demand toward more accessible clean technologies. 

Consumers will see increased options made available to them that will require industry agility and digital dexterity in energy infrastructure. Staying attuned to adjustments in broad consumer demand—and the adoption and ownership of green technologies—will ensure energy and utility providers remain nimble in the changing market.