The Inflation Reduction Act and Solar Power | Seeing Progress Already
Economics is a peculiar science. I will fall back on the economist Friedrich Hayek, who said that economics uses an approach which is "decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed." This may help explain why most accepted economic theories sound like they were cooked up using Mad Hatter logic.
As I write, it is December 9, 2022. The recently-passed Inflation Reduction Act, which we recently blogged, has mostly not yet taken effect. It will fully kick in starting in 2023. And yet the very inflation which we were so concerned about has begun to recede.
Meanwhile, gas prices have also dropped noticeably.
This would be the expected result after the Inflation Reduction Act kicked in, but it hasn't yet.
What the crackers is going on? We did just have a national election, which always seems to nudge the market off its previous course, especially when the election results appear to reflect a strong grassroots movement in a certain direction. The rest may be put up to anticipation. Consumers and corporations alike tend to react to economic news immediately, while the effects of said news item haven't even been implemented. If bad news breaks about a company, its stock plummets, even before the announced news has taken effect.
The Inflation Reduction Act is Bolstering the Solar Industry Already
This is good news, and we'll take any excuse for a spot of optimism in our current climate.
About 80% of the Inflation Reduction Act's price tag goes to climate-related programs, from electric vehicle tax credits to home energy credits and rebates for the likes of solar power and geothermal energy systems. An important distinction is that the Act has extended green energy subsidies to public power utilities, which can now receive direct federal incentive payments for renewable projects.
In direct response to the Act, we've seen the following stories come out:
- Arizona public power utility Salt River Project has approved the completion of a 55 megawatt solar project in Florence, AZ
- The executive director of the Catholic Climate Covenant affirms his enthusiasm for more solar-power conversions of churches
- First Solar, a solar panel manufacturer, has announced the founding of its fourth manufacture plant in Alabama
- The CEO of Enel North America, another solar equipment manufacturer, has also announced that it will construct a solar panel manufacturing facility in the US
All of the above are citing the Inflation Reduction Act as their motivation. These stories are just scratching the surface. We are witnessing a "solar rush," and, whatever else the Act accomplishes, it seems like it's creating a lot of solar industry jobs if nothing else.
What Does the Inflation Reduction Act Do For Homeowners?
This boom in solar adoption in the industrial sector is all great news (for our planet as well as our economy), but what about the home front? We covered some of the green energy subsidies in the Inflation Reduction Act last time.
We should note: The 30% tax credit for installing solar PV panels on your home is an extension of the previous federal solar tax credit, not in addition to it. However, any state tax credits still apply separately. Also, the tax credit applies to both a solar power system and a battery storage system, in case you can swing one of those.
In addition to perks for installing solar panels on your home, the Act includes other provisions such as:
- The Clean Vehicle Credit applies a $7500 tax credit to those purchasing an electric vehicle
- Tax credits of 30% each for purchasing geothermal heating systems, heat pump water heaters, electric panel upgrades, and home insulation
- Rebates for these same upgrades (varies)
- Up to a $840 rebate for installing an electric stove or dryer (as opposed to natural gas)
Last week we talked about how it's possible to power an electric vehicle solely through your home solar power system - with some caveats. The Clean Vehicle Credit puts that goal within closer reach. While not every home will be set up to do this (given roof size, roof angle, shade trees, and other variables). But for those that can, saving on your power bill with solar while also not having to buy gas is likely to make a huge difference in the household budget.
With Solar Power, the Sky's the Limit!
Even though we're always enthusiastic about green energy progress here, you have to admit that we are in an exciting time in solar power history. All over the world, one country after another is switching from fossil fuels to renewable energy, with some getting near 100% renewable energy. It's a new renaissance for the industrial age, and a more economical and less polluted future for us all.