Inflation Reduction Act Could Usher In Roof Top Solar Boom

Financial incentives in the recently approved federal Inflation Reduction Act could help thousands of Wisconsin homeowners install solar panels or pursue energy efficiency projects.

The act signed by President Joe Biden on Aug. 16 provides nearly $370 billion for the clean energy transition to combat climate change. That’s set to increase incentives to improve energy efficiency and install renewable energy for Wisconsin homeowners.

The legislation passed along party lines with only Democrats supporting the package as Republicans objected to the sweeping climate investment. Wisconsin Democrats in Congress said the law would make the nation cleaner and more energy independent, putting the country on a path to cut emissions 40 percent by 2030. At the same time, the state’s Republican lawmakers called it a “tax-and-spending bonanza” that contained too many corporate incentives for green industry amid soaring inflation.

Regardless of political viewpoints, the law contained many incentives for homeowners and companies to go green. Here are some of the measures that could affect Wisconsin.

Tax credits for residential solar, energy rebates

The Inflation Reduction Act includes tax credits that would cover 30 percent of the cost to install solar panels and battery storage for residential homes over the next 10 years, according to figures from the White House. It’s anticipated that could help more than 90,000 homes install rooftop solar in Wisconsin. Those credits would be retroactive for residential installations from Jan. 1 of this year.

The law also includes $4.275 billion for grants to state energy offices and $224 million to tribes for rebates that would cover 50 to 100 percent of the cost to install new electric appliances.

Rebecca Cameron Valcq, chair of the Public Service Commission, said incentives move the needle toward addressing climate change through energy efficiency as scientists urge drastic cuts in greenhouse gas emissions.

“We know that we can’t just continue to build new generating facilities, even if it’s clean energy,” said Valcq. “We need to really focus on energy efficiency, so that we are lowering everybody’s consumption of electricity.”

Homes could receive up to $8,000 to upgrade heat pumps that are energy-efficient alternatives to furnaces and air conditioners. Depending on income, households could receive lesser rebates to cover the cost to install new electric stoves, water heaters or electric wiring.

Tom Content, executive director of Wisconsin’s Citizens Utility Board, said the law doubles down on investments in electrification and energy bill savings. He noted the current incentive for a heat pump is $1,500 under Focus on Energy, the state’s energy efficiency program.

“This is putting more power in the hands of individual homeowners to take control of their costs,” said Content.

Content said that’s significant as natural gas prices have soared. In August, natural gas futures spiked to their highest level since 2008 due to a hot summer and the Russian war in Ukraine. The vast majority of Wisconsin relies on natural gas or propane for heating.

“You can’t control the price of natural gas…What people can control is how much energy they use,” said Content.

Grants are also available to help the state and local governments adopt the latest building energy codes. That could save the average homeowner in Wisconsin 21.6 percent on utility bills or around $650 each year.

Updating building codes was one of many recommendations of Gov. Tony Evers’ climate change task force. State Democrats introduced a package of bills last year that included a proposal to allow communities to go beyond state requirements, but it didn’t advance in the Republican-controlled Legislature.

Tax credits for community solar projects, electric vehicles

The law also includes tax credits that would cover 30 percent of the costs for community solar projects, providing additional credits of 20 percent for affordable housing and 10 percent for low-income communities. For the first time, nonprofit organizations like schools, hospitals and local governments would be able to utilize tax credits under the law despite their tax-exempt status.

It also provides an extra 10 percent tax credit for renewable energy projects that are sited in an “energy community” that has a coal plant that recently closed.

“This law could facilitate renewable generation, battery projects in places like Pleasant Prairie in Kenosha County or the Columbia power plant in Columbia County near Portage or South Oak Creek,” said Michael Vickerman, policy director for RENEW Wisconsin.

In June, utilities announced they were delaying retirement of coal plants in Columbia County and South Oak Creek in Milwaukee County due to COVID-19 supply chain constraints and fears of an energy shortage in the Midwest.

Even so, Vickerman said the extension of tax credits over a longer term gives companies the confidence to invest in building renewable projects or manufacture components for them. The law contains incentives for equipment from American-made sources and using local labor for utility-scale solar projects. Wisconsin could receive as much as $4 billion for large-scale renewable projects by 2030.

“Utility scale development will rely increasingly on domestic companies to provide the equipment, provide all of the value-added work that goes into the power plant as it relates to solar farms,” said Vickerman.

As that transition takes place, the law also provides a $7,500 tax credit to encourage people to buy new electric vehicles and up to $4,000 for a used electric car.

Congress still must appropriate funding under the law, and it’s unclear when money will be made available to Wisconsin. Valcq hopes allocations will be announced in the first half of next year.

Listen to the WPR report here.

More than 90K homes could install rooftop solar in Wisconsin under Inflation Reduction Act was originally published by Wisconsin Public Radio