Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Economy

The First IRA Tax Credit Data Is In

Here are four ways to parse it (and five charts, too).

The First IRA Tax Credit Data Is In

More than 3 million American households used the Inflation Reduction Act’s subsidies for homeowners last year, collectively saving more than $8 billion on things like solar panels, batteries, heat pumps, insulation, and other clean energy technologies and efficiency upgrades.

That’s according to new data released Wednesday by the Treasury Department, which provided the most significant insight yet into how Americans are actually using the IRA. Polling had so far suggested that Americans were curious — if confused — about the law’s benefits, but until today, there was no official data available to back up those impressions.

The data sheds light on usage of two tax credits in particular, one of which encourages Americans to make energy efficient changes to their home, e.g. installing a heat pump or a more efficient water heater, the other of which goes toward installing rooftop solar or another form of zero-carbon energy generation.

Of the more than 137 million tax returns the government had processed by late May, some 3.4 million of them — or approximately 2.5% — took advantage of at least one of these two subsidies. That’s about 30% more people than used similar, though less generous tax credits in 2021.

“The Biden Harris administration’s top economic priority is making life more affordable for Americans,” Wally Adeyemo, the deputy secretary of the Treasury, said during a briefing call this week. “The Inflation Reduction Act is doing exactly that.”

Not all of the data flatters the Biden administration’s goals, however. The tax credits — especially those that reward energy-efficient home upgrades — are used in large part by richer households who have the money and wherewithal to pay for costly upgrades to their homes in the first place. Here are four takeaways from this first crucial look into how the law is going.

1. Americans are using the tax credits more than projected — but that’s mostly because of the popularity of rooftop solar.

More than 1.2 million Americans used the residential clean energy tax credit, which covers some of the cost of installing clean electricity-generating technology. A comfortable majority of those claiming the credit — some 750,000 — purchased rooftop solar panels.

When the IRA was first proposed in 2022, the Joint Committee on Taxation projected the government would spend $2 billion on the residential clean energy credit in 2023. In fact, it has spent more than triple that — a total of $6.3 billion and counting. The Biden administration expects more claims to appear as tax returns keep rolling in through November.

2. Uptake is more about geography and economics than politics.

The top three states claiming the efficiency tax credit were Maine, New Hampshire, and Vermont. These states have some of the strongest state energy efficiency policies in the country, according to the American Council for an Energy Efficient Economy’s state scorecard, giving homeowners the chance to stack multiple subsidies to help them pay for upgrades. Northeast states also have some of the most expensive electricity in the country, and many homes there still use fuel oil heating systems, the priciest option for home heating.

But another set of states dominated the clean energy tax credits, which cover solar panels. The top three states to use that subsidy were Nevada, Florida, and Arizona — some of the sunniest places in the country, which have long led on rooftop solar adoption.

Ironically, West Virginia — home of Senator Joe Manchin, one of the IRA’s architects — was dead last of states that used at least one of the credits.

3. The federal government helped pay for nearly 600,000 new natural gas-burning heating systems.

The Inflation Reduction Act revived an earlier, expired tax credit that helped Americans pay for energy efficient home upgrades and appliances. But while the new program increased the amount households could get back for installing electric heat pumps from $500 to $2,000, it also kept in place subsidies for “qualified” natural gas heaters. The government helped pay for taxpayers to install nearly 600,000 new natural gas-burning space heating and water heating systems in 2023. Those appliances have a useful life of at least 15 to 20 years.

The level of uptake is not necessarily surprising — the upfront cost of a natural gas boiler or furnace is much lower than that of a heat pump system. In many states, natural gas heating systems will also result in lower energy bills than a heat pump will.

Heat pump water heaters are more competitive on cost than space heaters, so there the mismatch may be more of a marketing issue. With the federal tax credit, the upfront cost can be nearly on par with natural gas water heaters, and they actually beat their natural gas-powered brethren when it comes to energy bill savings.

4. Wealthier Americans were more likely to take advantage of the IRA.

On a call with reporters on Tuesday, Adeyemo pointed out that nearly half the families who claimed one or both of the residential clean energy credits had incomes lower than $100,000 in 2023.

That’s true. But roughly 75% of filers had incomes lower than $100,000 in 2023. When you look at how many people claimed each tax credit as a percentage of the total number of filers in that bracket, it’s clear that both tax credits are more frequently adopted by higher income Americans.

There’s also an interesting split between the two credits. Wealthier households were especially enthusiastic about efficiency upgrades — roughly one in 25 of those bringing in more than $100,000 claimed the energy efficiency tax credit.

Adeyemo also pointed out that, since people invest in their home’s heating system rather rarely, the administration expects uptake to increase over time.

“Our expectation is that as more American families become more familiar with these tax credits, and they look for ways to save money, they’ll continue to see this as a means to do so,” he said. “Given what we’ve heard from some of the companies selling these products, our expectation is that this will continue.”

Green

You’re out of free articles.

Subscribe to access Heatmap’s expert analysis of climate change, clean energy, and sustainability. Save $57 on an annual subscription, just $156 $99/year.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Daily Briefing

Ford’s Fathom? Drive!

Facing down a sea change, the automaker has staked its next EV bet on a compact, sporty pickup.

Ford headquarters.
Heatmap Illustration/Getty Images

“Full fathom five, your father lies,” the invisible spirit Ariel sings early in The Tempest, as a handsome and grieving prince listens, rapt. The song tells of a shipwrecked skeleton transforming into something else — its eyes have become pearls, and its bones pink coral — as it undergoes, yes, a “sea change.” It is the first time that phrase appears in the English language.

Ford is now facing its own kind of sea change. Over the past decade, the automaker has doubled down on its most profitable and exciting vehicles — pickups, SUVs, and the Mustang muscle car — and dropped from its line-up the cheap, boring cars that once made it famous. It embraced, then backed off, the transition to electric vehicles, in part because it failed to make money from them; and it began to reckon with the surge of cheaper, cleaner, and “far superior” EVs from Chinese producers that are transforming global auto markets around the world.

Keep reading...Show less
Blue
Energy

Amazon Is Building America’s Biggest Fossil Fuel Plant to Power AI

The company confirmed its plans to market research company Cleanview.

The Amazon logo and smokestacks.
Heatmap Illustration/Getty Images

The data center buildout has hit a new inflection point. It has long been true that artificial intelligence is fueling climate change by driving up power demand; more recently, tech companies have started directly financing new natural gas plants in their quest for AI glory. Now one is backing the biggest fossil fuel-fired power plant ever to exist in the United States — exclusively to power an AI data center complex.

That company is Amazon, according to the market research company Cleanview, which reported on Friday that the tech giant is building an AI data center campus in Texas powered by an up to 7.65-gigawatt off-grid natural gas plant.

Keep reading...Show less
Red
Climate

Which Wildfire Smoke Is Worst?

The smoke pouring into Seattle from Spokane is particularly bad, but there’s also no such thing as good smoke.

An AQI city.
Heatmap Illustration/Getty Images

I wrote this story from inside a cloud of smoke. Owing to some funky meteorology in the Seattle area this week — a pressure ridge paired with a thermal trough — the region’s usual westerly winds reversed, causing smoke from the fires burning in the eastern half of the state to pour through the mountain passes and river valleys of the Cascades and pool over the populous Puget Sound lowlands, where I live.

Though it’s cleared up some today, I’m still running my air purifier on full blast because I know what’s in the lingering smoke. Unlike the still blazing wildfires in Ontario that are burning through mostly uninhabited forests, the smoke in the Seattle area this week came to us partially from Spokane, where the Old Trails fire razed at least 700 buildings and homes last weekend. That means that beyond the usual organic matter associated with wildfire smoke, the pollution that has hung over Seattle has likely also contained particles and chemicals from burned plastics, batteries, cars, and household appliances.

Keep reading...Show less