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A practical guide to using the climate law to get cheaper solar panels, heat pumps, and more.
Today marks the one year anniversary of the Inflation Reduction Act, the biggest investment in tackling climate change the United States has ever made. The law consists of dozens of subsidies to help individuals, households, and businesses adopt clean energy technologies. Many of these solutions will also help people save money on their energy bills, reduce pollution, and improve their resilience to disasters.
But understanding how much funding is available for what, and how to get it, can be pretty confusing. Many Americans are not even aware that these programs exist. A poll conducted by The Washington Post and the University of Maryland in late July found that about 66% of Americans say they have heard “little” or “nothing at all” about the law’s incentives for installing rooftop solar panels, and 77% have heard little or nothing about subsidies for heat pumps. This tracks similar polling that Heatmap conducted last winter, suggesting not much has changed since then.
Below is Heatmap’s guide to the IRA’s incentives for cutting your carbon footprint at home. If you haven’t heard much about how the IRA can help you decarbonize your life, this guide is for you. If you have heard about the available subsidies, but aren’t sure how much they are worth or where to begin, I’ll walk you through it. (And if you’re looking for information about the electric vehicle tax credit, my colleague at Heatmap Robinson Meyer has you covered with this buyer’s guide.)
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There’s funding for almost every solution you can think of to make your home more energy efficient and reduce your fossil fuel use, whether you want to install solar panels, insulate your attic, replace your windows, or buy electric appliances. If you need new wiring or an electrical panel upgrade before you can get heat pumps or solar panels, there’s some money available for that, too.
The IRA created two types of incentives for home energy efficiency improvements: Unlimited tax credits that will lower the amount you owe when you file your taxes, and $8.8 billion in rebates that function as up-front discounts or post-installation refunds on equipment and services.
The tax credits are available now, but the rebates are not. The latter will be administered by states, which must apply for funding and create programs before the money can go out. The Biden administration began accepting applications at the end of July and expects states to begin rolling out their programs later this year or early next.
The home tax credits are available to everyone that owes taxes. The rebates, however, will have income restrictions (more on this later).
“The Inflation Reduction Act is not a limited time offer,” according to Ari Matusiak, the CEO of the nonprofit advocacy group Rewiring America. The rebate programs will only be available until the money runs out, but, again, none of them have started yet. Meanwhile, there’s no limit on how many people can claim the tax credits, and they’ll be available for at least the next decade. That means you don’t need to rush and replace your hot water heater if you have one that works fine. But when it does break down, you’ll have help paying for a replacement.
You might want to hold off on buying new appliances or getting insulation — basically any improvements inside your house. There are tax credits available for a lot of this stuff right now, but you’ll likely be able to stack them with rebates in the future.
However, if you’re thinking of installing solar panels on your roof or getting a backup battery system, there’s no need to wait. The rebates will not cover those technologies.
A few other caveats: There’s a good chance your state, city, or utility already offers rebates or other incentives for many of these solutions. Check with your state’s energy office or your utility to find out what’s available. Also, it can take months to get quotes and line up contractors to get this kind of work done. If you want to be ready when the rebates hit, it’s probably a good idea to do some of the legwork now.
If you do nothing else this year, consider getting a professional home energy audit. This will cost several hundred dollars, depending on where you live, but you’ll be able to get 30% off or up to $150 back under the IRA’s home improvement tax credit. Doing an audit will help you figure out which solutions will give you the biggest bang for your buck, and how to prioritize them once more funding becomes available. The auditor might even be able to explain all of the existing local rebate programs you’re eligible for.
The Internal Revenue Service will allow you to work with any home energy auditor until the end of this year, but beginning in 2024, you must hire an auditor with specific qualifications in order to claim the credit.
Let’s start with what’s inside your home. In addition to an energy audit, the Energy Efficiency Home Improvement Credit offers consumers 30% off the cost (after any other subsidies, and excluding labor) of Energy Star-rated windows and doors, insulation, and air sealing.
There’s a maximum amount you can claim for each type of equipment each year:
$600 for windows
$500 for doors
$1,200 for air sealing and insulation
The Energy Efficiency Home Improvement Credit also covers heat pumps, heat pump water heaters, and electrical panel upgrades, including the cost of installation for those systems. You can get:
$2,000 for heat pumps
$600 for a new electrical panel
Yes, homeowners can only claim up to $3,200 per year under this program until 2032.
Also, one downside to the Energy Efficiency Home Improvement Credit is that it does not carry over. If you spend enough on efficiency to qualify for the full $3,200 in a given year, but you only owe the federal government $2,000 for the year, your bill will go to zero and you will miss out on the remaining $1,200 credit. So it could be worth your while to spread the work out.
The other big consumer-oriented tax credit, the Residential Clean Energy Credit, offers homeowners 30% off the cost of solar panels and solar water heaters. It also covers battery systems, which store energy from the grid or from your solar panels that you can use when there’s a blackout, or sell back to your utility when the grid needs more power.
The subsidy has no limits, so if you spend $35,000 on solar panels and battery storage, including labor, you’ll be eligible for the full 30% refund, or $10,500. The credit can also be rolled over, so if your tax liability that year is only $5,000, you’ll be able to claim more of it the following year, and continue doing so until you’ve received the full value.
Geothermal heating systems are also covered under this credit. (Geothermal heat pumps work similarly to regular heat pumps, but they use the ground as a source and sink for heat, rather than the ambient air.)
Here’s what we know right now. The IRA funded two rebate programs. One, known as the Home Energy Performance-Based Whole House Rebates, will provide discounts to homeowners and landlords based on the amount of energy a home upgrade is predicted to save.
Congress did not specify which energy-saving measures qualify — that’s something state energy offices will decide when they design their programs. But it did cap the total amount each household could receive, based on income. For example, if your household earns under 80% of the area median income, and you make improvements that cut your energy use by 35%, you’ll be eligible for up to $8,000. If your household earns more than that, you can get up to $4,000.
There’s also the High-Efficiency Electric Home Rebate Program, which will provide discounts on specific electric appliances like heat pumps, an induction stove, and an electric clothes dryer, as well as a new electrical panel and wiring. Individual households can get up to $14,000 in discounts under this program, although there are caps on how much is available for each piece of equipment. This money will only be available to low- and moderate-income households, or those earning under 150% of the area median income.
Renters with a household income below 150% of the area median income qualify for rebates on appliances that they should be able to install without permission from their landlords, and that they can take with them if they move. For example, portable appliances like tabletop induction burners, clothes dryers, and window-unit heat pumps are all eligible for rebates.
It’s also worth noting that there is a lot of funding available for multifamily building owners. If you have a good relationship with your landlord, you might want to talk to them about the opportunity to make lasting investments in their property. Under the performance-based rebates program, apartment building owners can get up to $400,000 for energy efficiency projects.
For the most part, yes. But the calculus gets tricky when it comes to heat pumps.
Experts generally agree that no matter where you live, switching from an oil or propane-burning heating system or electric resistance heaters to heat pumps will lower your energy bills. Not so if you’re switching over from natural gas.
Electric heat pumps are three to four times more efficient than natural gas heating systems, but electricity is so much more expensive than gas in some parts of the country that switching from gas to a heat pump can increase your overall bills a bit. Especially if you also electrify your water heater, stove, and clothes dryer.
That being said, Rewiring America estimates that switching from gas to a heat pump will lower bills for about 60% of households. Many utilities offer tools that will help you calculate your bills if you make the switch.
The good news is that all the measures I’ve discussed in this article are expected to cut carbon emissions and pollution, even if most of your region’s electricity still comes from fossil fuels. For some, that might be worth the monthly premium.
Tax Credit #1 offers 30% off the cost of energy audits, windows, doors, insulation, air sealing, heat pumps, electrical panels, with a $3200-per-year allowance and individual item limits.
Tax Credit #2 offers 30% off the cost of solar panels, solar water heaters, batteries, and geothermal heating systems.
Rebate Program #1 will offer discounts on whole-home efficiency upgrades depending on how much they reduce your energy use, with an $8,000 cap for lower-income families and a $4,000 cap for everyone else.
Rebate Program #2 is only for low- and moderate- income households, and will offer discounts on specific electric appliances, with a $14,000 cap.
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Chatting with RE Tech Advisors’ Deb Cloutier about data centers, lifecycle costs, and the value of federal data.
Last fall, my colleagues and I at Heatmap put together a comprehensive (and award-winning!) guide on how to Decarbonize Your Life. Though it contained information on everything from shopping for an EV to which fake meats are actually good, as my colleague Katie Brigham noted, “an energy-efficient home needs energy-efficient … gadgets to fill it up.” So we also curated lists of climate-conscious stoves, heaters, and washer-dryers — recommendations we made by talking to experts, but also by looking closely at appliances’ Energy Star certifications.
You’ve probably relied on these certifications, too. Overseen by the Environmental Protection Agency, Energy Star labels are recognized by 90% of Americans as indicating that an appliance is top of its class when it comes to saving electricity and money. According to the government’s estimates, the voluntary program has saved Americans $500 billion since it began in 1992.
But now all that appears to be reaching its end: Last week, EPA leadership told staff that the division that oversees the Energy Star efficiency certification program for home appliances will be eliminated as part of the Trump administration’s ongoing cuts and reorganization (although the president has also long pursued a vendetta against low-flow showerheads and dishwashers that “don’t work”). To better understand the ramifications of such a decision, I spoke this week with Deb Cloutier, the president and founder of the sustainability firm RE Tech Advisors and one of the original architects of Energy Star. She provided technical guidance and tools as a consultant during the program’s development stages of the program, and later worked as a strategic advisor for the Department of Energy’s Better Buildings Initiative. Our conversation has been lightly edited and for length and clarity.
You’ve been involved in the Energy Star program since the beginning. Can you tell me a little about what the atmosphere was like when it was established back in 1992? Was there resistance to it from appliance manufacturers or Republicans at that time?
Energy Star represented a voluntary public-private partnership, meaning a nonregulatory approach to engaging the business community and catalyzing the adoption of strategic energy management. So at the time, it was the first of its kind. I wouldn’t say folks were just like, “Yes, let’s do this.” It was really new and different.
The other thing is that at that time, we had come out of the oil crisis of the 1970s, and people were starting to recognize the importance of where and how our energy was being produced. But we weren’t focused on thinking about it as an opportunity. For office buildings, the single largest controllable operating expense is your energy or utilities expenses; if the Environmental Protection Agency or the government could build awareness, develop tools, and help businesses understand how they could invest in energy efficiency and how that would translate to financial performance results for them — it was a great experiment. And it turns out that it’s the single most successful voluntary program we’ve had to date, saving over $5 billion annually.
It’s clear how losing Energy Star would harm consumers, but I’m curious to hear from you about how this is also bad for building owners and residents. What is the cost of losing this program, especially from a climate perspective?
The most important contribution of the EPA’s Energy Star program is that it has created a national standard to benchmark and measure efficiency and energy performance. You can’t manage what you don’t measure, and consistency across building types, ages, and sizes — it’s pretty complicated to make an apples-to-apples comparison.
One of the tools and resources that Energy Star has created, which I see as being embedded in the fabric of American businesses, is their benchmarking tool called Portfolio Manager. It is tied to dozens of state and local jurisdiction policies and legislation that range from building energy disclosure to mandatory best practices to maintaining and operating buildings and emissions thresholds. So the Energy Star rating system is tied not only to how organizations assess their whole building performance, but also to how it tracks and measures progress towards efficiency improvements and then gives a certification or recognition for the most highly efficient ones.
Another thing folks tend not to consider is the relationship between energy efficiency and grid stability. Energy Star-certified appliances, homes, buildings, and industrial facilities help to reduce peak demand, which improves grid stability and resilience. It also lowers the risk of brownouts and blackouts. Think about the growing demands of data center computing and AI models — we need to bring more energy onto the grid and make more space for it. People sometimes don’t realize that it is really dependent on a consistent, impartial standard as a level setting.
If you look at some of the statistics, they’re projecting that investments in new data centers will grow at more than a 20% compound annual growth rate, and that’s equal to $59 billion. It’s just astronomical how much more energy demand there will be. If you try to put that on top of a grid that is fairly antiquated and very inefficient in the way it generates, transmits, and distributes energy, then you are intensifying the potential problem.
I’ve heard about manufacturers or an outside energy or appliance group possibly setting up a replacement program if Energy Star is eliminated. What is the advantage of having the government specifically oversee Energy Star?
Three or four things make the federal government the most unique entity and the most well-equipped to oversee the Energy Star program. First, they have access to large data sets using CBECS, the Commercial Building Energy Consumption Survey, and RECS, the Residential Energy Consumption Survey. The government inherently is an impartial, unbiased group, and entities are willing to share their data with it, and that would not be the same if it were a third party or a privatized group. That data set is instrumental in creating the standards that allow you, for products, to evaluate the most energy efficient, or for buildings, to develop a one-to-100 score. Energy Star allows the top 25% to be recognized as exemplary energy performance.
The government also has access to the National Renewable Energy Laboratory resources; they have the data, and I believe they have the impartiality and the trust. Today, the Energy Star brand has over 90% consumer recognition. I would be concerned if manufacturers or others would produce confusion in the marketplace related to a single little blue label.
Is there anything consumers should know about making decisions or navigating their choices if we return to a pre-1992 landscape?
In the absence of an Energy Star label, one thing we can do is help consumers understand that it is not just about the first cost of a dishwasher or a washing machine or renting an apartment. It’s about total lifecycle costs. What the Energy Star label does is it helps you have confidence that [an appliance] will use the least amount of energy necessary to run over its lifetime. But if your product or apartment is full of less efficient appliances, you have to think about how much more energy you will pay for over that life cycle. That’s sometimes a difficult concept for folks to understand: They think of their first cost, not the cost to operate or maintain something over time, which is higher if it’s not energy efficient.
Is there anything else people often overlook when considering the ramifications of losing Energy Star?
Energy efficiency is important for all constituencies and all sectors of the U.S. economy. Some folks will be harder hit by this, and by that, I mean low-income housing, schools, hospitals, and public sector buildings. Those facilities often have very limited budgets, so energy efficiency is one of the lowest-cost, most effective investments with good returns. But if you’re a low-income family, think about it: If you make less than $33,000 a year for a family of four, your utility bills have an outsized impact on the total cost of living. If the total utility bill is $300 or $400 a month, then utilities represent 10% to 15% of your total income, so efficiency can have an outsized impact.
The other side of that is mission-critical facilities. Having the ability to run lights, air conditioning, and cooling is important for comfort, but in some facilities — like precision manufacturing or biopharmaceuticals, data centers, things of that nature — it becomes a mission-critical area, not a nice-to-have. We can help reduce the amount of energy used by those facilities, extend their useful life, help them maintain their systems longer, and allow those businesses to be more competitive.
What’s your read on how the proposed Energy Star elimination is being discussed right now?
There’s a lot of hyperbole about Energy Star being eliminated — it’s a fait accompli. It is important to note that Energy Star is a line item identified in the statute by Congress for approval for funding. It seems pretty unrealistic, from a judicial standpoint, that it would be able to be eliminated before the end of this fiscal year.
I know that there are many, many representatives, both Republican and Democrats, who support Energy Star. We’ve had 35 years of bipartisan support, and it has been earmarked in congressional law many times, through multiple George H.W. and George W. Bush administrations. And there are a lot of lobbying efforts that I’m personally aware of within the commercial real estate industry and the manufacturing industry, where folks are reaching out and doing calls to action for the House and Senate Appropriations majority members — similar activities to what we did eight years ago when Energy Star was directly under fire.
It seems like such a strange thing for the administration to go after. It’s not like appliance manufacturers were clamoring for this, right?
It’s very vexing to me. I don’t get it. If the Trump administration wants to focus on affordability in American households, energy efficiency isn’t the thing to cut. I’m not sure if it’s getting caught up in the fact that it is in the Office of Atmospheric Pollution Prevention, or because at the Department of Energy’s Better Buildings Program, Biden launched the Better Climate Challenge. I don’t know if it’s because it had some ties to climate, but what’s ironic is that it didn’t start as a climate program. It began as an energy efficiency program, and it’s always been focused on businesses and the financial returns on investment — it helps us attract capital and debt for investment in real estate. It’s really disconnected.
On drinking water, a ‘rogue’ discovery, and Northwest data centers
Current conditions: Today marks the start of the Eastern Pacific Hurricane Season, and meteorologists are monitoring two potential areas of tropical development• Millions in the Great Plains and Eastern U.S. face risks of thunderstorms, large hail, and tornadoes • Steady rain continues Thursday in the eastern Democratic Republic of Congo, where at least 100 people have died in flash floods.
1. Trump administration backtracks on promise to protect drinking water from forever chemicals
The Environmental Protection Agency announced Wednesday that it plans to rescind four Biden-era limitations on pollutants in drinking water. Per- and Polyfluoroalkyl Substances, also called PFAS or “forever chemicals,” are linked to many serious health issues, including certain cancers; as I’ve covered, they are common in products advertised as stain-proof, nonstick, and water repellent. The EPA’s decision follows Administrator Lee Zeldin’s claim less than two weeks ago that “I have long been concerned about PFAS” and “we are tackling PFAS from all of EPA’s program offices,”E&E News reports.
In the Wednesday announcement, Zeldin backpedaled from his initial call for action, claiming the agency is looking into “common-sense flexibility in the form of additional time for compliance.” He also pushed back on claims that the agency is weakening PFAS standards, per The Washington Post, saying the EPA is looking into revising the limits and that “the number might end up going lower, not higher.” Water utilities, which have balked against the high cost and difficulty of filtering PFAS out of an estimated 158 million Americans’ drinking water, praised the EPA’s delay as “the right thing.”
2. Security experts discovered ‘unexplained’ pieces of communication equipment in Chinese-made solar power inverters
U.S. energy officials have discovered “unexplained communication equipment” in some Chinese-made solar inverters, Reuters reports. Inverters help connect solar panel systems to the electric grid and allow utilities to conduct remote updates and maintenance; because China makes most inverters, power companies typically use firewalls to prevent foreign communication with the devices.
Security experts reportedly found the rogue devices during inspections. Though the sources who spoke with Reuters did not share the manufacturers of the inverters, similar communication devices were reportedly also found in some batteries from “multiple Chinese suppliers” over the past nine months. A spokesperson at the Chinese embassy in Washington pushed back on Reuters’ report, saying, “We oppose the generalization of the concept of national security, distorting and smearing China's infrastructure achievements.”
3. Northwest data centers could ‘cannibalize’ clean power in states with lower environmental protections: report
Sightline Institute
The Northwest has one of the country’s highest concentrations of data centers due to the region’s tax breaks — including low or no property taxes for many in Oregon and sales and use exemptions on equipment purchases and installations in Washington — as well as its below-average renewable power prices. But utilities “working across state lines could shift renewable resources to serve Northwest data centers, making up the difference by burning more coal and gas in places that lack strong environmental protections,” Emily Moore, the director of climate and energy at the sustainability think tank Sightline, writes in a new report.
One such example is what’s being done by Avista, an electricity service in eastern Washington and western Idaho. To meet the needs of a new 200 megawatt data center in Washington, as well as to comply with the state’s Clean Energy Transformation Act, “the company indicated it would add 95 megawatts of gas capacity in Idaho and then shift wind resources that would have served Idaho customers to Washington,” Moore writes. In essence, Washington is “cannibalizing” clean power currently serving Idahoans, and Avista is polluting “more in Idaho to make up the difference.” The report goes on to propose policy paths for Northwest leaders, including accelerating the buildout of the region’s congested electric transmission system, since “a right-sized modern grid could let data centers tap wind from Montana or sun from California instead of encouraging them to locate in states with no commitment to clean power.” You can read Sightline’s full report here.
4. BP chief economist warns China is winning the ‘new energy’ race
Michael Cohen, BP’s chief U.S. economist and head of oil and refining, warned this week that China is winning the “new energy” race with its clean technology supply chains and electric vehicles, Fortune reports. At the Enverus Evolve oil and gas conference in Houston, Cohen said the U.S. is at risk of failing “Econ 101” if it slow-walks on renewables due to resistance from the Trump administration, supply chain issues, and interest rates. He projected that global oil demand will peak in the next decade, with renewables rising from 15% to 30% of the global energy market between now and 2050.
A new report by Carbon Brief appears to back up Cohen’s analysis. The report says that renewable energy sources in China produced enough electricity in the first quarter of the year to “cut coal-power output even as demand surged,” with CO2 emissions down 1.6% year-on-year despite power demand growth. Carbon Brief adds that, if sustained, the findings would “herald a peak and sustained decline in China’s power-sector emissions.”
5. Trump family Bitcoin business adds personal stakes to energy policy
The Trump family is poised to have a fresh personal stake in U.S. electricity and energy policy as Eric Trump and Donald Trump, Jr. plan to take their Bitcoin mining firm public, E&E News reports. According to the announcement earlier this week, American Bitcoin — co-founded by Eric Trump — will merge with Gryphon Digital Mining Inc., which is already publicly traded.
Initially a subsidiary of Hut 8, an energy infrastructure partner with more than 1,000 megawatts of energy capacity, American Bitcoin boasted that with the merger, it will achieve “mining leadership” by leveraging Hut 8’s “energy advantage, rapid execution, and proven team.” Cryptocurrency mining is highly energy-intensive, accounting for an estimated 2.3% of the nation’s electricity use last year, and President Trump’s aspirations to have it “mined, minted, and made in the USA” are part of what his administration has used to justify its energy emergency. With American Bitcoin, the Trump family is also “delving deeper into the energy space where federal policies under Trump intersect directly with access to electricity and fuels,” E&E News writes, noting that Eric Trump stated at the launch of the company last April that “We’ve got the best energy policy in this country. That policy is only getting better.”
Penguin Random House
Nigerian author Abi Daré has won the inaugural Climate Fiction Prize for her novel And So I Roar. The book “follows fourteen-year-old Adunni from her life in Lagos, where she is excited to finally enroll in school, to her home village where she is summoned to face charges for events that are in fact caused by climate change.”
Tax credit transferability is a wonky concept, but it’s been a superpower for clean energy developers.
One of the most powerful innovations in the Inflation Reduction Act was a new vehicle to finance clean energy projects. In addition to expanding the nation’s tax credits for climate-friendly projects, Congress gave developers freedom to sell these credits for cash. If a battery factory couldn’t take full advantage of the tax credits itself, it could transfer them to someone else who could.
Now, Republicans on the House Ways and Means Committee have proposed getting rid of this “transferability” provision as part of a larger overhaul of the tax credits. A draft bill published on Monday would end the practice starting in 2028.
Nixing transferability isn’t the bill’s most damaging blow to clean energy — new sourcing requirements for the tax credits and deadlines that block early-stage projects pose a bigger threat. But the ripple effects from the change would permeate all aspects of the clean energy economy. At a minimum, it would make energy more expensive by making the tax credits harder to monetize. It would also all but shut nuclear plants out of the subsidies altogether.
Prior to the passage of the Inflation Reduction Act, if renewable energy developers with low tax liability wanted to monetize existing tax credits, they had to seek partnerships with tax equity investors. The investor, usually a major bank, would provide upfront capital for a project in exchange for partial ownership and a claim to its tax benefits. These were complicated deals that involved extensive legal review and the formation of new limited liability corporations, and therefore weren’t a viable option for smaller projects like community solar farms.
When the 2022 climate law introduced transferability across all the clean energy tax credits, it simplified project finance and channeled new capital into the clean energy economy. Suddenly, developers for all kinds of clean energy projects could simply sell their tax credits for cash on the open market to anyone that wanted to buy them, without ceding any ownership. The tax credit marketplace Crux estimated that a total of $30 billion in transfers took place last year, only about 30% of which were traditional tax equity deals. In the past, tax equity transfers have topped out at around $20 billion per year.
Schneider Electric, which has long helped corporate clients make power purchase agreements, now facilitates tax credit transfers, as well. The company recently announced that it had closed 18 deals worth $1.7 billion in tax credit transfers since late 2023. The buyers were all new to the market — none had directly financed clean energy before the IRA, Erin Decker, the senior director of renewable energy and carbon advisory services, told me.
It turns out, buying clean energy tax credits is a win-win for brands with sustainability commitments, which can reduce their tax liability while also helping to reduce emissions. Some companies have even used the savings they got through the tax credits to fund decarbonization efforts within their own operations, Decker said.
By simplifying project finance, and creating more competition for tax credit sales, transferability also made developing renewable energy projects cheaper. Developers of wind and solar farms have been able to secure upwards of 95 cents on the dollar for transferred tax credits, compared to just 85 to 90 cents for tax equity transactions. The savings go directly to utility customers.
“State regulators require electric companies to pass the benefits of tax credits through to customers in the form of lower rates,” the Edison Electric Institute wrote in a policy brief on the provision. “If transferability were repealed, electric companies once again would rely on big banks to invest in tax equity transactions, ultimately reducing the value of the credit that flows directly through to customers.”
Many of the companies that can’t count on tax equity deals will still have other options under the GOP proposal. Tax-exempt entities, like rural electric cooperatives and community solar nonprofits, can use “elective pay,” another IRA innovation that allows them to claim the credits as a direct cash payment from the IRS. For-profit companies developing carbon capture and advanced manufacturing projects also have the option to use elective pay for the first five years they operate. All of this raises questions about whether axing transferability would furnish the government with meaningful savings to offset Trump’s tax cuts.
But the bigger danger for Trump would be his nuclear agenda. Prior to the IRA, low power prices meant that many nuclear operators couldn’t afford to extend the licenses on their existing plants, even ones that had many years of useful life left in them. The IRA created a new tax credit for existing nuclear plants that made it economical for operators to invest in keeping these online, and even helped bring some, like the Palisades plant in Michigan, back from the dead.
This wouldn’t have worked without transferability, Benton Arnett, the senior director of markets and policy at the Nuclear Energy Institute, told me. Going forward, finding a tax equity partner would be nearly impossible because of the unique rules governing nuclear plants. Federal regulations require that the owners of a nuclear power plant be listed on its license, so bringing on a new owner means doing a license amendment — a headache-inducing process that banks simply don’t want to take on. “We’ve had members reach out to tax equity groups in the past and there was very little interest,” Arnett said
While a few plant owners might have enough tax appetite to benefit from credits directly, most have depreciating assets on their books that greatly reduce their liability. “Without transferability, for many of our members, it’s very difficult for them to actually monetize those credits,” said Arnett. “In a way, nuclear is disproportionately impacted by removing that ability to transfer.”
In February, Secretary of Energy Chris Wright declared that “the long-awaited American nuclear renaissance must launch during President Trump’s administration.” But so far on Trump’s watch, between the proposed loss of transferability and early phase-out of nuclear tax credits, plus cuts to loan programs at the Department of Energy, we’ve only seen policies that would kill the nuclear renaissance.