Why the Solar Community Cares About the Inflation Reduction Act
In the first quarter of 2022, the solar industry experienced its largest growth in the residential sector, adding 1.2 GWdc to the power grid, though other segments were strained due to supply chain issues. Solar installations made up approximately half of all added capacity in electricity generation that same quarter. Though industry forecasts project an overall decline in 2022, solar is expected to bounce back to 2021 levels in 2024.
Even with the rapid expansion in solar, the U.S. requires more efforts to further boost production and manufacturing if we hope to attain this administration’s goal for 100% clean energy by 2035. There is hope. President Joe Biden signed the Inflation Reduction Act into law on August 16, 2022. Here’s why it’s important to the solar community.
The Inflation Reduction Act Increases Domestic Manufacture and Production
Much of the solar industry currently depends on China to supply critical components. The country’s total contribution to the global supply is more than 80%, leaving the U.S. vulnerable to China’s economic, production and manufacturing capabilities. If something goes wrong with any of those, as has happened recently, it creates trouble for our solar community.
The new law paves the way to ramp up domestic production and manufacture. The government offers incentives in the form of tax credits to encourage companies to keep production and manufacturing on U.S. soil for solar panels, cells and other components, including energy storage systems. Additionally, the Inflation Reduction Act pulls down a $500 million appropriation from the Defense Production Act to spur domestic solar technology production.
The IRA Extends Tax Savings to Homeowners
The U.S. solar technology industry isn’t the only one to benefit from the new law. You can, too! The American Clean Energy Support tax credit was initially set to expire at the end of 2022, but the IRA extends that savings for another 10 years. If you’ve been considering a solar installation, the 30% investment tax credit can save you significant cash.
The Inflation Reduction Act Promotes Clean Energy for Rural Communities
Rural communities benefit from the IRA, which seeks to reinforce resilience and electricity reliability. The law provides funding for clean energy projects, including:
- Money for rural energy cooperatives to transition to renewable electricity sources, with the potential to take advantage of direct pay tax credits for clean energy
- Increased funding for the Rural Energy for America Program, which provides grants and guaranteed loans for renewable energy projects on farms and in rural communities
- Tax credits for solar manufacturing and solar installation projects in areas where coal mining or power plants have closed or significantly laid off workers due to the decline of the fossil fuel industry
These measures support rural America’s transition to reliable, renewable energy sources for increased energy independence and affordability.
The Inflation Reduction Act Gives Hope for the Future
At Unbound Solar, we join the rest of the solar community in cheering the passage of the Inflation Reduction Act! We’re committed to doing our part in supporting America in its transition to clean energy. You get a lifelong partner in all your solar needs when you work with us. Check out our sale on primarily U.S.-sourced top-tier solar systems to lower your installation costs even more.