The federal Inflation Reduction Act of 2022 included the most comprehensive suite of legislation ever enacted to rapidly reduce greenhouse gas emissions that are warming the planet at an alarming rate. It provides an estimated $369 billion in funds targeted at building a clean electric grid, commercializing new technologies, improving building efficiency, and kickstarting the nation’s transition to electric vehicles.
The Biden administration has elected in the IRA to fight climate change primarily by incentive-based programs, giving both families and businesses the flexibility to invest in clean energy solutions that have the greatest impact for them. However, these incentives are effective only to the extent that people and institutions take full advantage of them.
Included in this package is more than $8 billion for individuals. This is a great opportunity for all of us to fight climate change and get reimbursed while doing so. Depending on your income level, incentives are in the form of federal tax credits and/or cash rebates. Additional New York State incentives are available in some categories, as outlined on the HeatSmart Finger Lakes website.
Home energy efficiency upgrades
Residential usage represents about 18 percent of U.S. energy consumption, which is why the IRA contains significant incentives for lowering that number. Many households (including renters for some items) should look at this list of improvements carefully, since they can claim federal tax credits as early as on their 2023 income taxes, and for all years going forward until 2032. Collectively, they represent a variety of appliances and products intended to make residences more energy efficient, thereby lowering utility bills and decreasing emissions. Credits or rebates are available for improving weather resilience (windows, doors, insulation, energy audits) as well as upgrading to electrically powered appliances that reduce energy consumption, such as heat pump systems for heating/cooling, hot water heating, and clothes drying.
The amount and type of incentives for these energy efficiency upgrades vary according to household income levels. Readers are encouraged to access the Rewiring America IRA Calculator to learn about what they are personally eligible for.
■ Point-of-sale rebates for low/moderate income levels. Generous cash-back incentives are available to both low- and moderate-income households. Rebates can be as high as $14,000. This program has the potential to be one of the most effective for helping homeowners in our region, since it covers income levels up to 150 percent of area median income. For example, a two-person household can earn up to $107,000 and still qualify for the program; the limit is higher for larger families. New York is developing the process for administering the funds; rebates are expected to be in place by early 2024.
■ Tax credits for all levels. Regardless of income level, any homeowner or renter is eligible for a federal tax credit equal to 30 percent of the purchase price, capped at a maximum level that varies by the specific item. Total annual credits can be as much as $1,200, plus an additional $2,000 when purchasing a heat pump or heat pump water heater. Credits renew each year, beginning with the current tax year.
Electric vehicle purchase
At 29 percent of U.S. carbon emissions, transportation in all its forms is an even greater source of carbon dioxide pollution than housing. Accordingly, the IRA provides tax credits to consumers who purchase either a new or used plug-in hybrid, battery-powered electric, or fuel-cell vehicle. Credits of up to $7,500 for a new vehicle and $4,000 for a pre-owned model can be claimed on your 2023 federal income taxes. Qualifying restrictions apply for income levels, final assembly location, and where critical materials are sourced. Visit the federal fuel-economy website to determine what you can expect your credit to be, depending on the option you choose.
Although vehicle choices are somewhat limited this year, that list will grow annually beginning with the 2024 models. The tax-incentive program is expected to be replaced in 2024 by point-of-sale cash rebates, which may bring more buyers into the EV market.
Solar electricity
Depending on a variety of factors unique to specific regions, it is now possible to generate electric power from solar at a lower operating cost than from any form of fossil fuels. As more utilities convert to both solar and wind, consumers may begin to see less-volatile electric bills. But homeowners who choose to install their own rooftop solar may produce electricity at an even lower cost per kilowatt-hour than what is available from utilities.
The IRA aims to induce more homeowners to take advantage of such a non-fossil fuel energy solution by extending for the next 10 years an incentive program to significantly lower the cost of the initial installation. A federal tax credit of 30 percent of the total project costs (labor and equipment), including the cost of battery storage, can be taken for multiple years until the full 30 percent is recovered. This program is available to all income levels. An additional benefit to New Yorkers is a 25 percent credit toward state taxes, up to a maximum of $5,000.
Geothermal heating and cooling
Another home energy investment that some may consider is a geothermal or ground-based heat pump for heating and cooling the house. Using a heat exchange system between your home and the earth, this is a major installation project that can cost $30,000 or more. But the long-term savings can be worth it, based on geothermal system efficiencies that can exceed other solutions. Federal and New York tax credits are identical to those of a rooftop solar installation.
To learn more
Citizens’ Climate Lobby volunteers are convening throughout the year a series of in-person and/or Zoom events that explain these incentives and provide the opportunity to ask additional questions. The next event is scheduled for 6:30 p.m. on Aug. 8 at the Mendon Public Library. The CCL calendar provides details for this event and for others that will follow.
Glenn Alexander is with Citizens’ Climate Lobby. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].
As a non-profit organization board member, I’m always frustrated that the programs use tax incentives. If that remains the case, we will never be able to participate in the conversion.
Thank you for the comment regarding whether not-for-profits will qualify for IRA-related incentives. The U.S. Department of Treasury is developing guidelines and procedures that will, in fact, create a number of such opportunities. In essence, many tax-exempt organizations, including not-for-profits, will be able to receive a cash refund equivalent to the amount of tax credit that would be assigned to each of 12 different energy efficiency projects. Depending on the nature of your specific not-for-profit organization, many of them may not be applicable, but some may very well be. The Treasury press release issued on June 12, 2023 (https://home.treasury.gov/news/press-releases/jy1533#:~:text=The%20Inflation%20Reduction%20Act%20created,of%20clean%20energy%20tax%20credits.), outlines the provisions in great detail. Another reference I found from a Google search (https://www.plantemoran.com/explore-our-thinking/insight/2023/06/inflation-reduction-act-green-energy-credits-could-benefit-nonprofits), summarizes the key provisions in simpler terms. Readers would be advised to consult with a tax advisor to assess their own particular circumstance, as pertains to tax-exempt organizations.
There is no existing or proposed law, policy or regulation in NYS that calls for “ripping out Nat Gas”. Any proposals on the table apply only to new construction. The electric grid is already breaking down from repeated heat waves, storms and continued growth in demand, not to mention needed replacement of old components. We should repair the existing grid and expand it for the future while we’re at it. According to the National Renewable Energy Laboratory, “Energy payback estimates for rooftop PV systems boil down to 4, 3, 2, and 1 years: 4 years for systems using current multicrystalline-silicon PV modules, 3 years for current thin-film modules, 2 years for future multicrystalline modules, and 1 year for future thin-film modules. With energy paybacks of 1–4 years and assumed life expectancies of 30 years, 87% to 97% of the energy that PV systems generate will be free of pollution, greenhouse gases, and depletion of resources.” My solar panels provide 60% of my annual household electricity, including heat pump, hot water, appliances and local use of my EV. When it snows, I clear my panels using a roof rake while standing on the ground. I think I did that three times last winter.
Interesting the responses you get when you dare give a different take from the “renewable” orthodoxy.
W/o doing any research I can say there is a focused effort to “rip out” the Nat Gas Plant @ Greenridge (Dresden) and that’s been covered here in the Beacon. (not to mention there have been many efforts to shut down nuclear power generating stations, and those are green house gas free, according to your standards)
I can remember “heatwaves” here going back to the 1960s, they are not new (the blackouts that did occur in ’65 were not caused by a heatwave, the ’77 blackout was in July but was caused by a lightening strike and was NYC centric). To the extent the grid is breaking down, its due to decommissioning existing power generating plants. (of which there has been a extensive effort) ref: https://www.albanystrategicadvisors.com/government-affairs/news-details/6.9.23-nys-fossil-fuel-plants-may-need-to-stick-around-for-years-power-grid-overseer-says/
I’d like to see the “payback” data back up for the #s, these panels are manufactured similar to semiconductors (chips) which require their own transformer stations because of high voltage implanting and other operations that are power consuming . 30 year life expectancy is a long time for something exposed to the elements, (most roofs don’t last 30 yrs) , count me as skeptical (your smart phone wouldn’t last outdoors 30 years), other than the metal included in the panel interconnect none of it is recyclable. As far as your financial pay back is concerned “60%” of your power capacity is not a pay back number, you need to monetize it against current rates, then calculate a payback. (Btw Govt incentives don’t count in this number because that is taxpayer money, not payback money) . What do you do when you have a multi-story building ? Don’t think a “roof-rake” would get it done, (not everyone lives in a cushy ranch style home like you apparently do ) The system you describe (w/o a polluting mined lithium battery pack) would still not work repeatedly during a power outage.
Many defective / spun comments here, so many they are too numerous to mention them all, I’ll just touch on a few. Solar & Wind: As NYS converts to solar and wind (with the reckless abandon of a religious fervor ) ripping out Nat Gas & no green house nuclear like they were Angela Merkel reincarnated, and forcing users to load the grid w/ electric heat etc, NY will be in danger of black outs. Given all of the State & Federal govt interference, none of this has a business case. Roof top solar sounds tempting until you apply reality to it. Various utilities have different rules as to how you can access your own power, some don’t allow you to have a direct connection to your panels, the power flows to the grid (essentially reversing your metered usage ) . This can be problematic if there is a black out as you can’t directly run your house from the panel. To run your house directly from a roof top panel efficiently, you need a expensive battery , that like the panel, will wear out eventually. It takes ~5yrs for the panel to replace the energy it took to manufacture it. Not to mention panel manufacturing is dirty, and involves acids, solvents, photo-resists etc that are eventually disposed of in injection wells. Remember this is overcast NY, not sure there is a robust amount of sunlight to start with. When mother nature drops a foot of snow on your roof, are you going to go up here with skis and clear it? When you need a new roof, guess what? The panels have to be removed. Not sure this sales pitch has been carefully considered.