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The IRA boosted green development, but some say it could be doing more

Tax credits have helped make going green more economical, but political pressure and unclear guidelines are hampering the Inflation Reduction Act’s success.
A worker installs a solar panel on a home in Napa, Calif., on July 17, 2023.
A worker installs a solar panel on a home in Napa, Calif., on July 17.David Paul Morris / Bloomberg via Getty Images file

A multipurpose entertainment venue with planned restaurants, sports fields and bars broke ground outside Cincinnati this week. The development, called Liberty Collective, will rely primarily on solar power, something the developers didn’t think was possible just last year. 

“We looked at solar on the roof and at the time it just did not pencil out financially,” said Mike Ewers, the developer of Liberty Collective.

But the Inflation Reduction Act, or IRA, changed that. The landmark legislation, which President Joe Biden signed one year ago, earmarked $369 billion for clean energy infrastructure. Thanks to tax incentives offered under the IRA, Ewers’ development qualified for a 30% tax credit for the solar power system at Liberty Collective.

He’s one of hundreds of developers, communities and nonprofit organizations using the IRA to fund green energy developments that were once beyond their financial reach. Clean energy projects creating more than 170,000 new jobs in 44 states have been announced or advanced between the legislation’s implementation and July, totaling $278 billion in new investments, according to a report from Climate Power, a climate change communications firm.

Tax credits are a centerpiece for the IRA not just for how much they offer in terms of incentives but also for how they could help accelerate clean energy efforts. A development like Liberty Collective can sell the tax credits it qualifies for to unrelated parties, meaning it wouldn’t have to wait to capitalize on them.  

“The new system of clean energy incentives will widen opportunities for clean energy investment by allowing developers to sell their tax credits directly for cash,” said Trevor Higgins, senior vice president of the energy and environment department at the Center for American Progress, a liberal think tank.

But there are some signs that momentum may be slowing. The IRA has come under fire from Republicans, who have voted 17 times to repeal the legislation since it passed. Labeling the tax incentives as “government giveaways,” GOP lawmakers most recently introduced a debt limit package that sought to eliminate the clean energy tax incentives. These efforts come despite Republican-held states having positioned themselves to benefit most from IRA tax provisions, according to an analysis by RMI, a nonprofit organization working to accelerate the clean energy transition.

“They’re making a political argument based on where they’ve been for the past two decades instead of dealing with the reality of what people are facing, their own constituents are facing, every single day,” said Lori Lodes, the executive director of Climate Power.

In addition to efforts to repeal the IRA, there’s been confusion about the tax incentives. Some clean energy developers say that guidelines for claiming tax credits have lacked clarity, causing hesitation for many who would like to get projects moving. 

This month, dozens of comments from municipalities, private companies, nonprofit organizations, trade associations and even a homeowners association hit the IRS website in response to the agency’s call for public input on IRA guidelines. Many called on the IRS to do a better job explaining when to file for the tax incentives, who can claim them and how they will be applied.

“I was struck when I looked at the comments that there are just so many different kinds of entities trying to make sense of this,” said Kathy Kuntz, director of the Office of Energy and Climate Change in Dane County, Wisconsin.

Dane County became the first county in Wisconsin and the fourth in the nation to receive 100% of its energy from renewable sources. And now, under the IRA, it will be able to receive tax incentives for clean energy projects for the first time. County officials plan to claim tax credits to build anew 911 call center supported by a geothermal energy system.

Kuntz’s office was one of the multitude of commenters submitting feedback to the IRS, explaining that the guidelines currently create a lot of uncertainty, such as if a project needs to be complete in order to file for tax credits.

“It’s our job out here in the world to pick these things apart and go, ‘OK, wait, is this totally clear?’” she said.

The IRS is expected to issue updated guidelines for IRA tax incentives this fall. Some green energy professionals think those changes could stoke more investment.

Russ Bates, founder and CEO of NXTGEN Clean Energy Solutions, a company that helps develop green energy projects, including Liberty Collective, said that guidelines for how to claim the 10% credit for domestically sourced materials are unclear. He is waiting for clarification from the IRS on whether only domestically sourced prefabricated solar panels qualify, or if the rule refers to the individual parts that go into the panels. 

“It can be frustrating,” Bates said. “Sometimes it feels like the guidelines need guidelines.”