A🧡473-word💛under💚2.5-minute💙read
As you would expect, the proposed changes to the Inflation Reduction Act have generated a spate of articles.
I think Abby Hopper, the CEO of the largest solar trade association – the Solar Energy Industries Association (SEIA) - said it best:
“This is a bad bill.”
According to SEIA the “badness” will cost jobs and increase electricity cost. The former is accurate, but the latter is debatable. Utility bills have, and will continue to escalate.
What struct me most about the proposed changes is the impact to average people. The 30% residential ITC tax credit would be a goner after this year. That won’t completely kill the residential solar rooftop market, but it will be severely restrict an already struggling sector.
Today, payback on residential solar is around 5 to 7 years. Without the ITC the payback likely extends to 8 to 10 years. I suspect that will be a show stopper for many, except the wealthy.
As for the much talked about EV credit, well, it will also sleep with the fishes after this year. This includes both for buying or leasing an EV, and for installing chargers. The one exception is for automakers that have sold fewer than 200,000 vehicles.
The 200,000 vehicle cap was the rule prior to the IRA. Tesla benefited most by its removal. If enacted, Tesla buyers will no longer receive any subsidies, while Ford and GM remain under the cap.
I can’t wait to see what Tesla’s financials look like next year if the EV tax credit is eliminated. The one saving grace for the company may be if California continues to offer its subsidy. However, given Elon’s current standing among Democrats, that’s far from a given.
The bill also kills the Energy Star program, which is a rare example of the government getting something right. Enacted in 1992, Energy Star preceded the climate movement. By any measure, it has been a success by reducing energy consumption and lowering utility bills for average people.
According to Google AI, Energy Star has been responsible for reducing electricity consumption by 5 trillion kWh, has saved consumers an estimated $500 billion, and has reduced greenhouse gas emissions by 4 billion metric tons. Maybe it’s that last achievement that ticked the “Trumpies” off.
This is a classic example of “stupid is as stupid does.” Hopefully, saner heads will prevail and the program will remain, but don’t count on it.
Tomorrow I’ll dive into how the proposed changes will impact the commercial side of the equation. The good news for the clean tech industry is that despite the desire to sunset many of the tax credits early, they are slated to sunset after this year. We’ll also review the proposed changes to transferability and restrictions on “foreign entities,” something, that unlike most, I anticipated would be an issue.
#solarpower #inflationreductionact #energystar #evs #electricvehicles