Inflation Reduction Act and Your Energy Bills
Inflation Reduction Act and Your Energy Bills
Last modified: September 19, 2022
If you’ve been working out how to economize on your energy bills and usage within your business or industry, you’ll have welcomed the signing into law on August 16 2022 of the Inflation Reduction Act (IRA) with a sense of anticipation. How might these tax credit incentives improve your financial position? Can you finally afford to improve your green credentials?
In this article, therefore, we’re going to share information about the IRA to help you see a way forward. However, if you already know you’d like to consult with an energy advisor about how the provisions of the Act affect your facility, contact us now. Otherwise, let’s dive in!
What is the Inflation Reduction Act?
The Inflation Reduction Act (IRA) encompasses many aspects that touch the lives of the American people in one way or another.
It also helps business owners and factory employees create a better, greener environment through tax credits that allow for energy retrofits.
Some of these tax credits and benefits are provided by:
- Credit Monetization
- New Tax Credits
- Existing Tax Credits Accessibility
- Government Funding for Environmental Projects
Although we only outlined four major “tiers” provided by the IRA above, some of the major takeaways from each tier include:
- Tax credits for wind and solar expansions
- A tax credit to meet new wage requirements and bonus tax credits for projects meeting domestic requirements
- A new tax credit called the Production Tax Credit created for solar deals
- Tax credit increase for carbon capture
- Tax credit for zero-emission nuclear power production
All of this sounds fantastic, but what does it really mean for you and your facility? Let’s get into the nitty-gritty and flush it out some more.
The Inflation Reduction Act Assists the Renewables Industry
First and foremost, signing the IRA into law lets companies create greener organizations by lowering their carbon footprint. It enables these organizations to receive tax credits that meet specific qualifications.
Since the IRA affects the entire supply chain, to reduce inflation while reducing gas emissions, organizations from all parts of the supply chain can benefit.
For instance, one facet of the IRA includes the rapid production of solar panels, wind turbines, batteries, and critical mineral processing – by giving companies that produce such items a tax credit for doing so. Therefore, if your facility creates any of the above, you can benefit from it and get money back in your pocket for producing these items faster.
If you’re a vehicle manufacturing company, these new tax incentives allow you to build green technology to create and maintain jobs in this industry.
Furthermore, these tax incentives also allow auto manufacturing companies to create clean energy vehicles and completely re-tool your facilities in order to do so. This particular tax incentive is provided by grant money (or money you don’t have to pay back). However, not all incentives are grants.
As an example, the IRA is also allocating $20 billion to build new green energy vehicle manufacturing companies. So, if you want to turn your facility into one or have the need to build a clean energy vehicle company from the ground up, now is a good time.
Reducing Emissions, Lower Energy Bills While Assisting Other Sectors
If your organization is not a part of the cleaner energy vehicle manufacturing sector, don’t worry, the Inflation Reduction Act has tax credits and other financial plans for other sectors.
In this instance, the IRA provides incentives for sectors within electricity production, transportation, industrial manufacturing buildings, and agriculture.
So what are these incentives, and how can you reap the benefits?
Roughly $30 billion dollars in both grants and loans are set aside for organizations that still need to reduce greenhouse gas emissions by becoming greener.
In other words, these dollars will allow you to reap from re-organizing your facilities and conducting an energy audit with a proper energy advisor. A side effect of conducting an energy audit is the reduction of your energy bill by implementing such programs (like LED retrofits, for example).
If your facility deals with chemical, steel, and cement, the IRA has created the Advanced Industrial Facilities Deployment Program with tax credits set aside to help your business.
Natural gas organizations also benefit from the IRA with their Methane Emissions Reduction Program. This program helps minimize leaks when natural gas is produced and distributed.
Farming Industries and Rural Communities
If you’re a manufacturing company in the farming industry, the tax credits will benefit you in different ways.
However, as it relates to energy, the benefits include:
- $20 billion in support to shift your facility towards a more sustainable and carbon-free facility, and
- Tax credits for biofuels and encouragement for sustainable aviation fuel and building the infrastructure needed for it.
We’ve touched on different industries and how you can benefit from the IRA. But what does that mean for everyday consumers, and how does this affect their energy bills? More importantly, how does this affect how you do business?
The Consumers Energy Bill and How it Will Benefit Them
All of these incentives allow everyday consumers to benefit from the products you produce.
Consumers can then purchase these products to reduce carbon emissions from their households while lowering their energy bills in the process.
These benefits include:
- A hefty rebate program for home energy retrofits to electrify home appliances and for energy-efficient retrofits. In other words, purchasing products produced by an organization like yours to better assist the environment. Use this information in your marketing!
- Consumers having access to tax credits for 10 years to make homes energy efficient, which includes purchasing heat pumps, rooftop solar, electric HVAC, and water heaters. These tax credits also bring more affordability to these systems, which allows people to purchase more from you!
- Consumers getting tax credits to purchase clean energy vehicles.
- Grant money provision turning affordable housing into energy-efficient households.
This is good news for you. The IRA has incentivized the renewables industry, creating greater supply and demand. And your organization can create the supply to meet that demand.
Your Facility and its Energy Bill
Now that we understand the Inflation Reduction Act and have laid out its tax benefits, how might this reduce your facility’s energy bills?
The key is to understand which tax credits you can benefit from.
Implementing greener machinery, lowering greenhouse emissions, or creating a zero-emission facility puts the money you spent in doing this back in your pocket as per the IRA. In turn, going green lowers your energy bills because you’ll use less energy overall.
As confusing as it is, an energy advisor can walk you through all the tax incentives and put your facility on the right path to improve your financial position.
That’s the IRA! Now, We Can Help You Benefit
The Inflation Reduction Act, even though it’s very new, creates a lot of exciting new benefits you and your organization can reap a harvest from.
To fully understand the benefits and how to implement them, however, please reach out to an energy advisor like Rapid Power Management that can walk you through every aspect.
Whether you’re interested in learning how your organization can go green, or you want to benefit from tax credits to reduce your carbon footprint, Rapid Power Management can help you through. Contact us today for a consultation.
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