As we start the new year at Stem, we continue to work with customers and partners to take advantage of the opportunities of the historic Inflation Reduction Act (IRA), the largest clean energy and climate investment in US history. IRA became law in August of 2022, and as of January 1, 2023, IRA’s new Standalone Storage Investment Tax Credit (ITC) is in effect. New energy storage no longer must be tethered to solar and charged directly from solar to receive an ITC. It’s hard to overstate the positive impact of this new tax policy, from improving the economics of storage adoption to enabling widespread grid resilience and flexibility. By adding storage where it’s most needed on the grid, we can realize the full range of storage benefits.
Almost immediately following the IRA passage, policy efforts turned to the US Treasury Department’s (“Treasury”) critical guidance necessary to deploy modern energy infrastructure nationwide. Nearly three-quarters of the IRA’s climate change investment will be delivered through the US Federal tax code, representing a significant undertaking to fulfill the law’s intent. The guidance process is critical to ensure investment certainty and operating clarity for energy system builders, adopters, and operators. Smooth implementation at scale requires coordination across the federal government and various stakeholders, including companies with real-world experience.
To achieve this, the Treasury and other federal entities launched an extensive public engagement effort. Treasury Secretary Janet Yellen held several stakeholder roundtables, including one regarding the bill’s power generation incentives. The Treasury also requested public comment on many of the law’s prominent features, including prevailing wage and apprenticeship provisions, domestic content requirements, energy generation incentives, clean vehicles and charging infrastructure, credit monetization, manufacturing incentives, and credit enhancements related to energy communities and low-income communities.
The public comment process represents a key opportunity for industry practitioners to inform upcoming regulations and guidance so that they are as useful as possible. Other federal entities like the Environmental Protection Agency have also taken stakeholder input on the IRA’s non-tax provisions. SEIA, among many other industry groups, filed a response to the proposal and Stem filed a stand-alone response covering the issues most vital to our customers. Click here to read the PDF.
Following the comment process, the Treasury announced initial guidance on the law’s prevailing wage and apprenticeship requirements, which may be refined through future iterations.
We expect to see guidance on several additional topics early this year and throughout the year. While Treasury has not announced what the next tranche of guidance will address, it’s possible that monetization, direct pay, low-income, and manufacturing provisions will be prioritized given their significant anticipated impact on project economics and benefits to traditionally disadvantaged communities. Another guidance area we’ll be watching closely at Stem is related to energy communities. This IRA provision is designed, in part, to incentivize new energy project development in areas that previously were centers of fossil fuel development and employment. Click here to access Stem’s interactive IRA Map showing energy communities.
The policy and regulatory framework necessary to realize IRA’s full potential is by no means limited to the discussion above. Virtually every energy-related organization in every state, including public utility commissions, policy and planning agencies as well as state and local governments will touch these decisions to a greater or lesser degree. Citizens will weigh in via town halls, community meetings, and other public input processes regarding new infrastructure projects. More broadly, the US also faces well-documented obstacles to broad clean energy deployment related to interconnection and permitting policies, which require continued reform to address today’s requirements. Much work lies ahead to continue upgrading our energy system for our current and future needs, and the effort required is on par with major US infrastructure buildouts such as the interstate highway system and power grid.
Despite these challenges, we are well-positioned as a nation to realize the promise of the IRA. Stem intends to remain engaged in the policy and education process in support of our customers, and we’re excited about what the energy future holds.
To see how Stem can help you take advantage of the IRA, visit our IRA page and a Stem representative will be in touch with you soon.
Darleen D. DeRosa, VP Policy & Regulatory Affairs, is one of SEIA’s newest at-large board members and leads Stem’s federal policy efforts.