Stem’s Inflation Reduction Act Insights: How Asset Owners can Maximize the Value of the Solar PTC

What is the Inflation Reduction Act’s Solar Production Tax Credit?

The Inflation Reduction Acts (IRA) made solar projects eligible to take the Production Tax Credit (PTC). Under the PTC, solar earns a credit for each kilowatt hour (kWh) generated for the first 10 years of a project’s life. That equates to a current value of credit of 2.6 cents per kWh and that adjusts annually for inflation.

What is the value of the PTC compared to the Standalone Storage Investment Tax Credit ? 

A solar project cannot receive the production tax credit and the investment tax credits (ITC) simultaneously. The project owner must choose one or the other. In many cases, the PTC will be more valuable than the ITC particularly for large C&I and utility-scale projects that tend to have relatively high capacity factors and low capex costs.

Furthermore, we expect the incremental value of the PTC, relative to the ITC, to grow over time. The PTC will likely increase annually because it’s adjusted for inflation whereas the ITC is based on the capex of a solar project, which is expected to decline over time. For these reasons, we expect many solar project owners will choose to take the PTC instead of the ITC moving forward. 

How can Asset Owners maximize the value of the Solar PTC?

Because the value of the PTC is based on the amount of solar generation, it puts a spotlight on operations. Project owners and operators need to ensure their plants are optimally managed to minimize downtime and maximize production. At Stem + AlsoEnergy, as market-leading providers of asset performance solutions, we’re here to empower our customers to confidently monitor, maintain, and report on the performance of their clean energy assets.

Disclaimer: This content is preliminary and is provided for informational and planning purposes only regarding the Inflation Reduction Act. This does not constitute legal, tax, regulatory, policy, or other advice or guidance. The provisions in legislative bill text require further clarification and guidance by executive branch, regulatory, and other agencies.