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What do the IIJA & IRA Mean For West Chester?

Updated: Jan 2, 2023

The Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) provide a long list of federal incentives (tax credits, grant funding, ec) that encourage a transition to electrification of transportation and heating for buildings and also supports distributed renewable energy generation (rooftop solar) as well as utility scale (wind and solar) and provides support for improving the energy efficiency of low and middle income homes and multi-family housing. All of these things align with the goals of the West Chester Area Clean Energy Future program.



Our community facing team can utilize these programs to respond to folks that say "I want to reduce my home or business' carbon footprint, but the sticker price is just too high." Let's give them the info and tools they need to compare their energy costs between the status quo (weekly fill ups or utility gas payments) vs making investments now in clean renewable energy sources.

These incentives cross the threshold for many to justify making the switch to EVs, Electric Heat Pumps and purchasing Solar Energy.

Critically, the IRA defines “greenhouse gas” in those provisions as “the air pollutants carbon dioxide, hydrofluorocarbons, methane, nitrous oxide, perfluorocarbons, and sulfur hexafluoride.” Expect the Supreme Court to revisit it's decision in West Virginia v EPA where it ruled that carbon dioxide was not covered as a pollutant by the Clean Air Act.


Highlights and Links To Resources


Following are some of the highlights of these acts with links to places where you can learn more about the details of how these incentives will work.


Tax Credits for New EV Purchases

Clean Vehicle Credit (plug-in & fuel cell)

Up to $7,500 tax credit: $3,750 for Critical Minerals + $3,750 for Battery Components

Restrictions for max MSRP, Vehicle final assembly, Income of buyer

Only new, financed and leased vehicles

No limit on # of vehicles per manufacturer

2 and 3 wheeled vehicles not included

Rules for Qualification

A % of critical minerals (lithium, nickel, cobalt, etc) must be extracted or processed in the US

A % of the battery components must be assembled or manufactured in North America (% increases each year)

Max $80,000 MSRP for vans, SUVs, pickup trucks

Max $55,000 MSRP for other vehicles

Final assembly must be in North America and no parts come from "areas of concern"

Consumers earn less than $300,000 (joint), $225,000 (head of household), $150,000 (single)

Tax credits can be transferred to the seller at Point of Purchase (useful for those that don't pay taxes)

What Vehicles Qualify?

Here's a list of what Electrek.co thinks the list of qualified EVs will be

Caveat - specific rules are still being sorted out

PA State Tax Rebates

The PA Dept. of Environmental Protection offers rebates (up to 1000 between 9/22 and 6/30/23) for working class Pennsylvanians up to $3K. Battery electric cars and trucks qualify for a $2K rebate (up from $750). A family of 2 with a maximum household income of $73,240 (Line 9 of the federal tax Form 1040) is eligible for a $2K rebate. Family of 2 with household income of $35K qualifies for a $3k rebate. According to a representative, rebates are still available as of 11-4-22.


Plug-in hybrid cars and trucks qualify for a $1.5K rebate.


All other alternative fuel vehicles, and electric motorcycles, qualify for a $500 Rebate


Only vehicles with a final purchase price of $50K or less, are eligible.


The Rebate amount is now the same for NEW and PRE-OWNED Vehicles


Rebates are considered taxable income and may result in the issuance of a 1099 form, if your rebate is greater than $600.


Alternative Fuel Vehicles (pa.gov)

Tax Credits for Used EV Purchases

Plug-In America lists these metrics

Vehicle must be at least 2 years old

Max $25,000 and sold by a dealer

No sourcing requirements (critical minerals, etc)

Max income of consumer: $150,000 (joint), $112,500 (head of household), $75,000 (single)

Tax credit: 30% (up to max of $4,000)

Point of sale transfer available in 2024

See Plug-In America slide set here

Tax Credits for EV Chargers

Adds funding and clarity to the existing 30% tax credit for EV chargers

Tax credit extended through 2032

Residential tax credit: 30% of cost of the equipment (up to $1,000 per unit)

Corp tax credit: 6% of cost of equipment (up to $100,000 per unit)

Bidirectional chargers allowed

2 and 3 wheeled vehicles allowed

Must be located in low-income or non-urban area - see detailed explanation at JDSpura.com

Available for tax-exempt entities - see detailed explanation at JDSpura.com


What about the PA Drive PA Forward Program?

The 30% federal tax incentive is in addition to the PA incentives (VW program) for L2 Chargers for

  • Public use at government owned property

  • Public use at non-government owned property

  • Non-public use at work places

  • Non-public use at multi-unit dwellings

Incentives from PECO

PECO has rebates (up to $3,000) for L2 chargers for Commercial sites, including multi-family housing. Utilities: Pennsylvania PECO L2 - Commercial (2020-4)

Watch the IRS IRC-30D page for latest and definitive info on tax credits for EVs and Chargers. And this Dept of Energy's page with a list of vehicles it considers "assembled in North America".


Incentives for Distributed Solar Energy

See summary details at Solar Investment Tax Credit: What Changed? (energy.gov). And the DOE's IIJA Fact Sheet.

Residential and For-Profit On-Site Solar

  • 30% tax credit on systems placed into service between Jan 1, 2022 and Dec 31, 2032 (then phases down to 26% for 1 year, then 22% for one year)

  • Installer must satisfy prevailing wage and apprenticeship requirements during construction

  • Includes energy storage equipment, solar electric, solar water heating, fuel cell, and small wind energy, and geothermal heat pumps

  • Additional tax credit (10%) for: domestic manufacture; brownfield site; in an area with significant employment in the fossil fuel industry; near a recently close coal mine or coal-fired power plant; located in a low-income community or building project or tribal land;

  • Taxable entities may elect to receive "direct pay" - transferring the credit to another party.

  • More info at Federal Solar Tax Credit Resources | Department of Energy



Non-tax Paying Entities

  • Tax exempt, government and tribal entities can elect to receive “direct pay” for tax credits

  • Site must be placed into service after Dec 31, 2022

  • Can be a partial transfer of tax credit

  • Must be paid in cash and are not deductible or considered income

  • More info at Solar for nonprofits - Solar United Neighbors


Building Electrification - Heat Pumps, Geothermal HVAC


Tax Credits for Air Source Heat Pumps

$300 for split systems (HSPF >= 8.5, EER >= 12.5, SEER >= 15)

$300 for package systems (HSPF >= 8, EER >= 12, SEER >= 14)

Learn more at EnergyStar page

Tax Credits for Ground Source (Geothermal) Heat Pumps

30% tax credit on systems placed into service between Jan 1, 2022 and Dec 31, 2032 (then phases down to 26% for 1 year, then 22% for one year)

Installer must satisfy prevailing wage and apprenticeship requirements during construction

Income Qualified Assistance

The High Efficiency Electric Home Rebate Act (HEEHRA), includes direct rebates for low- and moderate-income households that install new, efficient electric appliances

A resident below 80% of Median Area Income can receive $62,000 (for single occupant) and increasing to $103,000 (for six occupants of the home).

Find more at Rewiring America IRA Explainer

Building Energy Efficiency

Affordable Housing

Improving Energy Efficiency and Water Efficiency or Climate Resilience in Affordable Housing has grants and loans for retrofit projects that advance building electrification, improve energy and water efficiency, and more in affordable housing

Find more at Rewiring America IRA Explainer

Environmental Education

The Environmental Education Grants Program, established by the Environmental Education Act of 1993, mandates that five percent of all pollution fines and penalties collected annually by the Department of Environmental Protection be set aside for environmental education.


Funding is available for Non-formal education (projects outside of the formal, PreK-12 school/higher education setting) or Formal education (projects integrated into the formal, PreK-12 school/higher education curriculums). Government entities are generally excluded, but EACs or climate/energy committees could partner with a local school or aligned non-profit entity to apply for funding to promote community action to reduce carbon emissions.


Program priorities are:

Water

Education programs promoting effective ways to reduce non-point source and source water pollution to improve water quality.

Climate Change

Education projects that promote practical solutions for reducing greenhouse gas emissions and the negative impacts of climate change including floods, changes to groundwater, pests, disease, agricultural disruptions, and potential threats to human health.

Environmental Justice

Education programs designed to engage audiences (youth and/or adults) living and/or working within Environmental Justice (EJ) areas. Use the DEP Environmental Justice Area Viewer to verify an audience is located within an Environmental Justice area.

Bonus Rebates from PECO

PECO just announced "bonus rebates" - additional rebates on top of their existing incentives for EnergyStar heat pumps, home efficiency improvements (insulation, air sealing), water heaters and refrigerators - for projects that address multiple items at the same time. From $200 to $770.



The IRA in Pennsylvania

A big chunk of the IRA spending will be given to states to determine exactly how it will be spent to support "clean energy". In PA, that looks like this:


TBD


How will Pennsylvania allocate these funds? Will PA revive the PA Sunshine Program to further support distributed solar? Will we see increased support for EV chargers (L2 & Fast) in the Driving PA Forward Program (the VW settlement)? Will we see increases in the Home Energy Efficiency program?


Or will we see new programs that support community outreach and education entities, like EACs, that are trying to encourage constituents to make informed, long-term decisions related to energy?


Things We Don't Know Yet

While the goals and overall numbers are described in the IRA and IIJA legislation is known, the actual language and rules are yet to be set by the US Internal Revenue Service (IRS). Look for announcements and analysis on how to apply tax credits, what products and who qualifies for these incentives towards the end of 2022.


Examples Of How WCA CEF Can Use IRA Info

Look for tools and analysis articles about total-cost-of-ownership (TOC) for vehicles, heat pumps and on-site solar. Sometimes the best we can do is point to a case study, because there are so many variables: miles driven per year, cost of electricity or gas, price of gasoline at the pump. And predicting the future is always tough. Look for tools that factor in tax credits or "instant discounts".


Here are some that I found that are not associated with a particular merchant:

  • Alternative Fuels Data Center (DoE) - assumes a 5 yr loan. Need to adjust sticker price for rebates. Compare several cars.

  • Keemut - compare one EV with one gas vehicle. Let's you predict the future price of gas and electricity.

  • Pacific Gas & Electric EV Comparison - California-centric. Nice visual comparisons. Includes federal incentives.

  • Solar Project Builder - from Midwest Renewable Energy Association (MREA), with support from the US Department of Energy Sunshot Initiative.

  • Efficiency Maine - compare home heating costs using different technologies

 
 
 

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