On Aug. 16, the Inflation Reduction Act (IRA) was signed into law by President Joe Biden. The legislation, designed to address and fight inflation in the United States, includes more than $369 billion in incentives to promote energy conservation technologies.
“SMART workers will be called upon to take on the green energy jobs that this bill creates,” said Joseph Sellers, general president of the International Association of Sheet Metal, Air, Rail and Transportation (SMART) workers, in a statement issued by the union. “We commend President Biden for signing this bill, and we look forward to meeting its demands.”
The legislation provides more than $200 million in funding to implement programs to train and educate contractors in the installation of home energy efficiency and electrification improvements, including projects eligible for rebates under the Home Energy Performance-Based Whole-House Rebates (HOMES) or high-efficiency electric home rebate programs.
This allows states to use funds to provide testing and certification of contractors and partner with nonprofit organizations to develop contractor training programs. The Department of Energy (DOE) will be responsible for administering the funds to states under its State-Based Home Energy Efficiency Contractor Training Grants program. The program’s funds will be available through 2031.
Additionally, the DOE will be responsible for administering an additional $1 billion in grants through Sept. 30, 2029, to help states and local governments adopt building codes for residential buildings that meet or exceed the 2021 International Energy Conservation Code and for commercial buildings that meet or exceed the American National Standards Institute (ANSI), the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) and Illuminating Engineering Society of North America (IES) standards.
The Department of Housing and Urban Development (HUD) will be responsible for administering direct loans and grants to fund projects that improve energy efficiency, including indoor air quality for eligible affordable housing. Owners or sponsors of low-income housing for the elderly or disabled individuals will be eligible to apply for the more than $1 billion in funding.
The DOE will also be responsible for allocating funding through the Office of Science for specific laboratory infrastructure and general plant projects. The program earmarks $133 million for science laboratory infrastructure projects, about $303.7 million for high-energy physics construction, $280 million for fusion energy science construction, $217 million for nuclear physics construction, about $163.8 million for advanced scientific computing research facilities, $294.5 million for basic energy science projects, and about $157.8 million for isotope research and development facilities. This program also appropriates $150 million for infrastructure and general plant projects to the Office of Fossil Energy and Carbon Management, the Office of Nuclear Energy, and the Office of Energy Efficiency and Renewable Energy.
Schools in low-income and disadvantaged communities will be able to apply for grants to monitor and reduce air pollution and greenhouse gas emissions. Under the Funding to Address Air Pollution at Schools program, the Environmental Protection Agency (EPA) will be responsible for administering grants from its fund of $37.5 million and another $12.5 million for technical assistance to schools.
The General Services Administration (GSA) will have $250 million to appropriate for the Federal Buildings Fund for the conversion of federal facilities to high-performance green buildings. An additional $975 million will be available for emerging and sustainable technologies, along with $2.15 billion to acquire and install low-carbon materials in the construction or alteration of buildings under the GSA’s jurisdiction.
Another $5 billion in funding will be available through loans to rework, repurpose or replace energy infrastructure no longer in operation or to support the operation of energy infrastructure that reduces, sequesters or utilizes air pollutants through the DOE’s Energy Infrastructure Reinvestment Financing Program. Applicants must submit a detailed plan and an analysis of how the project will impact neighboring communities.
Grants and rebates to reduce air pollution at United States ports will be available under an EPA program that will allow for the installation of zero-emission port equipment or technology. States, tribal or municipal agencies, ports and private entities will be eligible to apply for the more than $2.25 billion in available funds.
Owners and operators of domestic, non-federal, non-power industrial or manufacturing facilities that engage in energy-intensive processes will be eligible for financial assistance to support the purchase and installation of advanced industrial technology, retrofits and improvements to eligible facilities through another DOE program. The Advanced Industrial Facilities Deployment Program has $5.8 billion available through 2026. Eligible entities will be expected to provide at least 50% of the cost of eligible projects.
An EPA-administered Greenhouse Gas Reduction Fund will offer grants and loans to states, municipalities, tribal governments and nonprofit organizations to support the deployment and use of zero-emission technologies that reduce air pollution.
The IRA also has multiple other grant and loan programs available to address climate issues. States, local governments, school districts, nonprofit organizations and building owners and operators will see unprecedented funding streams under this legislation.
Additionally, the IRA includes tax credits to incentivize production and installation of clean energy technologies in homes and commercial facilities. For the majority of the tax credits, there is a two-tiered tax credit offered, in which taxpayers can earn up to five times the base credit amount if they meet prevailing wage and registered apprenticeship requirements. To meet the act’s apprenticeship requirements, employers must ensure that a set percentage of total hours worked on a construction project is performed by registered apprentices. The law’s apprenticeship utilization standards require that in 2022, 10% of total labor hours on a supported construction site be completed by qualified apprentices; the requirement increases to 15% by 2024.
One notable tax credit program, the Energy Efficient Commercial Buildings Deduction, also known as section 179D, expands and increases the deduction for building owners that install energy-efficient systems for 10 years. The deduction increases from the current $1.88 per square foot to $5 per square foot if these labor standards are fulfilled. Commercial buildings, not-for-profit organizations, churches and religious organizations, and public and for-profit schools and universities are eligible, as are the designers of buildings owned by government entities. The deduction can be taken on qualified buildings every three years if they are privately owned and once every four years if publicly owned. Projects must be measured against the ASHRAE standard from four years prior to completion of construction. The tax credit requires those claiming it meet registered apprenticeship and prevailing wage requirements to achieve the maximum deduction.
Additional tax credits and rebate programs under the IRA include:
- Energy Efficient Home Credit (45L)
- Credit for Energy Efficiency Home Improvements (25C)
- Residential Clean Energy Credit (25D)
- Home Energy Performance-Based, Whole-House Rebates
- High Efficiency Electric Home Rebate Program
- Clean Hydrogen (45V)*
- Carbon Sequestration (45Q)*
- Nuclear Power (45J)*
- Extension and Modification of Credit for Electricity Produced from Certain Renewable Resources (Production Tax Credit or PTC, 45)*
- Extension and Modification of Energy Credit (Investment Tax Credit or ITC)*
- Clean Energy Production Credit (PTC)*
- Clean Energy Investment Credit (ITC)*
- Extension of The Advanced Energy Project Credit (48C)*
- Clean Fuel Production Credit*
*Has labor standards attached, including paying prevailing wages and/or meeting registered apprenticeship requirements to receive maximum credit.
For additional information on how the Inflation Reduction Act can help you, contact a NEMI or NEMIC staff member