How Tax Credits are Driving Clean Energy Growth Two Years into Inflation Reduction Act

Two years ago, President Biden signed the Inflation Reduction Act, the Biden-Harris Administration’s landmark climate law. Today, American consumers, businesses, and other entities across the country are already seeing the tangible benefits of this law. This is especially true as a result of new, expanded, and extended clean energy tax incentives. 

Over the past two years, the Department of Energy has worked across the Administration to help inform the guidance that is now available for nearly all of the clean energy tax provisions created or expanded in the law, providing clarity so that consumers and businesses can take advantage of incentives to produce more clean energy, improve energy efficiency and reduce costs, invest in domestic manufacturing and U.S. global competitiveness, support good-quality jobs, and lower carbon emissions. 

These provisions are historic and include many firsts. For the first time, the market has long-term certainty – 10 years of incentives or more in many cases – written into the tax code. For the first time, tax-exempt entities – including nonprofits, states, local government, Tribes, and territories – can join businesses and consumers in taking advantage of these incentives, using new tools created by the law. And for the first time, companies that may not have previously been able to realize the full value of the credits can transfer them to those who can. The credits also include the most significant incentives in U.S. history to promote clean energy investments in low-income communities and in historic energy communities, as well as provide a focus on domestic job creation, with strong requirements for companies to pay prevailing wages and participate in apprenticeship programs to increase the value of these incentives. 

Americans are already feeling the results of these policies. Over 3.4 million families across all 50 states, the District of Columbia, and Puerto Rico have claimed over $8 billion in residential clean energy and home energy efficiency credits. Nearly half have been claimed by families making under $100,000, with the average credit worth $5,000 for energy upgrades, and $880 for efficiency measures. (To learn more about how you can take advantage of these incentives, visit the DOE’s Energy Savings Hub.)  

Clean vehicle buyers are also capitalizing on credits that can be delivered at the point of sale, with more than $1.5 billion provided in upfront incentives for new electric vehicles so far. And these upfront savings translate into massive avoided fuel savings over the life of an EV. Earlier this year, the DOE released a Local Fuel Savings tool that calculates how much drivers can save by driving a fully electric or plug-in hybrid electric vehicle. The results are striking: no matter where you live in the country, you will save on fuel costs with an EV – up to $2,200 a year for a fully electric vehicle, and $1,500 a year for a hybrid electric vehicle. 

Companies and other entities are responding to the incentives too. Spurred in large part by the tax credits, over $215 billion in private sector clean energy manufacturing investments have been announced under the Biden-Harris Administration. The investments are widely distributed across over 740 sites in 46 states and Puerto Rico and have the potential to create over 210,000 jobs. Many of these investments have indicated they plan to claim clean energy tax incentives. For instance, more than 100 projects across 35 states were awarded tax credits in round one of the competitively selected Advanced Energy Project Credit. Awardees will build domestic facilities to produce key components of the clean energy supply chain, produce and recycle critical minerals, and will reduce greenhouse gas emissions at existing industrial facilities. 

Beyond the economic benefits, DOE analysis shows that the Inflation Reduction Act and the Bipartisan Infrastructure Law together position the U.S. to dramatically reduce greenhouse gas emissions, increase clean electricity, and reduce our reliance on net crude oil imports, all by the end of the decade.  

Stay tuned for more news in the roll out of these credits before the end of the year, as we continue to implement the most significant climate investment in our nation’s history.