‘Inflation Reduction Act’ poised to bring millions to Utah energy transition

Opposed by Romney and Lee, the act offers tax breaks and rebates for electric cars, rooftop solar and clean-energy companies.

(Chris Samuels | The Salt Lake Tribune) Solar panels cover electric vehicle charging stations at the new Zions Technology Center in Midvale, Friday, July 15, 2022. The U.S. Senate has passed legislation that will extend the $7.500 tax credit for buyers of new electric vehicles and create a new $4,000 incentive for used electric vehicles.

This story is part of The Salt Lake Tribune’s ongoing commitment to identify solutions to Utah’s biggest challenges through the work of the Innovation Lab.

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It likely will happen without the support of a single Utahn in Congress, but the Inflation Reduction Act of 2022 would bring millions of dollars in incentives to encourage Utahns to convert to clean energy.

From extending tax breaks for electric cars and rooftop solar panels to adding new breaks for energy storage and solar and wind farms, the bill aims to reduce the nation’s carbon footprint 40% below 2005 levels by 2030.

Among the provisions:

– $27 billion for state-operated “green banks” that would provide seed capital for clean energy industries.

– Extension of the federal tax credits for solar and wind energy projects, with the credits now available for energy-storage projects, too.

– Extension of the $7,500 tax credit for the purchase of new electric vehicles, and a new $4,000 credit for used electric cars. The credits will now have income caps that reduce the benefit for high earners.

– Extension of the federal tax credit for rooftop solar installations, which comes as Utah’s own rooftop solar tax credit is scheduled to expire in 2024.

$4.28 billion for home energy incentives, including up to $8,000 for installing heat pumps to heat and cool homes. Smaller incentives are aimed at heat-pump water heaters ($1,750 maximum) and clothes dryers ($840 maximum). Those also have caps intended to target households with lower incomes.

– $3 billion for a grant program to reduce emissions at ports, which could be tapped by the Utah Inland Port or private companies operating in the state.

“It is a historic investment in clean energy and emissions reduction,” said Josh Craft, government relations manager for Utah Clean Energy, a nonprofit advocacy group.

Craft says Utah is well positioned to take advantage of the act’s benefits. “We are a growing clean energy state with abundant clean energy resources. We have businesses that can take advantage.”

Harry Hansen, communications director for the Utah Office of Energy Development, said encouraging energy storage is crucial for transitioning to cleaner power because renewable sources like wind and solar are intermittent. “A lot of the talk about moving to green energy is putting the cart before the horse because we need baseload power.”

Many of the incentives are tied to building up U.S. clean energy infrastructure, requiring that new equipment be domestically sourced in order to qualify for the tax breaks. This includes domestic manufacturing of batteries and solar panels, as well as the mining of strategic minerals needed to produce those products.

“Utah has a lot of access to critical minerals,” Hansen said. “We’re committed to American energy independence.”

Paul Charles, CEO of American Battery Factory Inc. in American Fork, welcomed the news. The startup is working on setting up a network of lithium iron phosphate battery factories across the U.S., and it recently hired former Tesla Executive James Herbermann as its vice president of manufacturing.

“American Battery Factory is pleased that the Inflation Reduction Act recognizes the importance of energy storage and directly supports manufacturing battery cells in the United States,” Charles said. “Not only will energy storage help us achieve 100% renewable energy, it will also optimize the power grid. By incentivizing individuals, businesses and municipalities to use battery energy storage systems, everyone will be empowered to strive toward energy independence while fighting climate change.”

A report from Rewiring America, a nonprofit group, estimated that the incentives in the act would reduce the average American household’s energy costs by $1,800 per year. “It is a market-tilting level of investment,” said Ari Matusiak, the group’s co-founder and CEO.

The legislation — part of a budget reconciliation bill — was approved on a strict party-line vote, with every Democrat in the Senate voting for it and every Republican voting against. It now goes to the House, where the majority Democrats are expected to pass it and send it to President Biden for signing.

Sen. Mitt Romney last week dismissed the act in a statement. “This is not about inflation reduction, this is all about Democrats spending on things they want to spend money on.” Romney made no mention of the clean-energy aspects of the bill, other than saying it would fund “Green New Deal priorities.”

Sen. Mike Lee, R-Utah, also put out a statement denouncing the bill. “American families cannot afford the Biden administration’s latest tax and spend scheme.” But the statement made no mention of the clean energy aspects of the bill.

Even Shell Oil tweeted out its support., calling the act “a step toward increased energy security” that will “help reduce U.S. emissions and accelerate a cleaner future.”

Tim Fitzpatrick is The Salt Lake Tribune’s renewable energy reporter, a position funded by a grant from Rocky Mountain Power. The Tribune retains all control over editorial decisions independent of Rocky Mountain Power.