From its name, the Inflation Reduction Act doesn’t sound like it would be landmark legislation for the renewable energy industry.
But, in fact, almost half of the new law’s $770 billion funding package goes toward addressing climate change and promoting renewable energy.
“People who have been in the solar energy space for a long time are doing backflips over the Inflation Reduction Act,” said Fred Ketcho, CEO of CalCom Energy, a full-service energy solutions and services company. “This is game-changing legislation for the renewable energy industry.”
Approved by Congress and signed into law by President Joe Biden in August 2022, the Inflation Reduction Act does things like lower costs for prescription drugs and healthcare and bolster supply chain resiliency.
But it’s also considered the most significant climate legislation ever enacted. Among its sweeping provisions are increased and extended tax credits for solar energy. That’s good news for tree nut growers and processors dealing with California’s escalating utility costs, Ketcho said.
The Inflation Reduction Act restores the 30% tax credit for solar investment that was dwindling under the older federal Investment Tax Credit. The new 30% tax credit will be in place to at least the early 2030s for agricultural solar projects, said Ketcho. The legislation also includes, for the first time, a 30% tax credit for battery storage.
Those incentives go a long way toward the expense of installing solar energy, which, in turn, can help control climbing electricity costs at farms and processing facilities.
“In the ag sector, the cost of electricity has been rising 5% to 8% a year,” said Jeff Lounsberry, CalCom Energy’s director of utility interconnection and regulatory affairs. “Growers and processors are exposed to the whims of California’s utility companies. But when you install either photovoltaic (PV) solar or battery storage, you provide a certain level of stability to your overhead costs.”
The new legislation also allows interconnection costs to be included in the 30% tax credit. That’s another plus for tree-nut processors and large, vertically integrated growing operations, said Lounsberry.
“In the past, a customer would go to PG&E or SoCal Edison, apply to interconnect their PV solar system and have to pay ‘x’ amount of money for utility upgrades,” he said. “That wasn’t included in the 30% tax credit before, and now it is. It’s a significant benefit because it improves the payback for the project.”
The new law also adds incentives on top of the 30% tax credit if most of a solar energy system uses steel and iron that’s been produced or manufactured in the U.S. and includes a certain percentage of U.S. components and domestic assembly.
Solar’s Marketing Boost
Solar power’s benefits to agricultural producers extend beyond overhead cost reductions, added Ketcho. With consumers and major retailers seeking sustainable practices from the food industry, the renewable energy source offers a marketing attraction.
“There’s a pricing advantage for those more progressive growers and processors who want to implement a sustainability road map,” Ketcho said. “I’ve had one almond processor tell me they get a 20% price premium on a pound of almonds simply by being able to verify and prove sustainable growing techniques and quantification around that.”
There are also emerging marketing benefits that will give producers and processors competitive differentiation by building out compliance with science-based targets and emissions reductions, added Ketcho. That includes the ability to support some of the Scope 3 emissions that larger Consumer Products Goods and food system organizations are looking for from their supply chain.
‘Once-in-a-Generation Investment’ for Ag
USDA calls the Inflation Reduction Act “a historic, once-in-a-generation investment and opportunity for the agricultural communities that USDA serves.”
The new law will help producers stay on the farm, prevent producers from becoming ineligible for future assistance and promote climate-smart agriculture by increasing access to conservation assistance, USDA noted.
As part of its funding, the Inflation Reduction Act provides $19.5 billion in new USDA conservation monies to support climate-smart agriculture. The legislation also allocates $40 billion into existing USDA programs, including the Agricultural Conservation Easement Program (ACEP), Conservation Stewardship Program (CSP), Environmental Quality Incentives Program (EQIP) and Regional Conservation Partnership Program.
The Inflation Reduction Act further includes $4 billion to mitigate drought impacts in the Western states. Funding can be used by the U.S. Bureau of Reclamation to compensate farmers who voluntarily reduce their water deliveries under short-term or multi-year agreements.
In December, the White House issued the first edition of a new resource, “Building a Clean Energy Economy: A Guidebook to the Inflation Reduction Act’s Investments in Clean Energy and Climate Action.” It provides clear descriptions of the law’s tax incentives and funding programs. The guide is designed to help Americans better understand how they can benefit from these investments and unlock the full potential of the law. Find the guidebook at whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/.
CalCom Energy will hold a webinar at 10 a.m., Feb. 28 to explain the Inflation Reduction Act and its incentives for renewable energy projects, particularly solar and battery applications.
Lounsberry will lead the presentation, “Implications of the Inflation Reduction Act on Commercial and Agricultural Solar in California.”
To join the webinar, register at attendee.gotowebinar.com/register/8375865603859624281.