August 11, 2022

What would the Inflation Reduction Act do for Indiana? Experts explain effects on solar, businesses

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What would the Inflation Reduction Act do for Indiana? Experts explain effects on solar, businesses

The federal Inflation Reduction Act could help Indiana utilities and other businesses to adopt renewable energy like solar — but whether it will encourage Indiana residents to do the same is unclear.

Indiana University professor David Konisky researches environmental and energy policy.

“So for utilities, there's a lot of money on the table to sort of nudge them towards investing more in cleaner technologies. That's really important for Indiana because we don't have state policy that's been pushing very hard in that direction," he said.

The bill would also extend tax breaks for residential solar panels for about a decade and create new tax credits for battery storage.

Alex Jorck is with Whole Sun Designs in Bloomington — which installs solar panels for homeowners and some commercial businesses. He said the outlook for the business has been bleak.

Because of a state law, Hoosiers who install solar panels will now get fewer credits for the excess energy they deliver back to the grid — making solar less affordable. Federal tax breaks for residential solar are also supposed to disappear by 2024.

But Jorck said extending those tax credits could put solar installers closer to “business as usual” next year.

“It’s 10 years. This is the most certainty we’ve had. So, it’s great," he said.

The bill also includes new tax credits for people who buy battery storage to accompany that solar.

Laura Ann Arnold with the Indiana Distributed Energy Alliance said, as utilities continue to raise rates, this could encourage some people to get solar with storage — lowering their monthly bills and reducing their dependence on the grid.

“So if there's a power outage, you can continue to have electricity for your home by drawing on your energy storage system," Arnold said.

Though Jorck said few homes are set up for residents to go completely off-grid — something utilities fear could drive up costs for their customers without solar.

The Inflation Reduction Act also provides rebates for home energy efficiency improvements like heat pumps and other electric appliances. Jorck said it’s an opportunity for solar companies like Whole Sun Designs to expand their business or partner with others that do that work.

READ MORE: With so much support, who wants to phase out rooftop solar incentives? Answer: Indiana utilities


 

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IU's Konisky said the bill also incentivizes businesses to manufacture more of these green products in the U.S. — including electric cars, which could be a positive thing for Indiana automakers.

"One of the things that bill does is it provides money to help companies that are currently building conventional cars to transition towards electric electric vehicles to sort of ease the transition for those companies," he said.

The Inflation Reduction Act also gives tax breaks to people who buy new and used electric cars. To qualify, new EV models would have to be assembled in the U.S. or a country that has a free trade agreement with the U.S.

Right now, some components for EVs — like critical minerals and batteries — often aren't made in the U.S. Konisky said that makes the future of EV manufacturing in the U.S. complicated.

"It may take a few years or longer for us to develop those industries. But I think the long term strategy is to build a large robust electric vehicle supply chain in the United States and other countries that we are friendly with," he said.

Konisky said, if the bill passes, it will be the first time the U.S. has had something like a national climate policy.

"The potential is there for pretty significant reductions in greenhouse gas emissions. So that's really exciting — it's a long time coming," he said.

Contact reporter Rebecca Thiele at rthiele@iu.edu or follow her on Twitter at @beckythiele.

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