How Will the Inflation Reduction Act Affect Corporate Energy Buyers

The Inflation Reduction Act of 2022 (IRA) was signed into law on Aug. 16, 2022. The IRA allows for major investments in domestic energy production manufacturing, heathcare, and climate change. The IRA provides nearly $369 billion in direct investment to ensure energy security, reduce carbon emissions, increase energy innovation and support environmental objectives.

What does the IRA mean for Renewable Energy Resources?

This innovative and timely piece of legislation will allow for the deployment of low carbon energy technologies while ensuring President Biden’s objective to reduce emissions by approximately 40 percent by 2030. For the first time, this legislation not only creates a 10-year runway for many energy tax incentives, it also revises the tax code to create a technology-neutral approach to incentivize the deployment of low carbon technologies.

How will the IRA Affect Opportunities for Corporate Energy Buyers?

Ambitious renewable energy goals by corporations have been a challenge in the current environment due to limited renewable generation. There have simply not been enough renewable assets available to meet the demand. RECs and energy purchases in the form of VPPAs/PPAs were the only solutions available and did not adequately meet business needs. The IRA will address two key elements to address these challenges:

  • Drive investment and development of new renewable assets (ex: wind, hydro or solar) with both higher and 10yr guaranteed tax incentives
  • More flexible means to monetize the tax incentives, allowing more flexible ways of selling the energy and RECs for newly developed assets

Both of these critical aspects of the IRA will allow businesses to achieve their sustainability goals that they have set out to achieve.

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