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The Inflation Reduction Act Could Supercharge Solar and the Right Partner can Maximize Your Benefits

December 16, 2022 Patrick Corr

The Inflation Reduction Act (IRA) passed in August 2022 brings commercial and industrial (C&I) energy purchasers significant incentives for adding solar to their portfolios. The bill extends a 30% tax credit for solar installations. And now energy storage systems also qualify for this benefit, whether or not they’re installed with an accompanying solar array. These breaks only add to the advantages that renewables already offered. But to unlock the benefits of this complicated bill, you need to choose the right partner.

Sustainability as a business necessity

The IRA’s passage has boosted solar deployment forecasts significantly. In their U.S. Solar Market Insight Q3 2022, the Solar Energy Industries Association (SEIA) and Wood Mackenzie lifted their estimate by 40% above prior guidance through 2027. Growth in commercial installations slowed in 2022 due to supply chain issues related to Chinese labor concerns, but solar still comprised 39% of all new generating capacity during the first half of 2022. And SEIA and Wood Mackenzie see installed and operational U.S. solar capacity possibly climbing to 335 gigawatts (GW) by the end of 2027, up from 129 GW at the end of 2022’s third quarter.

Supporting this growth are corporate initiatives to drive down not only their greenhouse gas emissions but also those of their suppliers. The three-tiered Greenhouse Gas Protocol incorporates a Corporate Accounting and Reporting Standard that requires participants to evaluate emissions from their direct operations (Scope 1), emissions related to purchased electricity and steam (Scope 2), and emissions produced by their supply chain (Scope 3).

The impact of supply chain reductions is quite possibly enormous. For example, in June 2021, Toyota Motor requested its tier-one suppliers reduce carbon dioxide (CO2) emissions by 3% that year versus the previous year’s figure. And Honda has asked its major suppliers to begin cutting carbon emissions by 4% annually, versus 2019 figures, beginning in 2025. Initially, these announcements only impact the companies’ biggest suppliers. But each of those companies has its supply chain, so the initiative could ultimately impact up to 30,000 companies worldwide. With that kind of ripple effect taking place across multiple industries, it’s easy to see how your organization, large or small, could face similar demands from its corporate customers.

Devils in the details

However, especially for companies new to solar solutions, it’s important to work with partners who know the right questions to ask to ensure finished projects are as good for their bottom lines as they are for the environment. This is particularly true for those organizations with a national property portfolio to support. Because electric utilities are regulated at the state level, and every state has its catalog of regulatory carrots and sticks when it comes to renewable energy, an approach that could work at one location might be completely wrong in another.

A key point to understand in this process is that C&I projects are not just smaller versions of utility-scale installations. Experience working with utilities won’t necessarily translate to this market. Utilities have different business goals and regulatory frameworks than commercial enterprises, so there’s a different set of factors that need to be penciled out for a C&I solar project to prove a success.

How to plan for success

So, what should C&I managers planning new or expanded solar efforts look for in a development partner? I believe the following characteristics are among the most important:

  • If you’re a regional company, you want a partner with at least seven or eight completed projects at the same scale as you’re planning. For national companies looking to roll out across multiple regions, look for advisors who’ve worked in at least five different markets with projects at the scale you’re considering.
  • Again, C&I-specific knowledge is key. Also, look for developers with a dedicated legislative-policy team that tracks regulatory issues in the regions where you’ll be working. Rules and incentives are changing all the time in ways that can significantly impact future success if they’re not addressed in how projects are structured.
  • Often, developers will find a site that looks appropriate and then shop for outside financing. This approach raises added risk regarding that third party’s eventual performance. So, look for a partner with internal financing options to help ensure you’re getting the full financial details of a project upfront before any contracts are signed.
  • Battery Storage experience. Today, making the most of a solar investment increasingly means incorporating energy storage into the plans. But this isn’t just a simple project upgrade, because there are multiple ways storage can add financial value that can vary by region and state. You need a partner who can help identify how a system will be utilized with a strategy that works both now and for the long term.

 

Visit Empower Energies to learn more about C&I solar and storage development. There you’ll find the opportunity for a no-cost assessment that can make it easy to start or expand your company’s renewable energy program.