IRA Renewables Impact: At a Glance | Black & Veatch

IRA Renewables Impact: At a Glance

IRA Renewables Impact: At a Glance

With more than $300 billion in investment allocated for energy and climate, the Inflation Reduction Act (IRA) means big things for the energy industry. Especially when combined with the Infrastructure Investment and Jobs Act (IIJA), it creates an unprecedented potential for new kinds of growth, opening up entry to the renewables market and labor force. The IRA is set up to create a massive transition, but there still are constraints. And given all of the complexities, here’s a breakdown of the high-level impact for the renewables industry.

What are the largest tax credits?

The legislation leans heavily on incentives, with significant green tax credits including:

  • $64.8 billion in renewable energy and clean energy investment tax credits (ITC)

  • $62.3 billion in renewable energy and clean energy production tax credits (PTC)

  • $36.85 billion for clean manufacturing

Renewable Energy Investment/Production and Renewable Manufacturing Tax Credits Breakdown

The IRA made significant changes to existing incentive and tax policy for clean energy development that have been well-understood for years. For instance, the new baseline credit is 6% (ITC) and $5 per megawatt hour (MWh) (PTC), but meeting certain criteria can get you to a maximum value of 50% and $32.50 per MWh. Those extra incentives will be derived from meeting the obligations of the bonus tax credits authorized in the legislation (more can be found below). Many details are expected in forthcoming guidance from the U.S. Treasury Department, but those planning to take advantage of these credits should pay attention to the requirements for the following key items:

Workforce Requirements (30%) ($25 MWh)

To get 30% ITC, project owners not only must pay the prevailing wage, but they also must use apprenticeship programs. This first piece isn’t much of a heavy lift – the prevailing wage often is already typical right now because of the tight labor market.

Domestic Content (40%) ($27.50 MWh)

If owners use steel, solar panels, batteries and other materials with a prescribed percentage of components or subcomponents made in the United States, it's an additional 10% in ITC bonus credits.

Energy Community (Bonus of 10%, $2.50/MWh, for total of $32.50 MWh/50%)

Where you site your projects can get you an additional 10% ITC or PTC credit. This is a huge area of opportunity – for example, you could site in or near areas with retired coal generation, energy extraction, low-income, unemployment and/brownfield location that has potential for IIJA grants, as well.

The manufacturing tax credits (MTC) offer credits by watt or weight of components for renewables projects like photovoltaic (PV) cells, inverters, and polysilicon for solar energy and blades, towers and foundations for wind energy. An entity can claim an advanced manufacturing tax credit for clean energy either through an investment tax credit or a production tax credit. The PTC provides tax credits for defined manufactured goods produced and sold in the United States. The credit lasts through 2029 and then depreciates over time before being phased out by 2033. The ITC allows manufacturers of qualifying advanced energy projects to apply for a 30% tax credit based on capital expenditures – for example, building a manufacturing line.

What are some of the key potential impacts of this legislation?

As it was intended, this legislation is set to make big waves. There are several large impacts that it is predicted to create:

This changes how the industry is siting new projects

Given that farmland traditionally is ideal, renewables were seen as a responsible way to sunset family farms, although doing so was difficult from a public relations standpoint. This gives new incentive to push toward nonproductive land while offering opportunities for brownfield sites and other areas.

There are lots of opportunities for rural, disadvantaged areas

Municipalities and cooperatives haven’t necessarily had access to the capital to build renewable generation, but this legislation, combined with other factors, has delivered the exciting opportunity for them to own these kinds of projects.

The bill can create a job market that will be game changing in five to 10 years

With prevailing wage and apprenticeship components to the tax credits, good-paying, non-exportable jobs in renewables (including renewables manufacturing) will have legal backing. This will create a job market that also will help safeguard the legislation because it will garner broad geographic support, particularly in rural areas, as these projects will mean good jobs. Cyclically, this also will help to build broad support for renewables across the board, strengthening the job market.

There’s potential to layer IIJA over IRA opportunities

Clients have new opportunity to consider things they never would have before, especially when considering how to layer incentives and grants. Through the IIJA, for example, the federal government will set aside billions for the development of hydrogen hubs across the country. When combined with the IRA’s new tax incentives, complex projects that integrate entire industries likely will come forward that will combine renewable power generation, industrial uses, hydrogen storage and blending into the midstream pipeline industry and carbon abatement.

The act has brought stability to the market

To have a 10-year runway for tax credits instead of one-to-three-year extensions is a game changer. This bill gives companies the opportunity to be strategic and think beyond the short-term horizon. There is a fair amount of certainty in the incentives remaining, even with a turnover in Congress or the House.

There are areas with bigger market impact

Different technologies will see different rates of change. Solar is likely one of the most significant. For example, Solar used to only be able to get 30 tax credit up front, every MW hour you get $25/bucks. Solar can access that so in some areas you have a ten-year revenue stream. If you can get domestic content (Steel, etc.) you can get some serious revenue.

The oil and gas industry impacts of this legislation are less often discussed, but the legislation gives the industry a path to decarbonize.

What are the roadblocks?

As with any plan, the IRA isn’t a complete solution, and there are several constraints that currently exist in the marketplace that will impede some of this growth.


The tightness of the labor market is no secret. Projects must compete for the labor they need, and there is a lack of resources. Many projects were budgeted prior to inflation and have trouble finding labor that will take jobs at the lower budgeted rate. Other areas will have multiple renewables projects going in at the same time, and it will be difficult to staff the projects.


A lack of equipment availability is going to continue and could stall more projects. From trade issues (including impacts of the Enforced Labor Protection Act, which left thousands of shipping containers from China sitting in Los Angeles), to trade wars and other developments. Solar panels and modules in particular will be a tough commodity to source and will contribute to inflation, affecting project budgets.

Transmission constraints

The limits of our existing transmission systems are going to be exacerbated. The IRA tax credits don’t have a significant impact on grid upgrades – and even though the IIJA does address this to some extent, it’s not enough to expect a complete overhaul of the grid. A widely cited study from Princeton University estimates the nation will need at least three times more transmission lines than are currently in place in order to meet net-zero objectives by 2050. Currently, our regional electric grids are experiencing huge bottlenecks and delays with getting renewable projects online due to lack of transmission interconnections. The Midcontinent Independent System Operator (MISO) recently reported that existing interconnection applications (nearly all renewable energy) are at roughly 171 gigawatts (GW) in capacity, yet the entire current installed market capacity for the regional grid operator is only 189 GW.


Achieving the highest-level incentives still requires additional details from the Biden administration, including key details on how certain inputs will be measured at various agencies and how tax credits will be implemented with guidance from the Treasury Department. Having a smooth, uncomplicated process for applying for and receiving the credits will require a robust administrative system from the government and knowledgeable staff serving on behalf of the project owners.   


Already- understaffed government agencies will struggle with the influx of permitting in an already bogged-down federal regulatory process. Current wait times can extend to years with particular projects and could cause some to miss out on this opportunity altogether.


The IRA is going to change the game and allow a bigger audience a bigger chance in the renewables market. However, there are criteria that need to be met in project plans, along with potential issues that will need to be accounted for. It’s important that those planning on taking advantage of these benefits stay up to date on developments and review resources such as the newly issued IRA guidebook:

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