Electric cars, solar panels and more: Here’s how Virginians can access millions through the Inflation Reduction Act
Big changes are afoot for the way people, businesses and others across the country can power their homes, fuel their cars and make the switch to clean energy.
Despite its wonky name, the Inflation Reduction Act – passed by Congress and signed into law one year ago – is considered the country’s most sweeping climate legislation to date.
The new law is expected to unleash $370 billion — or more — in federal funding for clean energy investments over the next decade, with the goal of curbing fossil fuel emissions that contribute to climate change.
Some of that money is available now, in the form of tax credits for households that install solar panels or buy energy-efficient appliances, for instance.
Even more money is filtering down to states and localities through an expansive mix of grants, loans and rebates.
The goal is to speed the transition away from fossil fuels by offering a variety of incentives and subsidies for cleaner alternatives, said Damian Pitt, associate director of policy and community engagement at Virginia Commonwealth University’s Institute for Sustainable Energy and Environment.
It's an approach that focuses on making clean energy cheaper and more appealing, Pitt said, rather than mandating specific actions, which would not have been politically possible in Congress.
The IRA encourages individuals and businesses to join the “green economy,” he said.
Here’s a guide to what’s happening and how you can take advantage in Virginia.
Available now: Tax credits
One of the biggest advantages of the IRA is the consistency it helps bring to the market, said Ben Hoyne, Virginia program director for the nonprofit Solar United Neighbors, which advises people about how to go solar.
One example is the major tax credit for residential solar power, the Investment Tax Credit.
The credit was first put in place in 2006. But the amount it awarded went up and down over the years through different political climates.
It was a sort of “boom and bust cycle,” Hoyne said.
That put pressure on homeowners and solar installers to do projects before the end of the year whenever the credit was highest.
The IRA increases the tax credit — to 30% of the cost of eligible projects — and keeps it stable for the next decade.
If a homeowner spends $20,000 on a rooftop solar installation, for example, they could receive a $6,000 credit on their federal taxes. The average cost of rooftop solar panels is $16,000, according to Forbes.
The government is also now offering households a similar credit for other green energy projects like solar water heaters, battery storage and rooftop wind turbines – even for renters who decide to invest in them.
Hoyne said besides cost, a lack of information is often the biggest barrier for households to consider solar power.
“There’s so much information out there about so many things, and misinformation,” he said. “And solar is really confusing.”
Solar United Neighbors has launched a Hampton Roads Solar and EV Charger Co-op to help bridge that barrier.
Those who participate can learn more about how to navigate the system and get discounted rates negotiated specifically for the co-op.
Solarize Virginia, a part of the Local Energy Alliance Program, is also encouraging Hampton Roads homeowners to take advantage of the federal tax credit.
Brian Campbell with Solarize Virginia said households that install solar power should immediately see lower monthly energy bills. Solar system owners usually break even in about seven to 10 years.
The industry can be a breeding ground for scammers – including those advertising false information about the IRA, said Aaron Berryhill, solar program manager with Virginia Energy, the state energy department.
He said people should be wary of businesses offering immediate rebates for solar, and never feel pressured to sign agreements in a short time frame. The tax credit will not be expiring anytime soon.
Traditionally, only households and institutions that pay federal income taxes can claim tax credits. But the IRA also changes that.
Tax-exempt entities like schools, local governments, nonprofits and churches can now access tax incentives through a new mechanism called elective pay that will refund them for eligible clean energy projects.
That means schools buying electric buses, a grassroots community solar project or a city investing in electric car chargers could all now benefit – without having to enter into a complicated agreement with a third party, as had been the case.
A huge emphasis of the law is on improving energy efficiency.
Experts say it’s one of the most important ways to move the U.S. toward a fossil fuel-free future – and saves people money on energy bills.
Berryhill called energy efficiency measures “low-hanging fruit.”
“It’s not quite as exciting as putting solar on your roof, but it’s easier to do oftentimes,” he said. “And it’s easier to see those cost savings upfront.”
Strategies include switching from an oil or gas furnace to a more efficient electric heat pump system, which can both heat and cool a home; improving insulation and ventilation; or buying electric instead of gas appliances.
Heat pumps operate differently than traditional furnaces and air conditioners. They use electricity to transfer heat from a cool space to a warm space, making the cool space cooler and the warm space warmer, according to the Department of Energy.
Because the pumps transfer heat — from air, water or the ground outdoors — rather than generate it, they require less energy than traditional heating and cooling systems.
The IRA now rewards energy efficiency efforts through a tax credit of up to $3,200 per year.
Electric vehicles and chargers
The IRA also expands tax credits for individuals and businesses buying new or used electric vehicles, offering up to $7,500 or $4,000, respectively.
But before you get ready to buy, check that the car qualifies.
The government has imposed a list of requirements for cars to be eligible for the full credit, including where automakers source their materials and a requirement that the vehicle undergo final assembly in North America.
The IRA also expands an existing vehicle refueling tax credit to include the installation of electric chargers.
Homeowners and businesses can qualify for a credit equal to 30% of the cost of a home charging station, up to $1,000.
But the credit is currently limited to properties in low-income communities and rural census tracts.
Coming soon: rebates for low and middle-income households
Beyond tax credits, the IRA also allocated millions of dollars to directly lower costs for low and moderate-income households switching off fossil fuels.
Virginia has been allocated about $188 million for these programs, which will be run by the state energy office.
About half of that funding, $94 million, is earmarked for the federal High Efficiency Electric Home Rebate program.
Under this program, rebates will cover up to $14,000 for low and moderate-income households doing certain electrification projects, such as installing heat pump systems, electric stoves or upgraded electrical wiring.
For the rebate program, low incomes are considered less than 80% of an area’s median income, while moderate is between 80-150% of that. A single person making about $52,000 or less in Hampton Roads is considered low income, according to the U.S. Department of Housing and Urban Development.
Virginia Energy says the high-efficiency home rebates will happen at the point of sale – meaning consumers receive the money immediately to cover up-front costs, rather than as a credit on their taxes.
Renters may also be able to use rebates to buy portable appliances like window-unit heat pumps and induction cooktops.
Another $94.5 million is allocated for the Home Owner Managing Energy Savings rebate program, which offers homeowners up to $8,000 for energy-efficiency retrofits like improving insulation and ventilation.
The size of those rebates will be performance-based, tied to how much energy a homeowner’s actions actually saves. The law requires the state to do energy audits before and after retrofits to confirm the energy savings.
Virginia says households can only access one of the rebate programs, not both. But homeowners can stack either of them with an energy efficiency tax credit.
Virginia Energy says its IRA-funded rebate programs may take a year or two to get up and running. You can learn more and check the status on the state’s website.
Filling in the state’s gaps
Virginia Energy is also pursuing additional grant funding opportunities under the IRA, Berryhill said.
For example, the department plans to apply to the U.S. Environmental Protection Agency’s new Greenhouse Gas Reduction Fund, a $7 billion pot of money earmarked for disadvantaged communities to benefit from or deploy carbon-neutral technologies.
If it wins funding, Virginia says it hopes to create a program to provide solar energy to lower and moderate income households.
Officials haven’t yet gotten into the details of how that would work. But in a recent notice seeking public comment, the state said it could happen by “reducing energy bills and contributing to the Commonwealth’s clean energy and economic development goals.”
Berryhill said Virginia is also still taking advantage of programs through a separate federal law, the Bipartisan Infrastructure Law of 2021, which included elements aimed at speeding the energy transition.
Programs funded by the infrastructure law include building new transmission lines and test facilities for clean hydrogen energy, he said.
The influx of clean energy funding comes at the same time Republican Gov. Glenn Youngkin is planning to withdraw Virginia from a major cap and trade program called the Regional Greenhouse Gas Initiative, or RGGI.
The initiative, which Virginia only joined in 2020, requires power plants of a certain size to buy allowances for their carbon emissions. Those credits are then sold at quarterly auctions, which have so far raised more than $650 million for climate adaptation programs in Virginia.
Money raised by RGGI auctions goes toward flood mitigation work around the state — particularly in Hampton Roads — and energy efficiency programs for low-income households.
Pitt, with Virginia Commonwealth University, said the energy efficiency funding often helps very low-income households insulate and weatherize their homes.
The funding is also used to incentivize developers to incorporate high energy efficiency in new housing.
The IRA could therefore fill in a gap in Virginia even if RGGI money continues, Pitt said: energy efficiency help for moderate-income households.
The new law offers a wide range of incentives for commercial renewable energy developers, including subsidies aimed to spur new clean energy manufacturing.
It adds further bonuses for projects located in “energy communities,” aiming to draw new economic development to regions that have been historically burdened by and economically dependent on fossil fuels — like former coal towns or brownfield sites.