Renewable energy projects, including solar, geothermal, battery storage, wind, and biogas, are potentially subject to additional requirements depending on project size and are also eligible for bonus tax credits, depending on the project characteristics and location.
Renewable energy projects under 1MW(ac) typically use the Investment Tax Credit, which provides a one-time credit. Larger renewable energy projects might opt for the Production Tax Credit, in which annual payments are based on energy generated. Learn more about how to calculate Investment Tax Credits and the difference between Investment and Production Tax Credits.
*Only wind and solar renewable projects <5 MW are eligible to apply for the competitive Low-Income Bonus Program, along with battery storage connected to those projects.
** +10% for projects installed in low-income communities or on Indian land
+20% for projects that are part of a qualified low-income residential building or qualified low-income economic benefit project
The IRA offers Low-Income Communities Bonus Credits for certain wind and solar renewable energy projects. Reference the Applicant Checklist for how to apply for the Low-Income Communities Bonus Credit Program. Once the federal government has allocated all of the credits for a year the application process will be closed until the next year. Because entities must secure an allocaton before their project is complete, we recommend organizations apply for this credit as early in the project process as they are able.
Forest Edge Elementary School is the first Net Zero School in Wisconsin. Completed in 2020, it features geothermal, solar arrays, and battery storage. Those features cost approximately $2.5 million to install. The table below illustrates the tax credits for that project if the project had been built after the Inflation Reduction Act was passed (in reality it was built before the new tax credits).
Assumptions
The project met the prevailing wage and apprenticeship requirements
The project was not eligible for the Low-Income Community Bonus Credit Program
The project was funded with tax-exempt bonds (and thus is subject to the credit adjustment for that)
| Base Rate With Prevailing Wage/Apprenticeship Requirements Met | 30% | 30% |
| Domestic Content | Yes + 10% | No + 0% |
| Subtotal of Credits | 40% | 15% of 30% = 4.5% |
| Tax-Exempt Financing | 15% of 40% = 6% | 30% - 4.5% = 25.5% |
| Subtotal % | 40% - 6% = 34% | 30% - 4.5% = 25.5% |
| Total Direct Pay Credit | $850,000 | $637,500 |
| Final Cost for System | $1,650,000 | $1,862,500 |
