The recent passing of the Inflation Reduction Act (IRA) is a monumental accomplishment in climate policy and will reorient America to reduce emissions drastically. The IRA’s programs are numerous and cover most of the American economy by reinvigorating existing programs and creating new robust ones. Looking at the IRA from the viewpoint of fleet electrification, it will directly subsidize the cost of new zero-emission vehicles and fueling infrastructure.
For most fleet owners, the decision to electrify their vehicles isn’t a question of if, but when. First movers in the industry are already deploying commercial EVs and the necessary charging infrastructure. But what about those more risk-averse fleet operators who have not been able to build a robust transition plan for themselves? The relatively new EV technologies and policy requirements of the nascent fleet electrification market have created an environment where it can, unfortunately, be easy for a fleet to make costly mistakes.
When companies task their fleet operators with electrifying their fleets, the two immediate focus areas are the vehicles and the charging stations. While these two parts are essential, most fleet conversions also require a holistic energy solution to meet the charging requirements of the fleet – charging stations are the tip of the iceberg of the infrastructure required for reliable fleet conversions. The energy required to charge an electric fleet is not as readily available as it might seem. Owners should include energy infrastructure in early conversations about their transition plan as failing to account for the source of electricity needed to charge the new fleet invariably impacts the cost of charging the fleet and may have other material operational ramifications. That is where microgrids can provide support.
A microgrid is a smart interconnected system of energy, including clean supply, storage and demand applications. Microgrids support fleet electrification projects by providing a more resilient fuel source for the fleet, optimizing energy consumption and economics, and improving the environmental impact of the fleet conversion. The passing of the IRA presents a unique opportunity for pairing microgrids with fleet electrification, as fleet operators can now benefit from vehicle and energy incentives.
The IRA extends and expands the Production Tax Credit (PTC) and the Investment Tax Credit (ITC) for renewable energy projects, adds credits for green hydrogen production, creates credits for commercial clean vehicles and charging infrastructure, and extends the alternative fuel refueling property credit. Combining these credits will make fleet electrification project economics more attractive.
Some fleet operators are already deploying microgrids to support their fleet electrification efforts. The IRA will only increase access to the technology, further de-risking the transition from ICE commercial vehicles to EVs. One great case study is how Quality Custom Distribution (QCD) is teaming up with Scale Microgrid Solutions and InCharge Energy to electrify its Southern Californian fleet. The economics of the project will provide energy and operational savings to QCD starting right in the first year, and the financing structure provided by Scale enables QCD to maximize the value of available tax incentives and other credits without having to become experts on the subject. By combining its fleet electrification efforts with onsite microgrid infrastructure under a comprehensive “as a service” financing offering, QCD will benefit from stacking the available energy and EV incentives available under the IRA.
To learn more about the available incentives, reach out to us.
Table 1. Microgrid Tax Credits
|
Description of Tax Credit |
Summary |
Base Credit |
Domestic Content Bonus |
Energy Community Bonus |
Low-Income Community or Native Land Bonus |
Legislative Text Section |
|
Credit if Wage & Apprenticeship Compliant* |
W + A Compliant* |
W + A Compliant* |
W + A Compliant* |
|||
|
Extends and modifies PTC for producing electricity from renewable resources |
The PTC is extended through December 31, 2024, and reinstates solar facility eligibility. |
0.3 cents/kWh |
10% |
10% |
10% |
13101 |
|
1.5 cents/kWh |
10% |
10% |
10% |
|||
|
Extends and modifies ITC for producing electricity from renewable resources |
The Act extends the ITC through 2024. Provides eligibility for stand-alone storage assets and microgrid controllers. The wage requirement must be met for 5 years after the facility is placed in service. |
6% |
2 percentage points |
2 percentage points |
10 percentage points |
13102 13103 |
|
30% |
10 percentage points |
10 percentage points |
10 percentage points |
|||
|
Creates a technology-neutral clean energy production credit (CEPC) |
The Act adds Sec. 45Y to the tax code. These credits apply to zero-emission facilities and energy storage technology placed in service after December 31, 2024. |
0.3 cents/kWh |
10% |
10% |
10% |
13701 |
|
1.5 cents/kWh |
10% |
10% |
10% |
|||
|
Creates a technology-neutral clean energy investment credit (CEIC) |
The Act adds Sec. 48E to the tax code. These credits apply to investments with respect to zero-emission facilities and any storage technology placed in service after December 31, 2024. |
6% |
2 percentage points |
2 percentage points |
10 percentage points |
13702 |
|
30% |
10 percentage points |
10 percentage points |
10 percentage points |
*Projects less than 1 MW(AC) capacity automatically qualify for the higher rates without wage and apprenticeship compliance.
Table 2. Clean Hydrogen Tax Credits
|
Description of Tax Credit |
Summary |
|
Lifecycle Greenhouse Gas Emissions Rate (kg of CO2e per kg of hydrogen) |
Legislative Text Section |
||||
|
=<0.45 |
0.45 - 1.5 |
1.5 - 2.5 |
2.5 - 4 |
|||||
|
Creates a new PTC for clean hydrogen production |
The Act creates a new production tax credit for hydrogen technology under Section 45V of the tax code, which is calculated based upon the kilograms of clean hydrogen produced by the taxpayer at a qualified clean hydrogen production facility for which construction begins before 2033. Amendments made in this section apply to electricity produced after December 31, 2022. |
Base Credit** ($/kg of clean hydrogen) |
$0.60 |
$0.20 |
$0.15 |
$0.12 |
13204 |
|
|
Credit W + A Compliant ($/kg of clean hydrogen) |
$3 |
$1 |
$0.75 |
$0.60 |
||||
|
Creates a new ITC for clean hydrogen production facility investment |
The Act creates a new investment tax credit for energy storage technology constructed before January 1, 2025. Elects to treat clean hydrogen production facilities as energy property. Taxpayers may not elect both the PTC and ITC. Nor may they claim credit for carbon sequestration technology in addition to either the ITC or PTC. |
Base Credit (% of eligible infrastructure) |
6% |
2% |
1.5% |
1.2% |
13204 |
|
|
Credit W + A Compliant (% of eligible infrastructure) |
30% |
10.2% |
7.5% |
6.0% |
||||
**Construction of the associated hydrogen production facility must commence within 60 days of the Secretary of the Treasury publishing necessary guidance with respect to wage and apprenticeship requirements.
Table 3. Electric Vehicle and Charging Tax Credits
| Description of Tax Credit | Summary | Legislative Text Section |
| Creates a credit for qualified commercial clean vehicles | Creates Sec. 45W, a tax credit of 15% for certain commercial clean vehicles. The credit is increased to 30% if the vehicle is not powered by a gasoline or diesel ICE. Qualified clean commercial vehicles which have gross vehicle weights under 14,000 pounds may not receive a commercial clean vehicle credit above $7,500. Eligible vehicles over 14,000 pounds may not receive a credit above $40,000. | 13403 |
| Creates a credit for EV charging infrastructure | Creates a tax credit for building alternative fuel refueling infrastructure (including EV charging infrastructure and hydrogen refueling stations) in commercial vehicle lots, in the amount of 30% per charger. If the project does not meet prevailing wage and apprenticeship requirements, the base credit is 6%. The credit for depreciable alternative fuel vehicle refueling property cannot exceed $100,000. For any other alternative fuel vehicle refueling property, the limit is $1,000. The credit is valid through December 31, 2032. | 13404 |
| Modifies the Advanced Energy Project Credit to include EV charging infrastructure | Modifies Qualifying Advanced Energy Projects to include charging or refueling infrastructure associated with light-, medium-, or heavy-duty electric or renewable fuel vehicles. | 13501 |
| Amends the Clean Air Act to provide funding for clean heavy-duty vehicles | Provides $1 billion for funding clean heavy-duty vehicles like school buses, transit buses, and garbage trucks by amending the Clean Air Act (42 U.S.C. 7431). $400 million must be used to replace vehicles that serve 1 or more communities located in an area that does not meet (or contributes to ambient air quality in a nearby area that does not meet) the national primary or secondary ambient air quality standard for any air pollutant. Awards may be made to eligible recipients until September 20, 2031. | 60101 |