Why small businesses stand to gain from the Cut Inflation Act

Clean energy producers and green home renovation companies stand to reap big benefits from the Cut Inflation Act passed by the Senate last week, if it becomes law.

As for bulk generation, one estimate assumes that we will see more than double utility-scale "clean energy" generation by 2030, and more than triple wind, solar and storage, in particular. Consumer tax credits for green retrofits will increase from a one-time $500 credit to an annual $1,200 credit, allowing consumers to make multiple upgrades over multiple years and earn credits. tax at every turn. These credits will subsidize the purchases of these goods and services and should generate additional sales for the companies that offer them. And thanks to the annual component, it should boost sales for years to come.

“Taxpayers can budget for different energy upgrades over a 10-year period. Insulation one year. Windows and doors another year,” Vincent Barnes, senior vice president of policy and research at the association at nonprofit Alliance to Save Energy in Washington, D.C., told the Wall Street Journal.

In total, these tax credits add up to $14.5 billion for this work. This is in addition to "home energy rebates" which would further reduce the cost of consumer-specific installation projects, such as heat pumps. And tax credits for wind and solar installations get an additional 10-20% increase when built in certain low-income areas or on Native American land.

Another area set to see big gains is manufacturing and recycling "green" equipment, with up to $10 billion in credits. These include equipment for renewable energy, energy storage, grid modernization and other key green technologies.

In all of these programs, a key innovation of the Inflation Reduction Act is transferable credits for consumer purchases: instead of requiring consumers to pay the full price up front and then claim the credit when filing their tax returns, they can now transfer the credit to another business, such as a fabricator or installer, or a finance company working with them, creating an immediate discount that can boost sales . However, this transfer can only be committed once, which means that a company that buys a lot of credits from its customers could end up with a lot of loans and little cash. Businesses selling with a down payment on transfer will therefore need to ensure that they have the right credit facilities, lender relationships and treasury operations in place to carry them out.