Inflation Reduction Act creating ‘uptick’ in interest for Iowa solar

Solar energy can be an attractive option for Iowans looking to lower their electricity bills, lock in electricity costs and use cleaner energy.

But costs, which vary depending on the size of projects, may be prohibitive: On average, residential projects in Iowa typically range between $15,000 and $25,000.

The Inflation Reduction Act, signed into law last August, invests nearly $370 billion in clean energy over the next decade — including several incentives for solar energy that make it more affordable.

Among its offerings, the legislation set tax credits for residential and commercial solar projects at 30 percent for the next decade.

Certain tax-exempt entities, like local governments and nonprofits, can now take advantage of those credits with a direct payment option. Additional credits are offered for domestic material sourcing, for competitive worker wages and for communities historically dependent on fossil fuels.

Solar companies in Eastern Iowa already are reporting a major uptick in local demand for solar projects since the IRA became law. Numbers of interested customers have increased between 10 percent and 100 percent, according to several companies The Gazette spoke with.

Other factors — like increased marketing and seasonal interest — could be contributing, too.

“The IRA definitely had a positive impact. There's no doubt about it,” said Larry Steffen, president of the Iowa Solar Energy Trade Association and executive vice president of sales and marketing at Dubuque-based Eagle Point Solar.

New legislation, more interest

Garrett Joseph, project manager of Hiawatha-based Hawkeye Electric, said the company is now receiving twice as many leads as it did before the IRA was implemented. Residents previously on the fence about solar are now moving forward with projects.

“I couldn't quite say how many of these new leads that are coming in are strictly because of that 30 percent tax credit,” he said. “But I do know that at almost every appointment I go to, they're talking about it as one of their main motivations for building solar.”

Solar companies also are expanding their customer bases with nontaxable entities, which were previously excluded in tax credit incentives.

“The direct pay program now in that bill has opened the door to nonprofits,” said Jason Gideon, president of Anamosa-based ECG Solar. “It’s cool because it really gives an even playing field for everyone.”

In 2022, the nation’s solar industry was gearing up for a reduction: The federal solar tax credit was scheduled to reduce from 26 percent to 22 percent by the end of the year. There was a rush of interest to meet the deadline, which strained vendors.

When the IRA hiked the rate up to 30 percent, it stabilized the industry.

“It took the pressure off of us to get things done by the end of 2022,” Steffen said.

Solar energy is only a drop in the bucket within Iowa’s current energy portfolio.

Around 500 megawatts are operating in the state, with the bulk of solar panels in businesses and homes, estimated Steve Guyer, energy and climate policy manager of the Iowa Environmental Council and president of Altoona-based GWA Solar.

More interested customers could boost the share of solar energy in the state.

“The IRA has clearly offered more opportunity, and it's still to be determined how it will all be written out,” said Troy Van Beek, CEO and co-founder of Fairfield-based Ideal Energy Solar. “But as that continues to evolve, those incentives will become clear, and our client base will probably continue to grow.”

Lack of knowledge, trust

While the IRA made waves when it was signed into law, solar companies told The Gazette they still encounter customers who haven’t heard of the legislation or have misconceptions about the incentives.

For example, customers don’t receive a check up-front for their solar projects; instead, they get money off their taxes.

“There really is very few, if any, sources out there that are promoting what is available with the IRA,” Guyer said. “That's part of the lag time where people don't know what's available yet, and so they haven't basically been exploring it.”

As interest in solar appears to ramp up, local companies said they’re careful to not follow in the footsteps of Moxie Solar — a North Liberty-based solar installation company that closed in December after it ran out of money and received complaints and lawsuits.

Several solar companies in Eastern Iowa told The Gazette they’re being mindful of the projects they’re signing, especially amid personnel shortages and supply chain setbacks.

Many are working with Moxie Solar’s previous customers to complete unfinished projects, and they advised interested customers to research solar companies before signing anything.

“There's a lot of solar contracts being signed,” Steffen said. “What we're seeing in some cases is they might be able to sell a whole bunch of solar arrays, but if you don't have anybody to build, condition, monitor and service them, that becomes a problem to the user.”

Although there’s more interest in solar, that doesn’t automatically translate to more contracts.

Potential customers may still be scared off by project price tags that have increased due to a variety of factors: inflation, heightened materials costs, supply chain issues and higher labor rates, shipping rates and insurance rates.

Last year, prices for standard solar products raised between 30 percent and 40 percent, Gideon said.

“The cost to do a system is way more now than it has been ever since I started all the way back in 2006,” he said. “I’ve got to pass that cost onto my customers, just like anything else.”

More incentives needed

Local solar companies praised the Inflation Reduction Act’s benefits for solar energy in Iowa — but they also lamented about the state’s current lack of resources for the industry. Utility rebates and the state’s solar energy system tax credit are no longer offered.

Surrounding states have instituted solar incentives beyond what the IRA is offering. Illinois, for instance, has a renewable energy credit program.

“We do have a lot of competition for other states that are pulling companies ... away from Iowa,” Van Beek said. “I just want to encourage the state to get behind the renewables in a way that's really going to bring in the business.”

Brittney J. Miller is the Energy & Environment Reporter for The Gazette and a corps member with Report for America, a national service program that places journalists in local newsrooms to report on under-covered issues.

Comments: (319) 398-8370; brittney.miller@thegazette.com