Going Solar Before Credits Sunset
On July 4th, the White House signed into law a budget reconciliation bill with sweeping implications. This bill results in several significant changes to the federal funding landscape:
It extends the 2017 tax cuts permanently. Just about any analysis of these tax cuts concludes that the benefits will disproportionately go to the wealthiest Americans and increase the US annual deficit.
To partially pay for these tax cuts, the bill reduces spending in two main areas:
Aggressive cuts to Medicaid, the federal insurance program for the poor and disabled, estimated at one trillion dollars and over 11M patients removed from the program.
Rapid repeals of clean energy and climate tax incentives and programs, most of which were passed under the Inflation Reduction Act of 2022. The net result is likely to be an increase in carbon emissions and an increase in household energy bills.
As an organization that is advocating for a) local climate and clean energy solutions and b) a fair share of the economic and health benefits of these solutions to go to those most impacted by climate change, these outcomes are directly counter to our mission at C3. Low-income Americans will be harmed by widespread loss of health care coverage and higher energy bills, and we will lose ground in our fight against climate change. These outcomes will worsen the effects of both the extreme weather and infrastructure damage that disproportionately impact these vulnerable populations.
This blog isn’t meant to depress you, but to ground you in what we are facing and inspire you to take action. The mission to fight climate change at all levels of society has been dealt an alarming setback, an about face from the brief era of unprecedented climate programs and funding that have now been ended all too soon.
So, what now? Despite the miserable headlines, there is a lot that we can still be excited about on the climate front. At times of federal inaction, advancing solutions at the local level becomes all the more critical. This period may also be an opportunity for fence-sitters to make big decisions that otherwise might have been delayed. So for today, let’s take a look at the main changes to climate and clean energy funding resulting from the bill, and how we might find new motivation and incentives in the altered landscape.
Summary of Changes to Energy Incentives
If you’re an energy and/or detail nerd, you can read this excellent summary from S2 strategies. To get straight to the point, though, the most impactful changes for individuals and businesses are as follows:
Solar tax credits
Residential credit (25D) stops at the end of 2025. Systems must be placed in service by this date.
Commercial credit has two new deadlines:
Start of construction by July 4, 2026. This is typically defined as 5% of project costs incurred, though this may be subject to further executive action.
Placed in service by end of 2027.
Direct pay for non-profits remains intact under these new timelines.
EV tax credits
All EV tax credits (commercial, individual new, and individual used) will now expire on September 30, 2025.
The commercial EV charging credit expires June 30, 2026.
Efficient buildings
The efficient home credit (25C), which covers heat pumps, water heaters, insulation, and more, expires at the end of 2025.
The commercial building deduction (179D) expires at the end of 2025.
Geothermal tax credits
The 30% tax credit remains in place as planned until 2035.
Most of these credits were not scheduled to begin to sunset until 2032; this is a rapid about-face. This is especially true for those considering the purchase of an EV or home solar system.
With that part out of the way, let’s review how we can translate this sense of urgency into action in each of C3’s focus areas: clean energy, buildings, and transportation.
What’s next for: Rooftop Solar
If you are considering solar and you can afford it, the call to action is simple: get off your butt!
With energy costs continuing to rise here in Virginia, solar remains one of the best ways to avoid paying your utility more than you absolutely must. For residents, you now have less than 6 months to get a system on your roof and get the federal tax credit. Cutting 30% off your system cost is a game changer for making solar pay for itself through energy savings as quickly as possible. Businesses also need to get moving, although they at least have until the end of 2027.
No idea where to start? Check out Solar United Neighbors Solar Help Desk for a quick orientation. And follow these golden rules from C3:
Choose a local installer who performs their own work.
Always get multiple quotes. Compare prices, warranties, and local work history.
Always ask for references.
Check your price against the average - the current VA benchmark is $2.80 per watt, but ask your installer to do better!
For the many Virginians who might be eligible for solar but can’t afford it, there is still good news coming. Virginia’s Solar for All program is moving forward, bringing with it $156 million for solar projects for low-income individuals and underserved communities. While briefly frozen earlier this year, the program is now moving forward, with initial projects starting next year.
Lastly, let’s be clear: solar is here to stay. The tax credits were always meant to be temporary and provide a boost to the industry at a time when it was needed most. The industry will regroup, solar costs will continue to come down, and as energy costs continue to rise, it will remain a vital clean energy solution for all.
What’s next for: Efficient and Electrified Buildings
The repeal of the efficient homes and commercial buildings credits has been a bit lost in the shuffle amidst the attention paid to solar and wind.
For residents, the calculation of how long to wait on that aging air conditioner or water heater just changed. If you have a major appliance that is on its last legs, you should strongly consider accelerating that decision if you can afford to. Heat pumps and heat pump water heaters can be credited up to $2,000 each through the end of the year. Make sure to find a heat-pump friendly contractor who knows the equipment and will set you up for long-term success! If you’re in the Cville area, the Energy Resource Hub can help you with this.
For commercial buildings, unfortunately, the ship for 179D has probably already sailed. These projects take time to analyze and develop, and the credit is designed primarily to serve new buildings and large retrofits. So if you happen to be in the midst of that process, talk to your engineer about timing. Otherwise, it’s time to buckle down and brush up on the common-sense economics of energy efficiency and heat pumps, which remain as true today as they were before the bill was passed.
And once again, there is significant good news on the way through another state program, the Home Energy Rebates. These rebates will, in many cases, provide much more financial support than the federal credit, with the highest amounts going to income-qualifying individuals. The program is on track to launch by the end of 2025.
Bonus here for Charlottesville residents: check out the new local rebate program!
What’s next for: Electric Vehicles
This one is probably the toughest. If you are kicking the tires on an EV, you have 10 weeks to make the purchase in time to get the tax credit. That’s $7,500 for a new vehicle or $4,000 for a qualifying used vehicle, subject to income eligibility.
Your best choice is to find an EV-friendly dealer that offers the credit at time of purchase. I personally was able to take advantage of this last year, and can testify that the process is pretty seamless if your dealer knows what they’re doing. If they seem unclear about the credits or how the process works, it’s best to move on.
If this timeline doesn’t fit your need for a new car, don't stress. For starters, there are a lot of ways to reduce your transportation carbon footprint in the short term. Your missed opportunity for the tax credit might turn into a more robust reassessment of how you get around, and how it impacts the climate. Try a bike or an e-bike (I love mine!), take public transit, or rideshare.
You may still find you are in the market for an EV eventually to decarbonize your needed car commutes. Much like solar, they are here to stay. The used EV market is now robust and competitive with gas vehicles. While the tax credit repeal will scramble things a bit, there will continue to be great options now that more affordable, long-range vehicles have been in production for several years. Battery costs also continue to decline and will bring EV costs with them, with potentially revolutionary technologies on the horizon that could leave gas vehicles permanently in the dust.
Let’s get to it
We are witnessing extreme polarity in the way that the two major political parties in this country are addressing and discussing climate change. This bill is potent evidence of that. For those of us observing the impacts of this seesaw federal support at the ground level, this can induce major whiplash.
However, the cobenefits of these actions reach far beyond their impact on climate - they reduce household and business costs, the burden on our infrastructure, create skilled job opportunities, improve health, and keep more money in local economies. If we can cut through the political narratives, we can see that these actions benefit all of us and the communities we live in.
Those more seasoned in the climate and sustainability movement have learned to take these ebbs and turn them into action. That is exactly the call to all of us now. If you have the means, now is the time to make that big climate- and community-friendly decision while these incentives are available to you. If not, at the very least, take this opportunity to get educated and prepare for big decisions when the time is right.
And for all of us, we can do the work of assessing our everyday decisions outside of our major energy-consuming purchases. Small actions add up, and they can ultimately help us be better prepared for the big ones when the time comes.
