Manchin and Schumer include microgrid tax credit in climate deal

July 29, 2022
A microgrid tax credit has made it into a long-sought climate deal, the Inflation Reduction Act, reached this week by Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W. Va.

A microgrid tax credit has made it into a long-sought climate deal reached this week by Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va.

Details of the proposal, known as the Inflation Reduction Act of 2022 (HR 5376), are still emerging. Staff of California Congressman Jimmy Panetta, D-Carmel Valley, architect of the credit, today confirmed that the microgrid tax credit is in the bill.

Part of the earlier Build Back Better Act, which stalled because of Manchin’s opposition, the 30% tax credit applies to microgrid controllers. To qualify, microgrids must provide at least 4 kW and not more than 20 MW, according to a draft of the Inflation Reduction Act that is circulating. 

In all, the act directs $369.75 billion toward climate and energy, $300 billion to reduce the deficit and $64 billion to lower costs associated with the Affordable Care Act.

The bill supports the manufacturing of a range of energy and decarbonization technologies, including many often found within microgrids, such as solar panels and energy storage. Funding measures include:

—$30 billion in production tax credits to accelerate US manufacturing of solar panels, wind turbines, batteries and critical minerals processing.

—$10 billion in investment tax credits for manufacturers of electric vehicles, wind turbines and solar panels.

—$500 million for heat pumps and critical minerals processing. 

—$2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles, ensuring that auto manufacturing jobs stay in the communities that depend on them.

—Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country.  

—$2 billion for National Labs to accelerate breakthrough energy research.

Electrification, an effort increasingly intertwined with microgrid development, also gets a boost. The bill offers consumers a $4,000 tax credit for used electric vehicles (EVs) and a $7,500 tax credit for new ones. The US Post Office receives $3 billion toward vehicle electrification, and another $1 billion is designated for heavy duty EVs, such as dump trucks and school buses. 

The bill’s authors say that it will lower energy costs, while reducing carbon emissions by about 40% by 2030. They anticipate that the legislation will require no new taxes on small businesses or families making $400,000 or less, but will be funded largely through closing corporate tax loopholes.

President Joe Biden praised Schumer and Manchin for reaching the agreement. Some pundits had deemed climate legislation dead for this year after Build Back Better lost Manchin’s support.

“If enacted, this legislation will be historic, and I urge the Senate to move on this bill as soon as possible, and for the House to follow as well,” Biden said in a statement released by the White House.

US PIRG, an environmental organization, characterized the deal as a compromise between fossil fuel and renewable energy interests that is less aggressive in fighting climate change than Build Back Better. In particular, the organization criticized the bill for creating roadblocks to offshore wind expansion and supporting continued offshore drilling.

However, it still could be a “game changer,” according to US PIRG.

“Even if this bill passes, work remains to be done. Not everything in the bill is perfect, but the clean energy tax credits in particular will inject a jolt of (renewable) energy into state and local efforts to reduce emissions and clean the air. They will help make it affordable for Americans of all stripes to switch to electric vehicles, put solar panels on their roofs and purchase cleaner, healthier electric appliances that don’t pump pollution in our homes and communities,” said Matt Casale, US PIRG environment campaigns director. “The funding in the bill will help electrify the US postal fleet and help communities clean up toxic Superfund sites, while requiring polluters to bear the cost.” 

The bill has been submitted to the Senate Parliamentarian and could come up for a vote in the coming weeks, according to US PIRG.

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

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