The Build Back Better Act: The climate portion, explained

Over the past few months, the Build Back Better Act (BBBA) has been a big topic of discussion – both in the solar industry and for the country as a whole. The bill includes climate provisions crucial for the United States to achieve its 100 percent carbon-free electricity target by 2035. However, it also contains social spending and tax changes that have received less support from Senate Democrats. So, what's the status of this bill? And what can you do to support it?

• What's in the BBBA?

• What's the difference between the BBBA and the Infrastructure Bill?

• Why hasn't the BBBA passed yet?

• Will the BBBA pass?

• What can you do to support the BBBA?

The BBBA has been a key initiative since Biden's presidency. Since initial negotiations started in July 2021, Congress has amended the bill several times, including a drop in budget from $3.5 trillion to $1.75 trillion. However, the key focus of the bill has remained unchanged, with initiatives aimed at climate change, social spending, and tax changes. In this article, we'll focus on the portions related to climate change.

The bill includes $555 billion towards clean energy and climate change provisions. It's important to note that initiatives in the bill may change, but as it stands in January 2022, here are a few parts that we're particularly excited about:

Expansion of the federal investment tax credit

Owning your solar system makes you eligible for the solar investment tax credit (ITC). Right now, it's set at 26 percent, meaning you can claim up to 26 percent of your system costs from your federal taxes. The tax credit is set to drop to 22 percent in 2023 and disappear altogether for residential systems (and drop to 10 percent for commercial systems) in 2024.

The BBBA would increase the ITC to 30 percent and extend it for ten years (until at least 2031). Significantly, the ITC would also be expanded to cover standalone energy storage.

Flexible tax credit payment options

Low and moderate-income (LMI) communities currently have lower solar adoption rates than higher-income households, partly because they often don't owe enough taxes to take advantage of the ITC. However, under the BBBA, the ITC would be refundable for residential installations – meaning if you don't have enough tax liability for 30 percent of your solar system, you will get a check from the Internal Revenue Service for the remaining amount.

While you can currently roll over your tax credit, this would allow you to get those returns faster, potentially reducing your dependence on solar loans. The bill also offers a direct pay option for commercial projects, allowing organizations that don't have a tax liability (like schools and churches) access to reduction.

Increased domestic solar manufacturing

The solar industry has been hit hard by supply chain constraints over the past year, hindering our ability to scale clean energy deployment in the U.S. quickly. However, the BBBA includes legislation introduced by Senator Jon Ossoff that provides tax credits for American manufacturers in the solar manufacturing supply chain. This would help grow our domestic solar supply chain, reducing our reliance on constrained overseas manufacturing while contributing to the U.S. economy.

Expanded electric vehicle tax credit

If you want to purchase a new electric vehicle (EV), you may be eligible for the Qualified Plug-in Electric Drive Motor Vehicle Tax Credit, which provides a tax credit of $7,500. However, in the second calendar quarter, after a manufacturer has sold 200,000 EVs, the tax credit is no longer available – meaning if you're interested in certain vehicles like Teslas, you can't take advantage of this tax credit.

Under the BBBA, all new EVs would again be eligible for the $7,500 tax credit; additionally, if your vehicle's battery is made domestically, you'd get an additional $500 credit, and if the car is assembled with union labor in the U.S., you'd be eligible for a $4,500 tax credit. These tax credits are designed to encourage broader EV adoption and domestic manufacturing of EVs.

Heat pump rebates

Heat pumps are essential to electrification, allowing homeowners to transition away from fossil fuel heating sources. The BBBA includes rebates for those purchasing heat pumps – if you're looking to install a heat pump for water heating, you will get a refund of up to $1,250. If you install a heat pump HVAC system with a British Thermal Unit (BTU) per hour less than 27,500, you'd be eligible for $1,500 or $2,000 if your installation meets Energy Star cold climate criteria and is installed in a cold climate. If your system is 27,500 BTU per hour or more, you will get $3,000 in rebates or $4,000 if you install a cold climate system.

Importantly, if you're an LMI household, you may be eligible for up to $2,000 or $3,000 more in heat pump rebates. Additionally, if you plan on other home electrification projects, your total rebates would be capped at 50 percent of the project costs, or $10,000.

Clean energy job creation

From increasing domestic manufacturing to bolstering clean energy projects, the BBBA would significantly increase the availability of clean energy jobs in the U.S. The Solar Energy Industries Association (SEIA) 's 2021 Q4 U.S. Solar Market Insight report estimates that the BBBA would triple the total amount of solar in the U.S. over the next five years. To meet this solar deployment, SEIA predicts that the bill would add $234 billion to the economy from 2022 to 2026, requiring at least 450,000 workers: double the size of today's solar workforce:

While the BBBA doesn't have support from Republicans, Democrats currently control both the House and the Senate, and the BBBA only needs a simple majority – so why hasn't it passed yet? The bill has passed the House but is currently held up in the Senate by a conservative Democrat from Virginia: Joe Manchin. Joe Manchin has stated that his hesitation stems from concerns over pandemic-related inflation rates that have been soaring over the past few months, increasing prices of everything from couches to groceries.

While the Congressional Budget Office estimates that the legislation would mostly be paid for, it would still contribute to the deficit and modestly increase near-term inflation. However, most experts agree that the increases wouldn't be significant, and the White House even argues that the bill would reduce inflation over time by driving economic growth.

Short answer? We don't know yet. Longer answer? The BBBA will likely need to be broken up to pass – and some sections probably won't pass in the current Congress. On January 19, 2022, President Biden voiced support for passing parts of the bill now and others later in his presidency. Notably, Senator Joe Manchin has expressed support for the $555 billion climate change portion of the BBBA, so the initiatives discussed in this article still have a good chance of passing in this Congress.

However, even with support from Senator Machin, more progressive Democrats may block the bill from passing if it's broken up. Many progressives want to see social spending provisions – like free community college and a child tax credit – passed now and fear they're less likely to pass on their own.

The BBBA is a highly complicated bill – whether you support it as it stands today, or a more broken-up version of it, the best way to help get these climate change initiatives passed is to make your voice heard! We'll provide some actions you can take to do just that:

Send a message to Congress

A straightforward way to let elected officials know what you think is to send a message to Congress. SEIA has made this even easier by creating a simple form to fill out. After entering some basic information, you can choose to customize your message or keep the pre-written text from SEIA urging Congress to pass the BBBA.

Call your state's senators.

Especially if the BBBA is broken up, it's important to directly call your state's senators to tell them why you want it to pass. It may help to prepare what you will say before you call to ensure your message is concise and direct. Try to explain how the BBBA will benefit you or your local community directly and why you want it to pass. To find the contact information for your state's senators, use this website.

Vote!

If the bill doesn't pass or only certain portions pass, the most important thing you can do is to vote in the November 2022 elections—research which candidates support the BBBA and who may stall its passage. Even if the bill does pass before these elections, voting for candidates supporting climate change initiatives may help pass future legislation important to the clean energy transition.

No! While it may be tempting to wait to see if the BBBA passes and the ITC increases to 30 percent, installing a solar system today is the best way to start saving on electricity. Supply chain constraints are already delaying some installations, so the sooner you connect with installers, the sooner you can generate free, clean electricity. On the EnergySage Marketplace, you'll receive custom quotes from local installers, which you can compare side-by-side to find a system that meets your needs at the right price.