The Inflation Reduction Act offers potentially beneficial tax credits for deploying new generation and storage assets, but some tax credit bonuses require compliance with certain criteria that may entail additional costs. Understanding the expected net benefit of the credits as well as some aspects of the market for apprenticeship labor and domestic content will help resource planners develop better cost assumptions for their planning efforts. This report begins with a brief overview of the Inflation Reduction Act of 2022 and an analysis of some of the key requirements for tax credit bonuses: the market for apprenticeship labor and domestic content in the United States. It then presents the findings of a cost study on compliance with the IRA’s labor and domestic content bonus requirements. The results indicate that compliance with the labor bonus requirements (prevailing wages and apprenticeships) may result in significant savings across technologies and credit types, whereas compliance with the domestic content bonus requirements (domestically sourced iron, steel, and manufactured products) may cost nearly as much or more than the value of the bonus.
Authors Romey James, Nicholas Pilot, and Anand Kumar