Now could be an unprecedented time for sustainability-focused companies.
As the Build Back Better plan inches toward a vote in Congress, founders are gearing up for potentially massive opportunities in the green tech space. While the plan has been slashed from an initial size of $3.5 trillion to more recent estimates of $1.75 trillion, the spending for climate provisions has remained mostly in place. The bill contains $555 billion in subsidies for green tech, including tax credits for electric cars; solar, wind, and nuclear energy; and repairs that make homes more energy efficient.
“On the subsidy side, 90 percent of the original Build Back Better plan is, in fact, intact,” says climate economist Gernot Wagner, associate professor at New York University and co-author of Climate Shock: The Economic Consequences of a Hotter Planet.
Lauren Salz, co-founder and CEO of New York City-based home retrofitter Sealed, expects the legislation to be a boon for many small businesses that make homes more energy efficient. The bill contains various tax rebates for these repairs and renovations, such as $1,500 for adding insulation and HVAC system upgrades, and $2,500 for installing a heat pump. All rebate amounts are doubled for moderate income families, who typically pay disproportionately high energy bills. Additionally, homeowners can earn $2,000 rebates for repairs that save 20 to 35 percent of their monthly energy costs, or $4,000 rebates if that number is more than 35 percent.
Whereas some climate-focused government incentive programs in the past have been based on costs, Salz notes that these are tied to the repairs’ effectiveness. “That’s how it should be,” she says. “The whole reason behind the legislation is that we’re looking to slow climate change.”
Should the budget bill be signed into law, Sealed will help its customers apply for the federal tax rebates, as it already does with local and state credits. “That rebate process can be very difficult to navigate,” says Salz. “Customers appreciate when you help them take advantage of it.”
A solar boost
The solar industry could also be in line for a jump-start once the bill is passed. The Build Back Better plan will increase the investment tax credit (ITC)–a subsidy for solar installations–from its current 26 percent rate to 30 percent, meaning more savings for residents who install solar panels. It will also ensure the ITC stays in place for at least 10 years. Previously, the ITC has been extended for only a handful of years at a time.
“In this industry, we’ve constantly been living in a world in which we’re bumping up against a deadline,” says Bret Biggart, founder and CEO of Austin-based Freedom Solar, one of the 10 largest solar installers in the U.S. “This gives us a 10-year runway with a great tax credit. I’m really bullish on it. I think it’ll move the needle tremendously.”
Biggart points out that the support provided by the legislation is likely to incentivize companies to build plants and begin manufacturing their solar equipment in the U.S., since they will no longer fear that the incentives could expire at any moment. Currently, many solar panels installed in America are manufactured abroad.
“This signals that the administration and the U.S. are going to support a long-term strategy in this space, which I think behooves everybody,” says Biggart. “It creates jobs, and it provides long-term stability and lets us put that infrastructure in place.”
The bill also contains a tax credit of up to $12,500 for purchasing electric vehicles. Biggart believes this will bolster Freedom Solar’s home battery business, since many customers who buy electric cars then purchase batteries to store energy for refueling their vehicles.
In all, Biggart expects the solar industry to feel the impact should the bill become a law. Currently, only 3 percent of energy in the U.S. comes from solar. “The consumers today that have gone solar are early adopters,” he says. “I think this package has the ability to help it make that transition to the mainstream.”
Still, not all the climate initiatives that were discussed by legislators made it into the latest version of the bill. Wagner points out that almost all the measures currently included are rewards, while most penalties–such as a carbon tax–were left on the cutting room floor.
A related measure that didn’t make it in: The Clean Energy Performance Program, which would have rewarded energy companies that increased their share of sustainable energy produced and penalized those that didn’t. Senator Joe Manchin of West Virginia, home to the country’s second-largest coal industry, pressured fellow Democrats to remove the program.
But overall, Wagner thinks the bill’s impact on business could be huge.
“It is the biggest climate bill ever agreed upon,” says Wagner. “Of course, now the name of the game is to actually pass it.”