- Welcome to the Solar Energy Channel, where you'll get an honest insider's look at all things solar. I'm here with Dale and we're
gonna give you an update of what we know of the
IRA bill as of today, and we're in late October 2023, so keep in mind that things change. You might be watching
this video in the future and a lot of the information
might be outdated. So we're recording this late October 2023 and we're gonna go through
each of the components of the IRA bill and let you
know what we kno
w as of now. (logo clicks) (paper shuffles) So welcome, Dale. - [Dale] Good to be here. - Let's talk first maybe about
the domestic content piece and give a summary of
what we know about that. - Not very much. - Yeah. - It's incredibly complex. And I think what we are seeing, Warren, is we're seeing a lot of manufacturing being opened in the US. It's gonna take some time. We were contacted just this week by a mod manufacturer who said by second quarter of 2024, they expect to have US made module
s. - Okay. - Will they? I don't know. But the domestic content,
it's clear as it was written, but it's not practical. And you know, I've been in other webinars where they've said that it, you know, it's gonna have to be
rewritten or reinterpreted because it's not practical the way it is. And it's fine as long
as everything's US made. But if you have a, if you have any type of manufactured product
that has components that are not US made, it gets really complex for manufacturers. I don't think th
e
manufacturers are gonna reveal the information you would
need to calculate it. - Yeah, so I think it
would be safe to say that for the next six to eight months, there's probably not gonna
be a lot of manufacturers that are gonna comply with the regulations or have the ability to comply. - It's been really, really quiet. - Yeah. - You know, we, when we
talked to our distributors and said, you know what are
the manufacturers saying? We're not hearing anything. The manufacturers are just like, qu
iet. What we hear is we're
building facilities in the US. - [Warren] Right. - And that takes time. - And, but we still don't
even know if those facilities are gonna be using components
that meet the requirements. - No, because I mean, even a module, you've got probably seven
components in a module, the way they look at it. And if they're not all US made, I just, I don't think the
manufacturers are gonna tell us and certify what they need to do. - Yeah, so at this point, there's really no update
on the domestic content. - Right. - Because it's really
not available for anybody to use at this point. - I mean, it's gonna be there, it's certainly an adder that
will eventually get legs but I just think, you know, in the immediate future,
and I'm talking months, we're just not gonna see it. - Sure, but then one of the nice things about the domestic content
is once we get past the qualification that you
meet the qualification, it's pretty simple to
know that you get it. If it's a hundred perce
nt US made, there's no application
process to go through or limitations or caps. If you get it, you get it. - Yes, I mean, there'd
have to be certifications. You're gonna have, it's
not enough to say, well, I bought it from somebody
and they said it was US made. There's gonna have to be certifications that you send along with your tax returns. - Sure, sure. All right so let's talk about then the energy communities. - This is the easy one. - All right, 10% adder, yep. - This one's real and
I thin
k this is the one that would affect most of
our clients of paradise. The Department of Energy
has a map for this one and for low income, but they have a map, and if you're within a census tract that is qualifying due to a
coal-fired energy plant closure or a coal mine closure,
either one of those, or an adjoining census tract, you're gonna qualify for this one. The one that's a little,
maybe a little less certain, is the Brownfield sites which
you and I just talked about that they're not on the
map. So you'd have to know that
it's a qualified Brownfield if you're gonna qualify that. And the MSAs are on the map, metropolitan statistical areas, which is based on the amount of revenue or the amount of tax revenue
that a census tract takes in. And then it has to, that
census tract has to have an unemployment rate that's
higher than national average. And that could change every year. - And that's impacted by fossil fuels. - It is. - Fossil fuel production
was removed from that area and it h
ad an impact on that census tract, they would qualify. - Yeah but the current unemployment rate would still have to be higher
than the national average. - [Warren] Correct. - So if they have a low unemployment rate because some other industry
moved in, they wouldn't qualify. - Right, right, and we'll include a link to the map in the description below, so you can go ahead
and take a look at that and see if you qualify for that. But keep in mind that
the census track changes every year that you ta
lked about. - It does, yeah. And how does that impact Dale, the start of construction
or the start of the project if that changes from the time you sign until the time you get it installed? - Yeah, you can, yeah, I mean, you can safe harbor that
basically the project started is what you have to say and the
safe harbor is part of that. And so if you can prove that, you're good. If the census tract changes
after that point, you're okay. It doesn't go when the
project's completed. It goes by when t
he project starts. - [Warren] Okay. - So as long as you start and you have continuous work
on it, you're gonna qualify, provided you qualified at the start. - All right, now let's
talk about low incomes. This one's a little more challenging, - And this is one that does not apply to most of our clients. We're working a lot of
times with system owners, but the low income is
split into multiple pieces. It's, you know, Native
American tracts and so forth. There's a, there's about,
it's a 1.8 gigawat
t cap, and 700 megawatts are allocated
basically to the category that we talk about, which
is behind the meter. And half of that is
allocated to non-profits. So the ones that I would see
most effectively using this would probably be non-profits
in low income areas. That would be a potential. But to qualify, you have
to submit an application to the Department of Energy,
that opened on October 19th. It's open for 30 days. Basically for 30 days, they're taking all the
applications they can, they ex
pect to be flooded. And if that happens,
there will be a lottery, and then you would be given, I mean, you'd be basically approved
as far as applying to the IRS and then the IRS has to approve it. So it's a dual approval process,
Department of Energy, IRS, and then that will be repeated each year. - Right. - So once we get, once we get going, once the initial wave is over, there will be a rolling approval process up to that 1.8 gigawatt per year. - Yeah, but for the most part, this doesn't apply
to the
majority of our customers. - No, I think we're
gonna see this, Warren, around probably community solar, low income housing projects, that may wanna go solar,
that sort of thing. And that wouldn't be, you know, it's not a residence in a low income area. It would have to be a multiunit residence, you know, an investor
owns it or something, and they're gonna apply for, you know, these 500 units are gonna,
we're gonna put solar there. - Yeah, yeah. - So, yeah. - Super, all right, now
let's t
alk about direct pay. - Yeah, that's, I mean,
it's a really nice feature. Direct pay allows nonprofits primarily, to capitalize on the ITC and
before nonprofits couldn't, they always had to have third party owners and go that route. Direct pay gives 'em the ability
to receive that money back from the government. Now, the tricky part about that is timing. You have to register your system, and then you have to file Form 990 which is typically filed in May, like halfway through May of the following
, if you're on a calendar year, it's filed, and then you're gonna wait possibly a year for the IRS to refund you the money. So if you build your
system early in the year, you're gonna wait until the following May, and then you may wait another year. So there's gonna be this
window where you're gonna need to finance in some way
that 30% tax credit, or it could be 40% or
the adders apply to this. So if you can get the adders, it's a windfall for nonprofits. They just have to be
prepared to handle
that. You know, the installer's
not gonna wanna wait two years to receive payment. - Get paid, yeah. We actually recently did, and we'll link to this in the
description below as well, a webinar with Collective Sun, who have two financing
options to structure this, to cover the direct pay
piece of it as well. - They do and Collective Sun's
had some great webinars too. I mean, they've done it an
outstanding job in my mind of explaining some of
these features of the IRA. - Yep they really have. All
right and then finally, the last piece is the transferability or the ability to sell the tax credits. - Yeah, so we were just, actually, before we started recording this, we're talking about
whether residential ones can be transferred. As far as I know, they cannot. - Okay. - I understand it's under the 48C, which is the commercial side of this. And the key with transferability
is how does it work? - Right. So a system would have to be registered. We know some of the principles,
some of the con
cepts, but we don't have a process
for registering the system yet. So you'd register the system, you'd get a number, registration number. That would follow the tax credits to whoever buys the tax credits. Based on our conversations
with other organizations that are looking at ways
to create brokerage firms or something for this, it's gonna be, it's gonna start out only with very large systems. - Okay. - I think it's gonna be
difficult to connect the buyers and the sellers for any smaller systems
due to the admin costs involved, the administration costs involved with creating this transaction. It could be an expensive transaction. - Sure, and the marketplace, not only does the
marketplace not exist now, but there's still risk on the person who takes the tax credit
once they sell it, correct? - Yeah, I mean, the recapture
risk goes with the buyer. So if some system owner does something that creates a recapture
situation for the person who bought the tax credit, they're liable. And there'
s a thought out there that there'll be an insurance
platform that comes up around that to insure buyers against that. I don't know what that's gonna look like, but there is a recapture risk
to the buyer of a tax credit. So, yeah, and tax credits
can be sold in slices. You could, if you have a
really large tax credit, you could sell it to three
buyers, for instance. - Correct, yep. - But then recapture risk would
go with all three of them. - Correct, you can't break it
up though and sell the adde
rs, you have to sell the whole tax credit can be broken up in its entirety. - Yeah, you have to think about
it kinda like a pie, right? The whole ITC is the pie, and that includes any adders that gonna, and you're gonna, you can
sell a slice of that pie. - Right, and also you can't
sell it to family members or any common ownership businesses. You can't do the. - [Dale] Can't be a related party, right. - Correct, here at the
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