Acquiring solar energy assets offers strong risk-adjusted returns and substantial tax savings due to accelerated depreciation, government-backed tax credits, and long-term cash flow. By leveraging these financial benefits, eligible investors can maximize their returns, preserve more of their wealth, and contribute to the clean energy transition.

The Investment Tax Credit (ITC) is a federal tax incentive that allows you to deduct a percentage of your renewable energy system’s cost from your federal taxes. Under the Inflation Reduction Act, the ITC remains at 30% for solar systems installed between 2022 and 2032.

The ITC bonus adders refer to additional tax credits available under specific conditions that increase the total value of the ITC. These adders include:

• Domestic Content Bonus: Provides additional tax credits for solar projects that use a specified percentage of U.S.-made materials. Projects that meet the domestic content requirement can receive an additional 10% credit on top of the base ITC.

• Energy Community Bonus: Provides additional tax credits for projects located in designated energy communities, which are areas that have historically relied on fossil fuels for employment or have been adversely affected by the closure of coal mines or power plants. Projects in these areas can receive an additional 10% credit on top of the base ITC.

• Low-Income Community Bonus: Provides extra incentives for projects serving low-income communities or on Indian land, potentially increasing the ITC by 10% or 20%, depending on the specific criteria met. Note that this adder must be applied for and approved by the Department of Energy before receiving the adder.

Reference: Inflation Reduction Act, Sections 13102 and 13103; 26 U.S. Code § 48 - Energy credit.

The Inflation Reduction Act (IRA) of 2022 is the most significant climate legislation in U.S. history, containing hundreds of billions of dollars in funding, programs, and incentives to accelerate the transition to clean energy, reduce healthcare costs, and increase tax revenues.

A carryforward strategy helps optimize future tax planning, while a carryback strategy allows you to claim a refund on previously paid taxes. Carrying tax credits forward or backward ensures you maximize tax benefits when your liability isn’t high enough to use all tax credits in a given year.

According to the U.S. Department of Energy, unused tax credits from your solar project can be carried back up to three years or forward for 22 years for projects placed in service in 2023 or later. After this period, half of any remaining credit may be deducted while the rest expires.

If your solar project generates more tax credits than your total tax liability in a given year, you can apply the excess to taxes paid in the previous three years—potentially resulting in a refund. Any remaining unused credits can be rolled forward for up to 22 years, allowing you to offset future tax liability, especially if you anticipate higher taxable income.

A Power Purchase Agreement (PPA) is a long-term agreement between a solar project developer/owner and an off-taker (i.e., customer) where the developer or owner installs, owns, and operates a solar energy system on the customer's property. The customer agrees to purchase the generated electricity at a predetermined rate for a specified period, typically 10-25 years—plus a potential extension period beyond the initial term. This arrangement allows the customer to benefit from solar energy without the upfront costs and responsibilities of system ownership.

Reference: Department of Energy, "Guide to Solar Power Purchase Agreements."

Impact investments aim to deliver compelling financial returns while driving measurable social and environmental benefits. We align our investment themes with their eligible ITC bonus adders and community solar benefits. See our impact investment section.