Energy Policy Expert Talks Tax Credit Successes, Future Expansion

Leslie Chang, director of strategy and policy at Caelux — a builder of perovskite solar cells — was involved in advocating for certain solar-related green energy tax incentives included in the Inflation Reduction Act (P.L. 117-169). Chang spoke with Checkpoint on how investments in new energy projects have grown in the two years since the bill’s enactment and work still yet to be done.

This interview has been edited for length and clarity.

Checkpoint: Can you tell me about your role in the drafting of solar tax incentives in the Inflation Reduction Act?

Leslie Chang: So I’ve been involved with the Solar Energy Manufacturers Coalition for America since late 2021 and back then, we were pushing for what ended up being the Code Sec. 45X tax credits. It was originally a standalone bill, and then it was part of the Build Back Better plan. We actually played a part in crafting the language that’s in the Inflation Reduction Act right now around tax credits for thin film solar manufacturers.

Now that it’s been passed, we’ve been working very closely with the IRS in terms of understanding what implementation and guidance should look like. The IRS and Treasury have indicated that this is an ongoing process, so we’re hoping to continue to stay pretty much in lockstep with them. They navigate the legal challenges, and we also navigate implementation and figuring out what that looks like.

CP: How have the credits been put to use in the last two years as the IRS continues to drip-feed guidance on the different Inflation Reduction Act provisions?

LC: Where we’re at today is we’re seeing the Inflation Reduction Act working. There are so many companies that have made commitments to either expand manufacturing sites within the United States or expand their current operations. That’s just not something we would have seen two years ago. Even here at Caelux, we would be an overseas company if it weren’t for all the different tax credits that were available to our investors. The tax equity pool has just expanded so much, and we’re really starting to see the benefits of that, just in terms of seeing those dollar commitments come in.

Moving forward, what we need to continue to do is to work with Treasury and, frankly, continue working with politicians, to think about how we can make sure these tax credits continue to work for us. We’re two years in already — manufacturing takes a lot of time. Building out a lot of these sites is going to take not a one- to two-year time frame, but a five- to eight-year time frame. And that takes us ever closer to 2030 when a lot of these tax credits expire. So if we want to think about ways in which we can actually utilize these tax credits, it means working very closely with Treasury now, but also thinking about whether or not there could be expansions within the Inflation Reduction Act or in maybe a new energy tax bill coming up soon.

That, of course, is dependent on the administration that comes in come January, as well as the composition of the House and the Senate. So there are a lot of things at play here, but I do think the Inflation Reduction Act is here to stay. The main question that I have looking forward as someone who looks at strategy and policy is whether or not there are going to be opportunities to expand it to ensure that that investment pool stays attractive.

CP: Is there an example of a part of the country where investment is really growing?

LC: Georgia is the first one that comes to mind. They’ve been leading the charge in terms of securing the battery belt for quite some time. They’re creating an environment where it’s very attractive for businesses to come in. The same can be said for North Carolina, also a state that you would think of as red, but they’ve created a lot of conditions under which it’s possible for energy companies to come in and take advantage of both Inflation Reduction Act and local tax credit opportunities.

Some 18 or so representatives sent a letter to Speaker Johnson requesting that any consideration being made to Inflation Reduction Act consider the tax credits that have already been put in play. And it essentially requested that if we’re going to address the Inflation Reduction Act, let’s not touch what’s already been put into the ground, because so many of the red states are benefiting from it. So even though it was a really partisan issue, passing it with Vice President Harris casting that deciding vote, both red and blue states are reaping the benefits. And two years in, it’s already been made very clear to communities on the ground and the representatives the benefits of these energy tax credits.

Looking ahead, really trying to focus on tax credits as carrots is going to be key for helping us continue to move forward decarbonization efforts, even if we don’t call it decarbonization.

CP: What has been the impact of the direct pay and transferrability options of the credits? How popular are they with taxpayers in these industries?

LC: What we’re seeing is that having these provisions in the Inflation Reduction Act is significantly de-risking projects for investors. It’s not only thinking about boosting project returns, but it’s thinking about ways in which the government is essentially providing an assurance that these projects are worthy investments, both from a federal strategy perspective and also from the perspective of trying to create a competitive energy marketplace. And that’s really the narrative that the federal government is pushing, that we want to attract investment. When we’re talking to our investors, this is something that they’re looking at.

CP: How has the online experience been with applying for and claiming these credits, like the IRS’ online portal?

LC: I think the process itself has been easy to navigate. Where there may be opportunities is for the IRS to make it more well-known that these resources are available. Once you find it and you go through it, it’s pretty straightforward. But I would bet that companies that are just now starting up or just now thinking about how to utilize these opportunities may not know about the entirety of what’s available to them. One area for improvement is thinking about ways in which the IRS could work with the Department of Energy, for example, or implementing organizations such as nonprofits, to make sure that businesses and startups of all sizes could benefit from this.

I do appreciate that the online portal has allowed everybody to provide a voice into the guidance crafting process. I think being able to know that the comment that you’re providing is going to be directly addressed by Treasury is very positive for that private sector/public sector engagement. But again, making sure that everybody can contribute to that is going to be very important because we don’t want it to skew only towards bigger corporations who have the financial means to be able to do so.

CP: Where are some areas the IRS could issue more guidance?

I think both Code Sec. 45X and Code Sec. 48C, because both of these are related to new buildouts. I would love to see an effort between the Department of Energy and the Department of Treasury, for example, around bringing together stakeholder voices to inform that process.

For us as a small manufacturer, we’re seeing the struggles of trying to start a manufacturing facility, trying to create a domestic supply chain, and implementing all of what’s been passed in real time. We’re seeing a lot of these challenges come up.

There’s going to be continued questions around the onshoring of jobs and the supply chain, where we’re sourcing all of these different materials from. I think that conversation can be used as an opening for any sort of additional tax credits as well. That’s a message that resonates across both sides of the aisle. That’s something that is going to continue to put the us on the map to both energy dominance and energy independence. So that’s the angle that we’re going to be trying to push for, trying to make sure that the whole value chain is built right here in the United States, and doing what we can, from a tax perspective, to encourage that.