The Inflation Reduction Act is Lowering Energy Costs for Arizonans

The Inflation Reduction Act has positively impacted millions of American households and businesses since its passage two years ago. In addition to lowering health care costs and making corporations and the wealthy pay more of their fair share in taxes, the Inflation Reduction Act was a historic investment in clean energy and a huge milestone in taking action on climate change. In particular, the law has multiple provisions that help families and businesses make energy efficient upgrades to their homes or businesses and to invest in clean energy. This helps households and businesses save money on these upgrades and reduce energy costs in the long run.

The clean energy provisions of the Inflation Reduction Act include the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit. The Residential Clean Energy Credit allows for homeowners to receive a tax credit that covers up to 30 percent of the cost of installing zero carbon clean energy sources, such as solar electric panels and wind turbines, and can be utilized until 2034. The Energy Efficient Home Improvement Credit provides tax credits for energy efficient home upgrades and appliances. This tax credit includes up to $1,200 a year for home improvements such as energy efficient windows and doors and upgrading a home’s insulation. There are special credits for up to $2,000 for electric heat pumps that improve the efficiency of heating and cooling systems. Homeowners can also get a credit of up to $150 to have an energy audit of their home with an inspector to evaluate what energy efficient improvements can be made. In 2023, over 3 million households across the country used the clean energy credits in the law, saving upwards of $8 billion in energy costs.

In Arizona, tens of thousands of households and businesses have taken advantage of the clean energy provisions of the Inflation Reduction Act, saving thousands of dollars a year on energy bills and protecting themselves from changes in fossil fuel prices. Arizonans currently have some of the highest energy bills in the country. On average, Arizonans spend about $134 a month on their energy bills, increasing up to $235 during the summer months. This is where a few provisions of the law can be particularly helpful to Arizona families and businesses. In 2023, over 88,000 Arizona families received more than $285 million in tax credits for energy efficiency and clean energy upgrades to their homes. The amount claimed for clean energy tax credits in 2023 is expected to increase, as more tax returns are filed and processed. 

Arizona has been one of the top states where homeowners are utilizing the Residential Clean Energy Credit. Homeowners in the state received about $244 million in credits in 2023. These tax credits include the installation of solar panels and battery storage, something many homeowners in Arizona have utilized, especially as there is no sales tax on solar panels in Arizona. Installing solar panels and storing the energy captured from solar in batteries allows for people to take full advantage of the sunshine and light the state gets. Nationally, over 750,000 households installed residential solar in 2023, and households with solar see median savings of $2,230 a year on energy costs. These thousands of dollars saved by using solar energy go an especially long way in Arizona, given the high cost of energy in the state. 

In addition, there are tax credits in the Inflation Reduction Act to cover 30% of community-based solar projects. Community-based solar projects are solar projects in a certain area that allow for a variety of people such as businesses, households, and organizations to use the energy drawn from the solar energy project. This lets groups and households who are not able to install their own solar panels benefit from solar energy production by purchasing a share of the energy produced, with additional credits for projects on affordable housing units and in low-income communities.

Alongside clean energy tax credits, the Inflation Reduction Act includes rebates for making energy efficient upgrades to homes. These rebates are for the installation of energy appliances such as stoves, ovens, dryers, water heaters, and more. The rebates are tied to income, with 100% of the costs covered for low-income households and up to 50% covered for middle-class households. Homeowners can get up to $14,000 in upfront savings for the purchase of high efficiency appliances meant to replace less efficient gas appliances. There are also grant funding programs in the law aimed at helping state and local governments update their buildings to newer and more efficient building codes, which could save the average new Arizona homeowner over $400 a year in energy costs.  

Despite the benefits they have provided to Arizonans, the Inflation Reduction Act’s cost-saving benefits for Arizonans are under threat. The Republican Study Committee’s proposed budget for fiscal year 2025, for example, would repeal the tax credits and rebates offered by the law for clean energy and energy efficient upgrades. This would put a stop to the savings that millions of Americans have already benefited from as they work to make upgrades to their houses and businesses. Beyond monetary savings, these tax credits increase climate adaptability across the country and allow for households to keep up with improvements in energy technologies. 

Overall, the clean energy and energy efficiency provisions of the Inflation Reduction Act have been incredibly beneficial for households and businesses. These provisions of the law not only save Arizonans money each year, but they work towards a future where the state is more energy resilient, a necessity as climate change impacts the state and contributes to rising energy costs.