 Hawaii, the state of clean energy. I'm your host, Mitch Ewan. Our underwriter is the Hawaii Energy Policy Forum, and that's a program of the Hawaii Natural Energy Institute. I'm very pleased to welcome our guest, Adam Strubeck, who's a graduate assistant with the Hawaii Energy Policy Forum. And we're gonna be talking story today about money. That'll get everybody's attention. Basically, how you, you listeners out there, to save thousands of dollars using federal tax credits. And that's all coming to us by the 370 billion, that's billion with a B, Inflation Reduction Act. So Adam has done us a real favor. He's read through all this stuff. He's done the heavy lifting of giving us a top level breakdown of the act to educate us on the specific opportunities. And this will be also useful to your tax accountants as well. So Adam, welcome to the show. Aloha. Aloha, Mitch. Thanks for having me on. Always a pleasure. Right. So let's jump right into it and pull up the slide in the second slide and tell us a little bit about the Inflation Reduction Act. I'm not sure if that's a misnomer, not 375 billion. Sounds like a lot of money is not kind of a reduction of anything, but go ahead. Yes. So I know we've talked about before how the Inflation Reduction Act is a huge source of funding. It may not be the most aptly named act given that we haven't seen inflation directly come down yet. But I think given all the things that are involved in it, the purpose is for making energy and consumable goods cheaper for your average American. So who knows, maybe it will accomplish some of that and we can get into the ways in which it's making energy and energy property cheaper for people. I can go ahead and just read the quote that I pulled out on this slide, which is the Inflation Reduction Act of 2022 is the most significant climate legislation in US history, offering funding programs and incentives to accelerate the transition to a clean energy economy and will likely drive significant deployment of new clean energy resources. And then the key part, which I've underlined here is that most provisions of the Inflation Reduction Act of 2022 became effective on January 1st of 2023. So when all the news broke last year about this act, we are still waiting for all of these programs to kick in. But now that they have, we can go through them in a little bit more detail and explain to the listeners what's going on. So I think the value of this program is that people haven't already invested in these programs before January. Now you have a chance to plan your expenditures. And it's not just a one-year deal. I mean, this goes on for, I think, 10 or 12 years. I mean, you've got to work through a lot of projects to burn through $375 billion with a B-dollars. So here's a chance for you to get smart on this opportunity, plan ahead, and get together with your tax account. And I'm sure your accountants don't know too much about this. So it might be a good idea for you to help them out and we'll give you a link of how they can get smart on. Yeah, and one thing I think is important to distinguish as well is that there's a lot of programs that are catered towards businesses, but then there's all, or municipalities or local governments, but then there's also programs that are targeted towards individuals. So that's something that we're gonna be going over today is the specific incentives for your average everyday person who may not know a ton about clean energy or the movement towards a decarbonized economy, but they are still able to benefit by using these tax credits. So the Inflation Reduction Act consists of grant programs, loan programs, rebates, incentives, and investments. And this just really means that there's a bunch of different ways to take advantage of the overall policy, which is the Inflation Reduction Act. So it does cover a wide range of alternative energy projects, home investments, even things that don't directly use energies such as home efficiency credits. So really it is, it can be a little bit daunting when you just see the whole document because the whole thing is like 1,000 pages or something crazy like that. But it's because it's in all of these different sections because it covers so many different programs. And then when you add all of those things together, that's how you eventually get to the $370 billion. Right? Well, let's go on to the next slide, which will inform us a little bit on how you can get more of the details. And this is something that you should tip your tax account yourself with. So go ahead, Adam, before I steal your thunder. Thanks. So to make it a little bit easier, I think on everyone that's trying to comb through all of this policy, the administration, the White House has created guidebooks sort of for interpreting all of the language and complexities requirements that are in the act. And so that's how they've arrived at this guidebook to the Inflation Reduction Act's investments. And this is published on a new website that I think we've touched on in prior episodes, but that's publiccleanenergy.gov. Hey, there we have it. Yep. Let me make that quick. Sorry, go ahead. I just want to make a little plug that if you haven't had a chance to write it down, it'll appear on Think Tech Hawaii website and the Hawaii Energy Policy Forum website. The slide deck will be up there, so you can gather it. I got that information there. So go ahead before I rudely interrupt to do that, Adam. No, no problem. What's also great about this website, cleanenergy.gov, that I found is they have different scenarios that you can follow. So if you say they have someone oh, making over $100,000 a year household income, then oh, these would be the programs that correspond. But then there's other scenarios, like if it's a family of four that's making a lower income, there's even more programs that are available to them. And there's different programs for home owners versus renters and things of that nature. So the website does a good job of not making it too difficult to find out which programs that you qualify for. So it was interesting to see that renters are not excluded from this as well. There's normally renters, they get the short end of the stick because they're renters and the landlords kind of scoop it all up. So it's really good to see that renters have a play on this money as well. This shows kind of an overview of the individual credits, which we'll be discussing today. And those include the investment tax credit, the new clean vehicle credit, previously owned vehicles, alternative fuel refueling property, and then the energy home efficiency improvements and the residential clean energy credits. Interestingly, what's the major one that's been left off this list is the production tax credit. So probably the two main tax credits in the Inflation Reduction Act are the investment tax credit or ITC and production tax credit or PTC. But most individuals aren't producing enough energy to qualify for the production tax credit. So where they can save a lot of money is by the investment tax credit. So if you're buying solar panels for your house or other things like that, that would be qualified under the investment tax credit. The production tax credit is more so for entities that are producing a large amount of energy like maybe a hydrogen plant or a big solar farm, something that's not really on an individual but more of a corporate basis. So like I mentioned, the investment tax credit, handles renewable energy generation, but then also heating, cooling and lighting. So this isn't just how you power your home, but it's also home improvements that may save you energy on lighting or heating or cooling. So these would be properties or pieces of property, I guess that would qualify for the investment tax credit. And then how it works is that there's a base credit of 6%, but then there's a multiplier based on labor standards, which are pretty common practice. So it's pretty much assumed that the credit will be around 30%. And then what's interesting is there's this energy community bonus of between two and 10%. And this is something that is new to me and I think is new to the Inflation Production Act and that's these energy communities. So there's a link in the bottom corner of where you can find this map. But basically this map is a GIS website that shows you which communities qualify for this energy community tax credit bonus. And you can see that the whole island of Oahu qualifies because we had a coal plant that shut down here. So all communities that are adjacent to where a coal plant has shut down in the past 20 or so years, I think it is, are considered energy communities. Well, you know, they had a coal plant, I mean, they were burning coal on the big island at one of the sugar plant stations inside and also on Maui at the HCNS. I don't know if that would qualify. And I'm not sure about Kauaii too, whether or not they were burning coal. I don't know if you can put the right spin on it. I think it's because they set a certain time and said that the coal plant had to have been shut down after a certain time. So I don't know if maybe those plants on the other islands had been shut down too long ago to qualify for the sort of credit. But looking at the map, it was just Oahu that was highlighted. But yeah, one thing that was new to me was these energy community tax credit bonuses. I'm not 100% sure how they distinguish between the two and 10% bonus, but I think it might be if you're in the community versus adjacent to the community. So maybe if you lived over near Campbell Industrial Park, you would get a higher percentage. And then the whole city and county, which is the island of Oahu would qualify as an adjacent census tract. So that was talking about a new vehicle, for all those up there that wanna buy a new car. Yes, so this was one of the ones that I mentioned is somewhat income-based. So I believe you have to have an income less than $150,000 a year. And then the credit itself is split into two components. So one of them is a credit based on critical minerals that have been identified and are present in these new clean vehicles. And then another one is based on the battery components. So I suppose if your car was missing one of those things, then you wouldn't be able to qualify for maybe part of it. But in total, it's $7,500, which is the value of the credit. There is a stipulation that the vehicle must be assembled in America. So I don't think it necessarily has to be an American company, it just has to be assembled in America. Of course, with how global our supply chains are, a lot of components are assembled various places and then shipped here. But I think it's just the final destination of where the car is assembled has to be in America. And also in addition to the income requirement, there's also limits on the MSRP of the car. That's $55,000 for regular cars, but then Vans pickups and SUVs, it's $80,000. So I'd be interested, I don't know if you know this, but if the new electric cars are coming out, are kind of tailoring their MSRP to fit within these requirements, you know what I mean? Yeah, right, well they are, of course. But anyway, all the local car dealers should be on top of this. And I understand there's a lot of electric vehicles available now, because the update hasn't been as much as they were hoping. So I guess there's some deals to be had. Yeah, and then the final stipulation with this one is that it has to be placed in service within 2023 and 2032. So that's just meaning that this credit will be available for the next 10 years or vehicles that are producing the next 10 years. All right, so what about rental cars? Or not used cars, sorry. Yeah, this is one I think has been somewhat overlooked because you don't hear about tax credits very much for previously owned vehicles. This one's a little bit different in that your income has to be less than $75,000. And then the credit itself is the smaller amount of $4,000 or 30% of the sale price. So you can't buy a car for five grand and then get a four grand tax credit. It could just be 30%. So that's smart. And then yeah, part of this is also the battery component requirement, which is pretty technical, I don't really understand. So I would recommend if people are interested, they read this guidebook because it's very informative. Another interesting part of this credit is that the vehicle must be sold by a dealer, which I thought was interesting because it seems like a lot of used cars get sold just in between individuals. So I guess if you were to just sell your car to someone, they may not be able to qualify, it would have to go through a used car dealership. So I don't know if you would get stuck with fees that would exceed the cost of the credit in some cases going through a dealer, but I'm not sure. And then the sale price of the car must be $25,000 or less. And then the same as the new vehicle credit, the vehicle has to be placed in service from 2023 to 2032. So that's interesting because previous electric vehicles that were created before 2023 wouldn't qualify for this credit. So we probably won't see this credit really being utilized until 2023 vehicles start to get sold on the used car market. I'm not sure if you need lease on electric vehicles, I'm not sure. I'm sure you could, but then you'd have to figure out your charging infrastructure as well because I think that's, like for example, I live in an apartment. So I don't think I'd be able to really utilize an electric vehicle because I don't have the charging network available at the current place. Yeah, you'd have to go somewhere else to charge a vehicle like the Safeway store or whatever. I noticed like at my Safeway that the slots are always filled with somebody charging their vehicles. They're highly used, which is, I guess there's an advantage for attracting people through the store. You get to charge for free if you shop at the store. You know that? Yeah, that is a good example. It is free, it's a heck of a deal. So it attracts people to the overall mall or whatever, there's various businesses that can support that. So let's go on to the next slide. Great, so this one is the alternative fuel vehicle refueling property credit, which is kind of a lot to say, but this deals with what we were just mentioning, which is things like charging infrastructure. So if you did want to get an electric car, you'd probably also need to buy the charger for it. And this tax credit covers those kinds of purchases. Interestingly, it also expands to not just electric recharging, but alternative fuels include ethanol, natural gas, hydrogen, biodiesel, and others. I'm not sure what the refueling property for those alternative fuels really looks like or how much it costs. Maybe you have some insight for the hydrogen refueling equipment. Yes, it's going right to about two to two and a half million dollars, but it depends if you're just dispensing hydrogen and you're bringing it in, that's one cost. But if you're actually producing the hydrogen on site with an electrolyzer, that's considerably more. So it just depends what kind of a setup you have. And we haven't got there yet. There's only one commercial station at Hawaii, and that's at the surf boat over in Mapuna Puna. And then my hydrogen station on the big island is the only current one. But it's not there for the general public. It's there to support the mass transit agency. The Hickam station is currently not being used. It's shut down, but I understand the plan is to recommission it going forward. But once again, that's on a military base, so it's not really available to the general public just to come in there. So there's only one station that's really available to the public, and that's the surf boat station. So we have a long way to go in getting the infrastructure in place. Also, the state of Hawaii has the tax credit, I think it's up to $200,000 to support installing new hydrogen stations here in Hawaii. That's the state tax credit. That's something I've noticed with reading these IRA policies is that they're kind of anticipating this stuff to become available in the future, even though it's not available right now. So that's kind of why I think the language is being so inclusive of alternative fuels is that maybe in the next 10 years, they're expecting these technologies to be more widespread for individuals. Well, they want to incentivize that business owners will eventually say, hey, I can make money at this, but then they'll be, you know, then the handoff from government subsidies to the business owners because, you know, when the businesses make money, then they'll invest. Otherwise, it's kind of a big ask to ask the business put up all that upfront money. So for example, surf boat, you know, they spotted that station out of their own hip pocket. It was a really big investment on their part and, you know, really forward thinking. So they made a heck of a contribution to certainly the hydrogen side of the house. I think we pretty well finished with vehicles and now we're on to the whole. Yes, so this next one is the energy efficiency home improvement credit. And this is one of the ones that I mentioned is available to renters in certain instances, but is mostly catered towards homeowners. So this credit would cover 30% of the cost of doing a whole list of activities to improve the energy efficiency of your home. And then there's limits for each type of improvement that you can do. So maybe this is where like the CPAs, I think, come in to play because you could spread out your home improvements over a number of years. So you could make sure that each year you're getting the tax credit for improving the energy efficiency of your home. In your reading, what kind of relief does there are incentives on it for renters? That's mostly based on the appliances in the home. I'm not 100% sure how it works because at least in most cases, it feels like the landlord's still responsible for purchasing the appliances. I think it's aimed at reducing like the electricity bill that renters would be paying because renters are still responsible for their electricity costs. So if you can work out maybe something with your landlord to make home efficiency improvements, say like your washer or refrigerator or stove top is a big one, then you could get a credit for that and your monthly energy bill would be reduced. So the next slide gives a little bit more detail on kinds of home improvement that can be funded. Yeah, so it primarily deals with what in the text is called energy property. But this really means like heating and cooling equipment. And then the limit on that is $600 a year. And then for windows, it's $600 a year. Doors, there's $250 per door up to 500. So two doors, I suppose. I'm not a trustee, I'm just kidding. And then the big one, I think perhaps most important one is heat pumps. There's like a big push by this administration to get as many heat pumps out there as possible because they're kind of a carbon neutral solution because they save energy regardless of if it's clean energy and or fossil fuels. So as we transition away from fossil fuels, they'll still be running off of the renewables and saving energy regardless. Yeah, it's pretty much interesting. Okay, let's talk a little bit about residential clean energy credits. Yes, so this one I think is primarily geared towards energy storage, meaning batteries. So these, this property or this credit is aimed at battery storage capacity with at least three kilowatt hours. And then the credit is 30% of the cost of equipment to through 2032. And then the credit starts to reduce after that. So it's 26%, 2033, 22%, 2034. And this one I wanted to highlight is new to 2023, so that's I think why we wanted to talk about it on the show today. Well, HECO or NTI has a program for battery storage that they come out with. So I'm wondering if some of these credits will be going towards that as well. Yeah, so I just wanted to include kind of a quick example, home renovation that someone may undergo, just to get a sense of how much of a percentage the credits would cover. So in this example, someone's getting a new electric vehicle, a photovoltaic solar system, a battery storage system, and they're also making energy efficiency improvements. So you can see the costs I've given for this example and then the subsequent credits. So in this case, the total cost is $88,000 and the total credit you would receive is $19,500, which is around 22%. And I think you've been mentioning some state programs as well. So this is just the Federal Inflation and Reduction Act credits. So I think if you were to calculate the state programs as well, it probably put you around like 25 or 30% slightly higher. Well, we're pretty well at the end of it. So let's just pull up the last slide so you can see how I can contact Adam. This is an email address up there. And this slide deck will be presented on the Hawaii Energy Policy Forum website. So you can see it. And also, of course, I think that will be why we'll be running it. Well, anyway, we've come to the end of our time. So we're gonna have to wrap it up here now. So you've been watching Hawaii, the State of Queen Energy on Think Tech Hawaii, and talking story with Adam Strubeck, a graduate assistant with the Hawaii Energy Policy Forum. So today we've been talking story about the significant tax credits available to you, our audience, from the $370 billion with a D Inflation and Reduction Act. So this slide deck, as I said, will be available on Think Tech Hawaii and the Hawaii Energy Policy Forum. Thank you, Adam, for doing all the heavy lifting and identifying the funding available to our viewers. I know it must have been a lot of work to work your way through that, to kind of simplify it. And thanks to our viewers for tuning in. I hope you found this informative. Please share it with your friends and your tax accountants. So I'm Mathew and we'll be back in two weeks with another edition of Hawaii, the State of Queen Energy. Aloha, everyone.