As climate change accelerates, companies are pursuing adaptation and mitigation strategies to reduce emissions and protect against risks. Clean energy solutions, like solar power, are critical to meet the growing demand to decarbonize. This evolution, combined with government mandates and incentives, is accelerating the deployment of clean energy solutions.
The commercial solar market is projected to grow an average of 8% per year over the next five years, and the solar energy market overall is expected to triple during that time.1 Businesses looking to decarbonize can access funding and incentives through federal, state and local government programs, such as tax credits, rebates and loans. Companies that adopt solar sooner rather than later, especially as some incentives near expiration, are better positioned to realize sustainability benefits, cost-savings and increased resiliency. Guided by a strategic roadmap that highlights available regulations, the switch to solar can yield far-reaching benefits beyond clean energy itself.
In this article, we detail a few key incentives available, how they can lower your cost of adoption and reduce tax burden, and steps to start realizing the benefits of clean energy.
Available to U.S. businesses: the Inflation Reduction Act
The U.S. federal government’s Inflation Reduction Act (IRA) is the most impactful climate legislation in U.S. history and has the potential to accelerate clean energy development and benefit businesses with the transition.
This climate legislation set a national target of 100% carbon and pollution-free electricity by 2035. To meet the goal, the IRA is projecting a $369 billion investment into the economy to boost clean energy, clean infrastructure and climate resilience. By taking advantage, your business can access federal support to contribute to the nationwide goal while also meeting your own decarbonization goals.
With qualifying energy upgrades, like solar panels and battery storage systems, your business can receive a 30% tax credit, saving thousands of dollars on clean energy installations. If you do not own your building, negotiating a solar and storage agreement with your landlord can cut energy costs, build resiliency and lower carbon emissions to bring you closer to net zero.
The IRS lists the credits and deductions available to businesses and how to take advantage of them.
Urgency: The IRA extended existing investment and production tax credit programs through 2024. Beginning in 2025, the IRA will replace these credits with the Clean Electricity Production Tax Credit (PTC) and the Clean Electricity Investment Tax Credit (ITC).
The ITC and the PTC are incentives that reduce clean energy costs, encouraging increased investments. The ITC lessens infrastructure expenses, and the PTC decreases production costs based on energy generated. Both credits contribute significantly to a greener economy, but it’s advantageous to access the IRA incentive now to maximize tax savings. Once these incentives are tapped, you can then benefit from the ITC and PTC.
Energy-saving incentives from states, local governments and utilities
Depending on where your company operates, you can unlock additional savings through state and local governments—as well as utilities—through tax credits, grants, renewable energy certificates or other incentives.
Building performance standards
While the IRA offers financial incentives for adopting renewable energy, building performance standards set mandatory requirements for the energy performance levels of existing buildings. New York, for example, implemented one of the most ambitious emissions-reduction plans in the nation, Local Law 97,2 which states that, as of 2024, buildings exceeding 25,000 square feet must comply with new regulations limiting energy consumption and greenhouse gas emissions. Further, more rigorous parameters will be implemented by 2030. The U.S. Department of Energy’s Building Performance Standards map highlights high-level criteria across the country.
Urgency: If your business is in an area with building performance standards, you could be required to make major changes to operations. If you’re not subject to a jurisdiction with a building performance standard, you might see one implemented soon. Take the first step to ensure compliance by performing an energy audit to collect building system and energy information and help identify cost-saving energy and emissions-reduction opportunities, like solar deployment and LED installations.
Energy incentives
Stemming from the Energy Policy Act of 2005 (EPACT), tax credits help transition to clean energy solutions to meet statewide carbon reduction targets and mandates. Some states offer non-refundable tax credits, on top of the federal credit, that stretch over multiple years, which reduce a company’s state tax burden and minimize the upfront costs of a solar installation.
For example, depending on your location, you could save on state taxes or qualify for tax exemptions with the aforementioned ITC. In this case, your business contributes to clean energy while gaining financial benefit, making the investment in clean energy more affordable.
Urgency: Financial incentives are often used to encourage an initial wave of adoption. With many companies already transitioning to clean energy—and the federal government offering its own incentives—state and local governments have fewer reasons to offer credits to businesses for decarbonization. If state tax credits are available to you, be sure to check for program sunset dates or decreasing credit schedules. Work with a reputable partner or complete due diligence to find what’s available to you before time runs out on policies.
Renewable Energy Certificates
Renewable Energy Credits (RECs) are market-based certificates that act as tradable commodities and verify that energy originates from a renewable source. The certificates can be bought to gain the environmental benefits, or emissions reductions, of renewables. Businesses leverage RECs to meet sustainability goals and adhere to renewable energy mandates without investing directly in renewable energy installations.
Some states—such as Pennsylvania, Maryland and Virginia—have programs that allow companies to sell certificates to the utility. Pennsylvania’s certificates, for example, are estimated at roughly 3 cents/kWh.
Urgency: Similar to state tax credits, some states are closing these programs to new participants. For example, New Jersey stopped accepting new registrations in 2020 after hitting its solar energy production milestone. Prompt action will secure competitive REC prices and ensure participation in these potentially short-lived programs.
State and local policies
State cash incentives or financing programs lower the cost of installing solar systems. Many states offer affordable commercial property-assessed clean energy (C-PACE) loans that cover sustainability projects.
For example, Colorado’s program helps building owners finance up to 100% of energy efficiency and renewable energy projects with repayment plans up to 25 years,3 which can easily cover the lifespan of solar panels. California’s Net Billing Tariff, commonly referred to as NBT 3, reduces paybacks for surplus power supplied to the electricity grid4 to incentivize the installation of solar systems with backup batteries to maximize onsite consumption and minimize the amount of energy exported to the grid during the middle of the day.
Utilities sometimes offer incentives in place of statewide programs. In Illinois, commercial customers of ComED utility can receive rebates per kilowatt hour for energy generated and stored.5 Several Texas utilities offer similar rebates on energy generated.
Urgency: State-based loan programs and utility incentives can change quickly. Act swiftly to secure these cost-saving opportunities and avoid missing out on favorable rates and conditions. Be proactive and regularly check resources, such as the Database of State Incentives for Renewables & EfficiencyDatabase of State Incentives for Renewables & Efficiency, to maximize state-sponsored incentives before they change or expire.
Helpful partners to guide your transition
When transitioning to green energy, the right approach is critical to achieve your sustainability goals, shrink your environmental footprint and reduce your tax burden. To take advantage of many programs, the first step is to identify key stakeholders and potential obstacles. Partnering with knowledgeable providers can streamline the process and ensure a successful transition.
Prologis' mission is to support your future-forward progress in reducing carbon emissions. See how we make it easy to access clean energy and increase the efficiency and resiliency of your company. Discover our custom end-to-end solar and storage solutions and how we can help redeem government incentives and tax breaks.
