Shedding light on types of federal funds and energy upgrades

The types of qualifying buildings:

• Retail
• Office
• Industrial
• Warehouses
• Government-owned (city, state, or federal) buildings, including schools, airports, town halls, and state colleges, etc.
• Apartment buildings greater than four stories.

A typical example of an 8,825 m² (95,000 sf) warehouse lighting upgrade:⁴

• Cost of a LED upgrade: $63,000.
• Utility rebate: $24,000.
• Total cost (after utility rebate): $38,000.

Retrofits can qualify by demonstrating a 25 percent decrease in energy use intensity (measured in BTUs) compared to the pre-retrofit building. A qualified retrofit plan is required, and the building must have been in service at least five years before producing this plan. The deduction must be taken in the year of its final qualifying certification.

The revised tax code offers a strong incentive to stretch energy efficiency in new buildings and modernize existing buildings. In new buildings, it incentivizes more detailed design and the most advanced control options. In existing buildings, it incentivizes a wide range of lighting and advanced control options that, when coupled with available utility rebates, can substantially reduce initial cost, which remains the largest inhibitor to investment in reducing operating costs via energy efficiency.

Funding opportunities

Building-related tax incentives make up for about 14 percent of the total clean energy-related resources in the IRA. The IRA provides many tax credit opportunities, even for tax-exempt organizations. In addition to these tax credits and the IRA’s changes to section 179D, organizations have other sources to help offset the costs of energy upgrades, new construction, and renovations. The following are a few funding opportunities from both the IRA and IIJA, broken down by tax-exempt and/or for-profit options.

Applicable to both:

• Greenhouse Gas Reduction Fund provides grants to support technical and financial assistance to reduce greenhouse gas (GHG) emissions, functioning essentially as a national green bank. The U.S. Environmental Protection Agency (EPA) will administer this $27 billion program, and funding runs until September 2024. The fund sets aside $15 billion, specifically targeting low-income and disadvantaged communities.