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A Clean Energy Future for America's Colleges and Universities

In January 2024, Treasury Secretary Janet Yellen visited Roxbury Community College (RCC) in Boston, Massachusetts where she toured the school and learned about its ambitious clean energy projects. RCC has built a novel “tri-level renewable solution” on its campus. A system of geothermal wells circulates fluid deep below the ground to cool the facility in the summer months. These wells sit below a parking lot with electric vehicle charging stations. And above the parking lot sits a canopy of solar panels that generates energy for the campus.

For years, higher education institutions have been investing in clean energy projects like these, doing what they can to lower utility bills and combat climate change. President Biden’s Inflation Reduction Act (IRA) is helping to accelerate the pace of clean energy investment. The law supports these investments by making many higher education institutions that are not subject to Federal income tax eligible for clean energy tax credits for the first time.

Past Projects

Students, faculty, and administrators across the country have taken major steps to drive clean energy adoption at colleges and universities. Here are a few examples:

Elective Pay for Colleges and Universities

Elective pay (also known as “direct pay”) is a new feature of the IRA that allows many institutions that do not owe Federal income tax like colleges and universities to take advantage of certain clean energy tax credits. To use elective pay, applicable entities such as colleges and universities with eligible clean energy projects would complete a pre-filing registration and file a tax return with the IRS. The IRS would then directly pay the entities the value of the tax credit.

For example, production tax credits (PTC) and investment tax credits (ITC) can help fund clean energy projects through elective pay.

  • The PTC provides up to $27.50 per megawatt-hour in 2022 dollars (adjusted for inflation annually) for qualified clean electricity produced and sold if prevailing wage and apprenticeship requirements are met. The ITC provides a one-time 6% credit for a qualified investment, with potential to increase to 30% if prevailing wage and apprenticeship requirements are met. Small projects with a maximum net output below one megawatt of alternating current may be eligible for the prevailing wage and apprenticeship bonus without meeting these requirements. A Notice of Proposed Rulemaking and FAQs have been released for this bonus provision.
  • Additional bonuses are available for projects that meet domestic content requirements by using qualifying amounts of steel, iron, and manufactured products made in America. The IRS published guidance in May 2023 about the domestic content bonus and additional guidance in December regarding projects beginning construction before 2025. 
  • The law also includes place-based bonuses for qualifying projects located in energy communities. This includes communities that have been at the forefront of energy production and have been hit hard by the decline of fossil fuel industries, such as coal communities.
  • The Low-Income Communities Bonus Credit Program, established under § 48(e), provides an additional bonus credit of 10 or 20 percentage points to the ITC for projects for underserved communities. For example, colleges and universities located in low-income communities or on Indian land could potentially qualify for this bonus credit program. Note that this bonus provision is an allocated credit and entails an application process administered by the Department of Energy. Final Rules and FAQs have been released for this bonus credit program.

Elective Pay for Clean Transportation Infrastructure

The IRA also includes a commercial clean vehicle tax credit, which can reduce the cost of replacing gas and diesel vehicles by up to 30%. Tax-exempt entities like universities and colleges can use elective pay to lower the upfront cost of purchase qualifying commercial clean vehicles, reducing their transportation costs. Savings can be up to $7,500 on vehicles that have a gross vehicle weight rating of less than 14,000 pounds (such as a sedan or an SUV), and up to $40,000 on larger vehicles (such as a bus).

Colleges and universities located in low-income and rural areas can also use elective pay to help fund alternative fuel vehicle refueling property, such as charging stations for electric vehicles

Potential Projects

Elective pay-funded projects could include, but are not limited to:

  • Solar panel farms or rooftop solar
  • Wind farms
  • Biomass renewable energy plants
  • Geothermal energy projects
  • Small irrigation power projects
  • Landfill and trash-fueled energy projects
  • Hydropower, marine, and hydrokinetic power plants, including dams
  • Battery storage projects
  • Electric vehicle charging stations
  • Commercial clean vehicles for transportation, facilities maintenance, and other purposes

Higher Education is Leading the Way Toward a Clean Energy Future

Since the passage of the IRA, colleges and universities have explored novel clean energy and sustainability initiatives and how they might benefit from provisions in the new legislation. Here are some examples of universities with notable active and announced practices on clean energy:

  • The University of California system has installed 55 megawatts of solar panels in over 100 projects and has a number of major energy initiatives announced and in service across ten campuses. These include a clean energy system replacing the natural gas plant at UC Berkeley, and America’s first ever all-electric medical center at UC Irvine. Other initiatives include biomethane collection from landfills and a commitment not to install natural gas heating for new buildings and large renovations.
  • The University of Maryland Eastern Shore, a public historically Black university, has built a 2.1-megawatt solar farm and conducts research on biofuels and sustainability. It has also launched the Green Collar Initiative, a workforce training program with a focus on preparing people in rural areas to join the green workforce.
  • Princeton University is building a large “geo-exchange” system with a ground-source heat pump that will heat and cool its campus. The system uses hundreds of 850-foot bores and a 13-mile network of distribution pipes to transfer heat and water around buildings. The system will save the school millions of dollars each year and regulate temperature for over 180 buildings. The university plans to phase out nonrenewable energy sources such as natural gas, and to achieve net-zero emissions by 2046, the school’s 300th anniversary.
  • Turtle Mountain Community College on the Turtle Mountain Indian Reservation in rural North Dakota is installing a 120-kW solar photovoltaic system and solar air heating at their Career and Technical Education facility. These investments will provide career training for students, save over $1 million, and cut the facilities’ electricity costs in half.
  • In 2023, the University of Michigan placed four new electric buses into service on its Ann Arbor campus. These vehicles will reduce the school’s greenhouse gas emissions, energy costs, and maintenance costs. The school is installing 32 EV charging stations around the campus and plans to add four more buses in 2024. These initiatives are part of the University’s plan to reach net-zero emissions from direct campus sources by 2040.


The Inflation Reduction Act and its elective pay provision provide new and helpful incentives to improve the sustainability of college campuses. Beyond the climate benefits, colleges and universities will benefit from the potential cost savings of many clean energy projects.

In the future, America’s colleges and universities will be largely powered by inexpensive, clean energy. The benefits of elective pay will be felt not only by students and staff on college campuses, but by all Americans, who stand to benefit from a cleaner climate.

Relevant Elective Pay Links