Featured Stories

The Low-Income Communities Bonus Credit Program: Our Approach to an Inclusive Clean Energy Economy

By Deputy Secretary of the Treasury Wally Adeyemo

Earlier this summer, I toured the RYSE Youth Center in Richmond, California. RYSE empowers young people to engage in service to their community, from economic and health justice to arts and culture. Recently, RYSE started a community-based solar and battery project led and governed by Richmond’s youth leaders. This project will power the center with clean energy technology, transforming it into a dependable resilience hub during any climate or extreme weather emergency.

Over the last year I have seen how communities across the country, like Richmond, are rising to the challenge of combatting climate change. It is clear there is no shortage of creative ideas or talented people. Especially in areas most impacted by climate change, local innovators and community anchors are primed to accelerate our transition to the clean economy. What is instead limiting the ingenuity of these entrepreneurs, small businesses, and mission-driven nonprofits is the lack of resources needed to expand and scale their efforts. 

Thanks to the Inflation Reduction Act, we have the tools to ensure all Americans participate in and benefit from the growth of the clean energy economy. Authorized by Congress, the Low-Income Communities Bonus Credit Program – also known as 48(e) – supports the deployment of renewable energy technology to benefit low-income households and communities. The program provides a significant incentive on top of the existing 30% Investment Tax Credit, allowing the transition to wind and solar energy to be more affordable for families and communities nationwide. Today, we are releasing final rules and procedural information for the 2023 program year. 

The program builds on the President’s economic strategy of driving economic growth from the bottom up and the middle out—creating jobs and spurring growth in communities that have too often been left behind. In line with this mission, when designing the program, we considered the unique needs of those least likely to have access to renewable energy installations and the delivery mechanisms most likely to provide the highest benefit to these communities. So, as part of our design we focused on ensuring companies and nonprofits based in low-income communities are well-positioned to compete for the bonus. We also designed the program to make awards to facilities for which this is a true incentive—not those that would be built even without the bonus. 

Our approach draws directly on Secretary Yellen’s modern supply-side economics framework that investment in underserved people and places can lead to disproportionately higher rates of return. Federal investments like the ones provided by this program will not only promote economic growth, but also help address inequality. With this program, we have the opportunity to deliver transformational technology to vulnerable communities, like the one that RYSE serves in Richmond, ensuring that they benefit from energy cost savings.

Our Approach on 48(e): 

We set ambitious public goals to keep ourselves accountable and to help stakeholders align with our policies. 

Specifically, in line with Congress’ direction, this program seeks to:  

  1. Increase the adoption of and access to renewable energy facilities in low-income communities and other communities with environmental justice concerns;
  2. Encourage new market participants in the clean energy economy; and 
  3. Provide social and economic benefits to people and communities that have been historically overburdened with pollution, adverse health or environmental effects, and marginalized from economic opportunities.

We listened to those most impacted by economic, climate, and environmental inequality.

Treasury engaged with a wide range of businesses, non-profits, and individuals to hear feedback from stakeholders that directly represent or serve the people and places most at risk of being left behind in the transition to a clean energy economy. We read hundreds of comments and hosted roundtables with community-based organizations, affordable housing developers, labor groups, Tribal representatives, rural communities, and those with new business models that aim to serve low-income households. The final regulations released today reflects that feedback.

Importantly, throughout this process we recognized the link between economic inequality and communities most impacted by climate change. Communities where levels of inequality are greatest, including rural, Black, Latino, AANHPI, Native, and low-income white communities, are disproportionately impacted by climate events. Residents in these communities are also more likely to lack access to secure, good-paying jobs, quality affordable housing and pay disproportionately higher energy costs.

We have created access for the people, places, and institutions that don’t always benefit from federal resources. 

To be eligible for the bonus, applicants must be developing a small solar or wind installation in a low-income community, on Indian land, as part of affordable or public housing, or they must be delivering direct financial benefits to low-income households. To further our impact, we focused on the people and places disproportionately impacted by energy insecurity, and, through our implementation efforts, have prioritized access for the institutions that serve them.

Providing this access is a key priority for us because energy affordability disproportionately burdens already disadvantaged groups. Low-income households, Black, Latino, and Native households, renters, and older adults all face dramatically higher energy burdens—spending a greater portion of their income on energy bills—than the average household. 1Renewable energy like solar can reduce low-income household energy burdens; however, renewable energy adoption rates are relatively low in these communities.

To improve these rates, at least 50 percent of the program’s capacity is set-aside for two types of facilities: First, energy facilities in areas with the highest energy costs and the least investment. Second, energy facilities owned by tribal enterprises, non-profits including local and tribal governments, consumer or worker cooperatives, and emerging market businesses. This leaves room for all types of stakeholders to be able to access this program.

Unfortunately, we know that places with the highest need, highest cost, and greatest opportunity for cost savings are the same places with the fewest resources to access new clean energy technology. These communities are also the ones with the least capacity to apply for and be awarded the bonus credits that can fund the necessary changes. If we implement the program in a way that defaults to where capacity already exists, we will exacerbate a divide that leaves our most vulnerable behind. To build an equitable green economy and meet the Administration’s ambitious climate goals, all entrepreneurs, small businesses, and mission-driven nonprofits must be able to participate. 

We’re taking the long-term view on our investment. 

Congress designed this provision to create incentives in untapped markets, support new market participants, and serve more low-income households, thereby fostering a more inclusive and equitable economy. We know that these ambitious goals will take time to come to fruition, but we are committed to building an economy that works for everyone. We’ve built the program to be flexible so as the clean energy industry evolves, this program does too. 

As we approach the 1-year anniversary of the passage of the IRA, we recognize it will take time to see the full impact of these historic investments. As clean energy technologies are deployed in communities across the country, families’ energy burdens will be reduced, communities will be better prepared for climate change, and the country will advance toward its climate goals. All the while, these investments plant the seed for long-term economic growth, spurred by expanding our productive capacity and investing in our people. 

1. How High Are Household Energy Burdens? An Assessment of National and Metropolitan Energy Burdens across the U.S. | ACEEE