Impact of Investment Tax Credit on Interconnection Costs

This report analyzes how a provision in the Inflation Reduction Act (IRA) allowing the Investment Tax Credit (ITC) to be applied to interconnection costs could improve the financial viability of onshore wind and solar projects in the United States. By examining data from five regional grids, the authors find that a 30 percent ITC could have bridged the cost gap for approximately 22 GW of withdrawn projects and 15 GW of active projects, potentially enabling a volume of deployment exceeding the 2023 record of 31 GW.

• A 30 percent Investment Tax Credit (ITC) on interconnection costs could have reduced the cost differential between cancellation and success for 22 GW of withdrawn onshore wind and solar projects and for 15 GW of projects that remained active as of 2022.
• The application of the interconnection ITC is expected to reduce the overall average costs of completed utility-scale projects by 3 percent for solar and 1.7 percent for wind.
• Under the Inflation Reduction Act, clean energy property smaller than 5 MW is eligible to include interconnection costs in its 30 percent ITC claim. Because the largest onshore wind turbines have a capacity under 3.5 GW, most onshore wind and solar projects using the ITC can apply it to interconnection costs, including physical infrastructure and required network upgrades.
• Grid interconnection is a primary driver of project failure, with over 60 percent of wind and solar developers identifying it as a leading cause of project cancellation.
• Analysis across five regional grids shows that the Midcontinental Independent System Operator (MISO) region has the highest capacity of projects that could be made viable by the ITC. Specifically, 11,872 MW of withdrawn solar and 8,364 MW of withdrawn wind projects had costs within 30 percent of the 75th percentile of completed projects.

APA

Solomon, M., & O’Boyle, M. (2024). Impact of Investment Tax Credit on Interconnection Costs. Energy Innovation. https://energyinnovation.org/wp-content/uploads/Impact-of-Investment-Tax-Credit-on-Interconnection-Costs.pdf

Chicago

Solomon, Michelle, and Mike O’Boyle. Impact of Investment Tax Credit on Interconnection Costs. Energy Innovation, 2024. https://energyinnovation.org/wp-content/uploads/Impact-of-Investment-Tax-Credit-on-Interconnection-Costs.pdf.

Wikipedia

{{cite report |last1=Solomon |first1=Michelle |last2=O’Boyle |first2=Mike |title=Impact of Investment Tax Credit on Interconnection Costs |publisher=Energy Innovation |date=February 2024 |url=https://energyinnovation.org/wp-content/uploads/Impact-of-Investment-Tax-Credit-on-Interconnection-Costs.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{solomon2024impact, author = {Solomon, Michelle and O’Boyle, Mike}, title = {{Impact of Investment Tax Credit on Interconnection Costs}}, institution = {Energy Innovation}, year = {2024}, month = feb, url = {https://energyinnovation.org/wp-content/uploads/Impact-of-Investment-Tax-Credit-on-Interconnection-Costs.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }