One Simple Tax Change Could Unlock Critical Clean Energy Infrastructure

This policy brief by RMI argues that the Build Back Better Act could be made more effective by allowing regulated utilities to opt out of 'tax normalization' requirements for stand-alone battery storage and transmission projects eligible for the Investment Tax Credit (ITC). While the bill introduces positive changes such as direct pay and the option for solar developers to use the Production Tax Credit (PTC), the author contends that current normalization rules force utilities to retain some ITC benefits for shareholders rather than passing them to customers, thereby increasing costs and disincentivizing the deployment of critical grid infrastructure.

• The Build Back Better Act includes three significant improvements to clean energy tax incentives: allowing solar developers to choose the Production Tax Credit (PTC) over the Investment Tax Credit (ITC) for 10 years, enabling 'direct pay' of tax credits to developers to bypass complex tax equity workarounds, and allowing transmission and stand-alone battery storage to qualify for the ITC.
• Rhodium Group modeling indicates that permitting renewables to choose between the ITC and PTC would result in double the emissions reductions by 2031 when compared to a standard 10-year extension of existing tax credits.
• The 'tax normalization' requirement currently limits the effectiveness of the ITC for storage and transmission by requiring regulated utilities to keep a portion of the financial benefit for shareholders, which prevents the full tax savings from being passed to customers and increases the cost of deploying these technologies.
• RMI analysis suggests that providing an option to opt out of tax normalization would save approximately $150 million for every billion dollars spent on transmission and storage over the technology's lifetime, reducing costs by about 15 percent.
• Allowing utilities to opt out of tax normalization could result in annual savings of over $1 billion for regulated utility customers by 2030 and reduce carbon emissions by an additional 50 million metric tons per year, which is roughly 3 percent of current electricity sector emissions.

APA

RMI (2021). One Simple Tax Change Could Unlock Critical Clean Energy Infrastructure. https://rmi.org/resources/one-simple-tax-change-could-unlock-critical-clean-energy-infrastructure/

Chicago

RMI. One Simple Tax Change Could Unlock Critical Clean Energy Infrastructure. 2021. https://rmi.org/resources/one-simple-tax-change-could-unlock-critical-clean-energy-infrastructure/.

Wikipedia

{{cite report |author=RMI |title=One Simple Tax Change Could Unlock Critical Clean Energy Infrastructure |date=5 November 2021 |url=https://rmi.org/resources/one-simple-tax-change-could-unlock-critical-clean-energy-infrastructure/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2021one, author = {{RMI}}, title = {{One Simple Tax Change Could Unlock Critical Clean Energy Infrastructure}}, institution = {RMI}, year = {2021}, month = nov, url = {https://rmi.org/resources/one-simple-tax-change-could-unlock-critical-clean-energy-infrastructure/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }