One Simple Tax Change Could Unlock Critical Clean Energy Infrastructure

The policy brief advocates for a specific amendment to the Build Back Better Act regarding tax normalization rules for clean energy infrastructure. While praising the bill's inclusion of direct pay and the option for solar developers to use the production tax credit (PTC), RMI argues that the investment tax credit (ITC) for storage and transmission is undermined by normalization requirements. These rules force utilities to retain some financial benefits for shareholders rather than passing them to customers. RMI estimates that allowing an opt-out from normalization would save approximately $150 million for every billion dollars spent on such infrastructure, potentially reducing carbon emissions by 50 million metric tons annually and saving customers over $1 billion per year by 2030.

• The Build Back Better Act introduces three significant improvements: allowing solar developers to choose the production tax credit (PTC) over the investment tax credit (ITC), enabling direct pay of tax credits to bypass tax equity workarounds, and allowing stand-alone battery storage and transmission to qualify for the ITC.
• Current 'tax normalization' requirements for the ITC force regulated utilities to keep a portion of financial benefits for shareholders, which disincentivizes the deployment of clean energy by increasing costs for customers.
• RMI analysis indicates that providing an option to opt out of tax normalization would reduce the cost of new transmission and storage by approximately 15 percent, saving about $150 million for every billion dollars invested over the technology's lifetime.
• Allowing utilities to opt out of tax normalization could result in annual carbon emission reductions of 50 million metric tons—roughly 3 percent of current electricity sector emissions—and annual customer savings exceeding $1 billion by 2030.

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} }