What the Inflation Reduction Act means for fleet electrification
The Inflation Reduction Act (IRA) represents the biggest investment in climate change mitigation in U.S. history. This headline-making legislation will provide more than $370 billion over the next ten years to reduce greenhouse gas (GHG) emissions, including several provisions designed to accelerate the adoption of electric vehicles (EVs). Transportation generates more GHG emissions than any other sector of the U.S. economy, and EVs offer the most promising means of reducing transportation emissions.
What is the IRA?
The IRA is a wide-ranging law that will, among other things, lower Medicare prescription drug prices, extend Affordable Care Act insurance premium subsidies, initiate a new minimum corporate tax rate, provide $80 Billion to the Internal Revenue Service for tax enforcement, and even reduce the federal budget deficit by $100 billion.
But it’s the IRA’s clean energy provisions that are of greatest interest to bp pulse. The IRA includes a new Commercial EV Tax Credit that will significantly reduce the upfront cost that fleet operators face when they consider going electric. It also includes reforms to the Section 30C Alternative Fuel Infrastructure Tax Credit and the Section 48 Business Energy Investment Tax Credit, both of which may reduce the cost of charging electric fleets.
The Commercial EV Tax Credit
Starting January 1, 2023, the IRA’s Commercial EV Tax Credit provides a 30% tax credit for qualified vehicle purchases. The value of this tax credit is capped at:
- $7,500 for vehicles weighing less than 14,000 pounds,
- $40,000 for vehicles weighing more than 14,000 pounds, and
- The price difference between the EV and a comparable internal combustion engine (ICE) vehicle.
This means that a company buying 10 light-duty vehicles would be eligible for up to $75,000 in tax credits. And a fleet operator purchasing 10 heavy-duty vehicles could save up to $400,000.
When a company transitions to EVs, the upfront cost is higher, but the operator saves money over time due to lower fueling and maintenance costs. The Commercial EV Tax Credit accelerates the break-even point, which means fleet operators will be in the black far sooner.
The Alternative Fuel Infrastructure Tax Credit
The cost of transitioning fleets isn’t just the vehicles. Commercial EVs need somewhere to charge. And the IRA introduces important new reforms to the Section 30C Alternative Fuel Infrastructure Tax Credit — the federal tax incentive for investing in EV chargers.
Section 30C of the tax code actually expired last year, but the IRA revives it through the end of this year in its current form. Under this version, fleet owners are eligible for a 30% tax credit for the installed cost of any EV chargers they purchase. However, this tax credit is capped at $30K per location.
Beginning next year, the $30K cap per location is replaced with a far more generous $100K cap per charger. But to qualify, the infrastructure:
- Must be installed in a federally designated low-income or rural census tract, and
- Construction and installation must satisfy prevailing wage and apprenticeship requirements.
bp pulse’s mission is to make charging your EV fleet easy and affordable. Our Charging-as-a-Service (CaaS) solution allows us to bundle CapEx, OpEx, energy costs, and federal tax credits into a fixed rate based on$/kWh or $/mile driven — which allows our customers to charge their vehicles without upfront costs. In certain circumstances, the reformed Alternative Fuel Infrastructure Tax Credit will make bp pulse’s CaaS model even more affordable.
The Business Energy Investment Tax Credit
The Section 48 Business Energy Investment Tax Credit is commonly known as the “Solar ITC.” But starting next year, standalone storage installations greater than 5 kWh will also qualify for this 30% tax credit. For fleet operators, this means bp pulse can add storage to a charging installation at a significant discount, providing a valuable new option for reducing fleet charging costs.
Utility rates present a mix of challenges and opportunities for any commercial ratepayer. Energy storage functions as a Swiss Army knife for charge management companies like bp pulse. We can use it to shift a customer’s electricity use to take advantage of time-of-use rates and to reduce monthly utility “demand charges,” which are based on a customer’s peak demand from the grid. While onsite storage may not make sense for every customer, it can make a significant difference for some. And the 30% investment tax credit provided by the IRA makes storage a far more attractive option.
IRA grant programs
In addition to its tax provisions, the IRA includes several grant programs that may be of interest to fleet operators. For instance:
- $1 billion in grants to replace Class 6 and Class 7 trucks with comparable zero emission vehicles,
- $3 billion in grants to reduce air pollution at ports,
- $5 billion in grants for states, localities, and municipalities to reduce local GHG emissions, and
- $60 million for grants, rebates, and loans to reduce diesel emissions through Diesel Emissions Reduction Act programs.
Each of these programs represents a new opportunity for fleet operators to receive federal assistance for transitioning to EVs.
With the IRA, the cost of transitioning a fleet to electric has become more affordable. This new law changes the economics of fleet electrification, significantly reducing upfront costs and shortening the time it will take for an investment in EVs to turn a profit. It also provides a long-term signal to the market that the future of transportation is electric.
Contact us to learn more
We’re eager to help fleet operators take advantage of all the opportunities presented by the IRA. If you have questions about any of the tax reforms or grant programs, contact us to learn more.
The guide to win grant funding for your EV fleet
Grant funding is available for your fleet. In our funding blog, we share tips on how to find grant funding and how to submit a winning application.
25 August 2022
Vice President, Policy
bp pulse fleet