Every successful project starts with a framework. A vision statement. A blueprint. The staff of Engineered Systems is proud to present The Blueprint — a monthly Q&A interview with HVACR engineering’s leading voices. These one-on-one discussions examine the trade’s history, current industry trends, the factors shaping the sector’s future, and more.

In this Blueprint Q&A, Megan Owen, vice president of enterprise sales and marketing, McKinstry, examines the inner-workings of the Inflation Reduction Act and explores how its provisions will benefit the engineering industry as a whole.

Engineered Systems: The Inflation Reduction Act (IRA) includes tax credits, rule changes, and grant dollars to lower carbon emissions and reduce power bills. But, how exactly will the legislation impact the commercial HVAC/comfort engineering sector?

Owen: First, the IRA renews certainty for the market. We see energy codes strengthening across the country and the regulatory market moving to drive cleaner sources of energy at the local and national levels (e.g., bans on natural gas in cities or 100% clean initiatives across utility territories). The tax incentives, the investment tax credit (ITC) and production tax credit (PTC) in particular, provide much needed financial support for building owners and occupants transitioning their carbon footprint over the next decade and beyond to comply with the changing landscape.

What does that mean in practical terms? Distributed energy resources (DERs), like solar, storage, and heat pumps, will be more affordable for any commercial building owner or residential consumer. And because the cost has often been a barrier to entry, we will see more design and system choices based on the outcomes a client wants instead of solely focusing on first costs.

Additionally, expanding the narrower ITC and PTC to broader clean energy tax incentives in 2025 pushes us beyond traditional renewables to a technology-agnostic approach that leaves the door open for new technologies and, most importantly, levels the playing field for integrated distributed energy resource solutions tailored for a client — their cost effectiveness criteria, programming needs, climate zone, and local utility grid needs, among other things. On its face, this is a game changer for clients, and because we are already designing projects that will go into service in 2025 or later, this has an immediate effect on project financials for a client.

Last, changes to the Energy Efficiency Deduction (179D) for commercial buildings has equal promise to change the game for the millions of square feet of new and existing building stock that needs a compelling financial case to go above and beyond energy code. Under the IRA, the maximum allowable benefit for the 179D Energy Efficient Buildings Tax Deduction will expand in 2023 from $1.88 per square foot to $5 per square foot. To qualify, new construction projects and renovated buildings must meet specific energy-reduction requirements.

While there is a path to partial deductions, to be in full compliance buildings must reduce the energy and power cost of interior lighting, HVAC, and hot-water systems by 50% or more than the minimum industry standard.

The IRA includes multiple programs that will drive building retrofits and upgrades, especially around building performance, renewable energy, and clean energy technologies to lower costs, deliver energy resiliency, and strengthen our economy. We are tracking individual opportunities and details as guidance is created but are extremely optimistic about what this means for our industry. It presents a call to action for us to think big and act boldly to accelerate zero-carbon planning, clean energy deployment, and high-performing building retrofits. Read the entire interview on Engineered Systems’ website.

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