Every energy infrastructure conversation I’ve been part of starts the same way: a boiler is failing, a chiller is past its useful life, or a new building is on the drawing board and someone has to decide how it gets heated and cooled. That’s the right starting point.

The problem shows up later when the discussion jumps straight from “we need a new system” to “what’s the cheapest bid?”, skipping the question that actually determines value: what will this cost the institution over the life of the equipment, and what could we do now to reduce that cost before a single contract is signed?

I’ve watched school leaders lock in a design, get through bidding, and only then ask whether there are any federal or state incentives that are available. By that point, the school may have fewer opportunities to make decisions that preserve or increase the available benefit. That can be a costly miss.

For eligible projects, the federal Investment Tax Credit can reduce a project’s cost by as much as 50%, which is often enough to change whether an option looks affordable in the first place.

Compare lifecycle cost, not just the construction bid

A bid tells you what a system costs to install. It doesn’t tell you what incentives might apply that would reduce the upfront costs, and it does not factor in what it costs to run for the next 20 or 30 years. A higher upfront price sometimes buys lower energy use and less maintenance, and that gap compounds over time in ways a single bid comparison never shows.

The comparison should run the length of the equipment’s actual useful life, not an arbitrary 10-year window picked because it’s easy to model. Start with the expected net investment after incentives and other funding, then layer in operating costs from there. Keep the assumptions conservative: energy prices move, and a credit only counts if the project meets the requirements attached to it. But run the math before ruling an option out on sticker price alone.

Understand what qualifies for the Section 48E tax credit

The credit worth understanding is Section 48E, the Clean Electricity Investment Tax Credit.  It was created under the 2022 Inflation Reduction Act and is in effect for qualifying clean-electricity facilities and energy storage placed in service through 2032. Congress created it to be technology-neutral and emissions-based, so the real planning question isn’t whether a specific system qualifies in the abstract, it’s whether an upcoming project could involve qualifying property and whether that gets evaluated early enough to matter.

The base credit is 6% of qualified equipment and labor costs. For some systems, it climbs to 30% when prevailing wage and apprenticeship requirements are met. An additional 10 percentage points are available if certain domestic-content compliance is met and, in qualifying circumstances, stacked incentives can raise the credit substantially, potentially reaching 50% of eligible investment. None of that changes the operational need driving the project. It changes the overall project economics and the ultimate return on the investment.

Why elective pay matters for schools and universities

For years, credits like this offered little to schools, public or private, because tax-exempt institutions don’t have federal income tax liability to claim them against. Elective pay, commonly called direct pay, changed that. Eligible governmental and tax-exempt entities can now receive the value of certain clean-energy credits as a direct payment, meaning that the credit becomes real funding—a check issued directly to the institution from the Treasury. State programs and utility incentives are worth stacking on top, but direct pay is what makes the federal credit relevant to a school in the first place.

Evaluate incentives before design decisions are locked in

Here’s the pattern I’d change if I could change one thing: incentives usually enter the conversation after the design is mostly finished and contractors are already selected. At that stage, the decisions that determine eligibility, or the size of the credit, are hard to unwind.

The better moment is what project teams sometimes call phase zero—when the institution is still defining the need and weighing which approaches are worth considering. Facility leaders can define what the project has to accomplish while financial leaders assess what the institution can fund, and the two conversations should happen together, not in sequence. That’s also when there’s still time to sort out timing requirements, qualifying costs, and the documentation the credit depends on.

A geothermal project shows why eligible costs matter

A public school district in Virginia gives a sense of what this looks like in practice. The district was building a new facility with a geothermal heating and cooling system. During the incentive review, the project team looked past the obvious equipment to the full set of costs required to make the system operate.

That review turned up additional eligible costs and meaningfully increased the project’s energy basis and resulting credit. The district ultimately received roughly $2.84 million through direct pay—money that came from asking the right questions early, not from a bigger or more expensive system.

Questions facilities and finance teams should ask first

Before signing off on a major energy project, facilities and financial leaders should ask a few things together:

• What does this project actually need to accomplish?
• What will each option cost over its real useful life, not just its first year?
• Which incentives could lower our net investment?
• What do we need to document or commit to now to keep them available?

Section 48E gives schools a reason to look past the sticker price of infrastructure that’s going to be in service for decades. Direct pay makes that credit accessible to institutions that couldn’t use it before. The rest comes down to timing: bring facilities and finance into the same conversation while the project is still being shaped, not after the bids are in, and you’ll be amazed at the results.

Matt Noll is Chief Operating Officer of alliant, a Houston-based consulting firm that advises organizations on federal and state tax incentives, including incentives for energy projects. He can be reached at [email protected] or 1-832-268-7311.