Clean energy generation projects, including nuclear and geothermal, will be part of the Clean Electricity investment and production tax credits, which replaces the IRA’s investment and production tax credits. (Source: Shutterstock.com)
Nuclear fission and fusion, geothermal, solar and wind are among the technologies that may qualify for production and investment tax credits under a Biden administration proposal released May 29.
The proposed guidance for clean electricity production and investment tax credits unveiled by the U.S. Treasury Department and the Internal Revenue Service came as part of the proposed rulemaking process involving the Inflation Reduction Act (IRA).
The proposed rules are intended to provide clarity for energy developers looking to advance clean energy production projects and enable the development of greenhouse gas emissions technologies.
The new credits are expected to become available in 2025 with the sunsetting of the existing Investment Tax Credit (ITC/Section 45) and Production Tax Credit (PTC/Section 48) of the IRA.
All clean energy generation projects, including solar and wind, will be part of the Clean Electricity Production Credit (Section 45Y) and the Clean Electricity Investment Credit (Section 48E).
“The Inflation Reduction Act’s new technology-neutral Clean Electricity credits, which will come into effect in 2025, are one of the law’s most significant contributions to tackling the climate crisis,” said John Podesta, senior advisor to the president for International Climate Policy. “Today’s initial guidance from Treasury will help provide long-term certainty to investors and developers, support new zero-emission innovations, and accelerate our progress toward a 100 percent clean power sector.”
The IRA extended the ITC of 30% and the PTC of $0.0275/kWh through 2025 for projects that meet wage and apprenticeship requirements. For systems entering service on or after Jan. 1, 2025, the Clean Electricity Production Tax Credit and the Clean Electricity Investment Tax Credit will replace the traditional PTC and ITC.
Applicable technologies include wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal and certain types of waste energy recovery property, according to the Treasury Department.
If a technology depends on fossil fuels for combustion or gasification to produce electricity, a lifecycle greenhouse-gas analysis will be required to demonstrate net-zero emissions. The proposal also includes a process for taxpayers to request a provisional emissions rate, which will be administered by the DOE.
Ray Long, president and CEO of the American Council on Renewable Energy (ACORE), called the guidance a win for American consumers.
“Analysis has shown that by 2035, clean energy capacity will increase by up to 50%. From this clean energy deployment, our environment will be substantially cleaner,” Long said in a statement. “By 2035, carbon emissions are expected to drop 43-73% below 2022 levels. This is truly a game-changing policy for all Americans.”
The guidance was released amid rising U.S. electricity consumption and generation capacity.
The U.S. Energy Information Administration forecasts total electricity consumption to rise to 4,159 billion kilowatt-hours (kWh) in 2025 from 4,103 billion kWh in 2024. Demand growth will be led by industrial sales followed by residential sales. Renewable energy sources—mainly utility-scale solar photovoltaic power plants—are expected to supply most of that growth.
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The Biden administration has ambitions for 100% carbon-free electricity by 2035 and net-zero emissions by 2035.
A recent study by the Rhodium Group states the technology-neutral 45Y and 48E clean electricity tax credits could deliver a combined GHG emissions reductions of between 300 million tons (MMton) and 400 MMton compared to no tax credits in 2035.
“There’s up to nearly 650 gigawatts (GW) more clean electricity capacity online in 2035. Air pollutants drop by at least 20%, and consumers across the economy will save a total of $16-$34 billion in annual electric costs in 2035,” Rhodium Group said. “From a decarbonization perspective, tax guidance on 45Y and 48E may be the single most important IRA implementation action the IRS will take.”
Public comment on the proposal will be accepted for 60 days following its publication in the Federal Register.
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