US Treasury Department, IRS Release Proposed Guidance to Boost Clean Energy Investment
This guidance aims to provide clarity for developers of clean electricity projects, furthering President Biden’s Investing in America Agenda.
June 01, 2024. By Abha Rustagi
This guidance aims to provide clarity for developers of clean electricity projects, furthering President Biden’s Investing in America Agenda. It is expected to support American jobs, strengthen energy production and security, and reduce energy costs for consumers.
The Inflation Reduction Act phases out the existing Production Tax Credit (Section 45) and Investment Tax Credit (Section 48) for projects beginning construction before 2025. It transitions to the Clean Electricity Production Credit (Section 45Y) and the Clean Electricity Investment Credit (Section 48E) for projects placed in service after December 31, 2024. These new credits incentivize any clean energy facility that achieves net-zero greenhouse gas emissions, offering long-term clarity and certainty to investors and developers.
The proposed guidance identifies technologies meeting high environmental standards, including wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal, and certain types of waste energy recovery property (WERP). It also clarifies how energy storage technologies can qualify for the Clean Electricity Investment Credit.
Technologies relying on combustion or gasification must undergo a lifecycle greenhouse gas analysis to demonstrate net-zero emissions. The Treasury seeks comments on this analysis to ensure the rules reflect the best available science.
“President Biden’s Inflation Reduction Act has driven an investment boom that is adding historic levels of new clean power to the grid while keeping consumer energy costs in check, reducing greenhouse gas emissions, and bolstering energy security,” said US Secretary of the Treasury Janet L. Yellen. She emphasized that the new credits provide market certainty and are set to drive substantial growth and lower utility bills over the long term.
John Podesta, Senior Advisor to the President for International Climate Policy, stated, “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.” He added that the initial guidance will support new zero-emission innovations and accelerate progress toward a 100 percent clean power sector.
Ali Zaidi, Assistant to the President and National Climate Advisor, highlighted the economic benefits, noting that American families are expected to save up to USD 38 billion on electricity bills and businesses are projected to spend 15 percent less on electricity by 2030. “This is how we win the future, by harnessing American innovation and the best workers in the world to grow our economy, reduce energy costs, and save the planet for future generations,” Zaidi said.
The proposed rules align with existing Production and Investment Tax Credits, offering clarity to developers. They also include provisions for including costs of interconnection-related property for lower-output clean energy facilities taking the Clean Electricity Investment Tax Credit. Eligible costs cover upgrades to local transmission and distribution networks necessary for connecting facilities to the grid.
Studies indicate that the Clean Electricity Production and Investment Credits are crucial for accelerating US emissions reductions and achieving US President Biden’s climate and clean energy goals.
please contact: contact@energetica-india.net.
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