Technology-Neutral Tax Credit Proposal Called a ‘Game-Changing Policy’ – pv USA Magazine

May 29, 2024 John Fitzgerald Weaver

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have released proposed guidance on the expiration of the existing Investment Tax Credit (Section 45) and Production Tax Credit (Section 48) of the Inflation Reduction Act. This transition will consolidate all clean energy generation projects, including wind and solar, into the technology-neutral Clean Electricity Production Credit (Section 45Y) and the Clean Electricity Investment Credit (Section 48E). These new tax relief sections will apply to all projects placed in service after December 31, 2024.

In a press release, the IRS stated that the goal of this new structure was to create a consistent framework for all clean energy technologies:

Technologies included in today’s Notice of Proposed Rulemaking (NPRM) include wind, solar, hydro, marine, and hydrokinetic energy, nuclear fission and fusion, geothermal energy, and certain types of waste energy recovery facilities (WERPs). The proposed guidance also clarifies how energy storage technologies qualify for the Clean Electricity Investment Credit.

The document includes technologies whose life cycle may depend on fossil fuels; however, the IRS states that these products must include life-cycle greenhouse gas analysis and demonstrate net zero emissions.

According to the American Council on Renewable Energy (ACORE), the tax credits are projected to “reduce the average annual electricity bill by $29.74 per household by 2030 and $42.95 by 2035.”

Called a “game-changing policy” by Ray Long, president and CEO of ACORE, he said: “The tax credit advances America’s energy security and reliability by deploying a new generation of clean electricity from wind, solar, battery storage and other zero-carbon technologies . technologies. The analysis showed that clean energy generation capacity will increase by up to 50% by 2035.

The IRS noted that the NPRM also specifies how to apply tax credits to interconnection costs for projects less than 5 MWac. These costs, incurred by solar projects designed to modernize local transmission and distribution grids, are currently covered by the Section 48 Investment Tax Credit, which the IRA has modified to include qualified interconnection costs.

Further cost structures are also detailed, for example the IRS notes that qualifying facilities require roads – therefore the cost of the roads is subject to the tax credit.

Proposed §1.45Y-2(b)(3)(iii) would provide that roads that are an integral part of a qualified facility are roads that are an integral part of the intended function of the qualified facility, such as roads within the facility on which the operations and maintenance of the qualified facility are conducted . Proposed §1.45Y–2(b)(3)(iii) would also clarify that roads used primarily for access to a facility or roads used primarily by employee or visitor vehicles are not integral to the intended function of a qualified facility and are therefore not an integral part of qualified facility.