Proposed Rules for “Technology-Neutral” Clean Electricity Incentives in Inflation Reduction Act
WASHINGTON – Today, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released proposed guidance on the Clean Power Generation Credit and the Clean Power Investment Credit established by President Biden’s Inflation Reduction Act. By providing clarity for clean electricity project developers, today’s guidance will advance President Biden’s Investing in America agenda, support U.S. jobs, and strengthen energy production and energy security while reducing energy costs for American consumers.
The Inflation Reduction Act terminates the existing Production Tax Credit (Section 45 of the Tax Code) and Investment Tax Credit (Section 48 of the Tax Code) by limiting their availability to projects whose construction begins before 2025 and switching to the clean electricity production credit (article 48 of the tax code). 45Y of the tax code) and the Clean Electricity Investment Credit (section 48E of the tax code) for projects placed in service after December 31, 2024. These new clean electricity credits constitute one of the the most significant reforms to the law, incentivizing first in time any clean energy installation that achieves net zero greenhouse gas emissions. These credits help develop new technologies without greenhouse gas emissions over time, while providing long-term clarity and certainty to investors and developers of clean energy projects.
After extensive consultation with interagency experts, today’s Notice of Proposed Rulemaking (NPRM) identifies specific technologies that meet the high environmental standards outlined in President Biden’s Inflation Reduction Act and would categorically considered zero greenhouse gas emissions for purposes of the clean electricity generation credit. and Clean Electricity Investment Credit. Technologies recognized in the current NPRM include wind, solar, hydroelectric, marine and hydrokinetic energy, nuclear fission and fusion, geothermal, and certain types of waste energy recovery properties (WERP). The proposed guidance also clarifies how energy storage technologies would qualify for the Clean Electricity Investment Credit. The law requires that clean energy technologies that rely on combustion or gasification to produce electricity undergo life-cycle greenhouse gas analysis to demonstrate no net emissions . The proposed rules released today solicit comments on a series of important issues related to this life cycle analysis required for combustion and gasification technologies. Treasury, in consultation with interagency experts, will carefully consider the comments received and continue to evaluate how other clean energy technologies, including combustion and gasification technologies, may qualify for clean electricity credits.
“President Biden’s Inflation Reduction Act has sparked an investment boom that adds historic levels of new clean energy to the grid while controlling consumers’ energy costs, reducing greenhouse gas emissions and by strengthening energy security,” said US Treasury Secretary Janet L. Yellen. “The clean electricity tax credits created under the Inflation Reduction Act provide market certainty and are poised to deliver substantial additional growth and reduced utility bills to long term. »
“The Inflation Reduction Act’s new, technology-neutral clean electricity credits, which take effect in 2025, are one of the law’s most important contributions to combating climate crisis,” said John Podesta, senior adviser to the president on international climate policy. “The Treasury’s first guidance published today will help provide long-term certainty for investors and developers, support new zero-emission innovations and accelerate our progress towards a 100% clean energy sector.
“With today’s guidance, energy companies have a new tool to lower electricity costs for families and businesses and fuel President Biden’s American manufacturing renaissance,” said Assistant to the President and National Climate Advisor Ali Zaidi. “Under the President’s leadership, the United States is expected to build more new electricity generation capacity this year than we have in two decades – and 96% of that capacity will be clean. Thanks to the efforts of the Biden-Harris administration, American families are expected to save up to $38 billion on their electricity bills and American businesses are expected to spend 15% less on electricity by 2030. That’s how that we will win the future, by harnessing American innovation. and the world’s best workers to grow our economy, reduce energy costs and save the planet for future generations.
These proposed rules generally follow the rules for existing production and investment tax credits, which should provide clarity and certainty for developers as they move forward with clean energy projects. Treasury is committed to basing these rules on the best available science and ensuring continued transparency and public accountability. Therefore, today’s guidance proposes that any future changes to the set of technologies designated as zero greenhouse gas emissions or to the designation of life cycle analysis models that can be used to determining greenhouse gas emission rates must be accompanied by an analysis prepared by the United States. Department of Energy (DOE) National Laboratories, in consultation with agency technical experts and other experts. The NPRM also proposes a process by which taxpayers can request an interim emissions rate, which DOE would administer in consultation with national laboratories and other experts, as appropriate.
Additionally, the NPRM includes proposed rules that clarify the inclusion of interconnection-related property costs for low-production clean energy facilities that qualify for the Clean Electricity Investment Tax Credit. Eligible costs, which pose a major barrier to faster deployment of clean energy, include the costs of upgrading local transmission and distribution networks that are necessary to connect facilities to the grid. The proposed rules continue the approach taken in the proposed rules for the Section 48 investment tax credit, which was modified by the IRA to cover eligible interconnection costs.
Treasury encourages the public to submit written comments in response to the proposed rules. Comments will be accepted for 60 days after publication in the Federal Register, and a public hearing is scheduled for August 12-13. The NPRM solicits comments on various issues, and Treasury and the IRS look forward to receiving further comments and benefiting from additional stakeholder perspectives on these issues. Treasury will carefully consider public comments before issuing final rules.
Outside studies have shown that clean electricity and investment credits are essential to accelerating U.S. emissions reductions and meeting President Biden’s climate and clean energy goals. A recent Rhodium Group study found that by 2035, the credits will reduce electricity sector carbon emissions by 43 to 73 percent compared to 2022 levels, saving U.S. consumers up to $34 billion. in annual electricity costs and will add nearly 650 gigawatts of clean electricity to the grid. .
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