Proposed rules for “technology-neutral” clean electricity incentives in the Inflation Reduction Act
WASHINGTON – Today, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released Proposed Guidance on the Clean Electricity Production Credit and the Clean Electricity Investment Credit established by President Biden's Inflation Reduction Act. By providing clarity to developers of clean electricity projects, today's guidance will advance President Biden's Investing in America Agenda, support American jobs, and strengthen energy production and security, while reducing energy costs for American consumers.
The Inflation Reduction Act ends 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 that begin construction before 2025 and transition to the Clean Electricity Production Credit (tax code section 45Y) and the Clean Electricity Investment Credit (tax code section 48E) for projects placed in service after December 31, 2024. These new credits Clean Electricity Plans are one of the law's most important reforms, providing early-stage incentives to any clean energy facility that achieves net-zero greenhouse gas emissions. These credits provide the potential for new technologies to be developed over time with zero greenhouse gas emissions, 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 set forth in President Biden's Inflation Reduction Act and would categorically qualify as zero greenhouse gas emissions. greenhouse effect for the purposes of the Clean Electricity Production Credit. and Clean Electricity Investment Credit. Technologies recognized in the current NPRM include wind, solar, hydroelectric, marine and hydrokinetic, 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 statute requires clean energy technologies that rely on combustion or gasification to produce electricity to undergo a life cycle greenhouse gas analysis to demonstrate net-zero emissions. The proposed rules released today seek comments on a variety of important questions related to this required life cycle analysis for combustion and gasification technologies. Treasury, in consultation with interagency experts, will carefully review the comments received and continue to evaluate how additional clean energy technologies, including combustion and gasification technologies, may qualify for clean electricity credits.
"President Biden's Inflation Reduction Act has fueled an investment boom that is adding historic levels of new clean energy to the grid, while keeping consumer energy costs in check and reducing greenhouse gas emissions. greenhouse effect and reinforcing energy security," said US Treasury Secretary Janet L. Yellen. "The clean electricity tax credits created under the Inflation Reduction Act provide certainty to the market and are poised to drive substantial further growth and reduce long-term utility bills."
"The Inflation Reduction Act's new, technology-neutral clean electricity credits, which go into effect in 2025, are one of the law's most important contributions to addressing the climate crisis," he said. John Podesta, senior advisor to the president for international climate policy. “Today’s initial guidance from the Treasury will help provide long-term certainty for investors and developers, support new zero-emission innovations and accelerate our progress towards a 100 per cent clean energy sector.”
"With today's guidance, energy companies have yet another tool to reduce electricity costs for families and businesses and fuel President Biden's American manufacturing renaissance," he said Assistant to the President and National Climate Advisor Ali Zaidi. “Under the President's leadership, the United States is projected to build more electric generating capacity this year than we have had in two decades, and 96 percent 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 projected to spend 15% less on electricity by 2030. Here's how we win the future, leveraging American innovation. and the best workers in the world to grow our economy, reduce energy costs and save the planet for future generations.”
These proposed rules generally follow existing Production and Investment Tax Credit rules, which should provide clarity and certainty to developers as they move forward with clean energy production projects. The Treasury is committed to basing these rules on the best available science and ensuring continued public transparency and accountability. That is why today's guidance proposes that any future changes to the set of technologies designated as zero greenhouse gas emissions or the designation of life cycle analysis models that can be used to determine greenhouse gas emissions rates greenhouse effect must be accompanied by an analysis prepared by the US National Laboratories of the Department of Energy (DOE), in consultation with the agency's technical experts and other experts. The NPRM also proposes a process through which taxpayers can request an Interim Emissions Rate, which DOE would administer in consultation with the National Laboratories and other experts, as appropriate.
Additionally, the NPRM includes proposed rules that provide clarity on the inclusion of interconnection-related property costs for lower-output clean energy facilities that receive the Clean Electricity Investment Tax Credit. Eligible costs, which are a significant barrier to faster deployment of clean energy, include the costs of upgrades to 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 qualified 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 seeks comments on a variety of topics, and Treasury and the IRS look forward to receiving and benefiting from further input. additional perspectives from stakeholders on these issues. Treasury will carefully consider public comments before issuing final rules.
External studies have shown that clean electricity production and investment credits are key to accelerating emissions reductions in the United States and achieving President Biden's climate and clean energy goals. A recent rhodium group The study found that by 2035, the credits will reduce the energy sector's carbon emissions by 43% to 73% below 2022 levels, save American consumers up to $34 billion in annual electricity costs, and add almost 650 gigawatts of clean electricity to the grid.
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