The U.S. Department of the Treasury and Internal Revenue Service (IRS) released guidance on the Investment Tax Credit (ITC) under Section 48 of Internal Revenue Code to spur the investment boom ushered in by President Biden’s Inflation Reduction Act. The guidance provides the private sector with additional clarity and certainty in making investment decisions for clean energy projects. According to the U.S. Department of the Treasury, given the new and expanded incentives created by the Inflation Reduction Act, this clarity is critical as companies secure financing for clean energy projects, create good-paying jobs in communities across the United States, and strengthen our nation’s energy security.
“To continue the investment and jobs boom created by the Inflation Reduction Act, Treasury has focused on providing companies with clarity and certainty needed to secure financing and advance clean energy projects nationwide” said Deputy Secretary of the Treasury Wally Adeyemo. “The guidance provides clarity for offshore wind and battery storage projects, as well as small scale projects that need to connect to the grid. Ensuring these projects can move forward efficiently is key to creating good-paying clean energy jobs and lowering Americans’ utility bills,” he added.
“The Inflation Reduction Act has already fueled a clean energy investment boom in America,” said John Podesta, Senior Advisor to the President for Clean Energy Innovation and Implementation. “The guidance from Treasury on the Investment Tax Credit gives clean energy developers even more clarity and confidence to continue their momentum.”
The Notice of Proposed Rulemaking (NPRM) provides clarity around the eligibility of power conditioning and transfer equipment like subsea export cables used in offshore wind projects, as well as certain power conditioning equipment located in onshore substations.
The NPRM also includes proposed rules around the eligibility of standalone battery storage for the ITC. This reflects a critical provision in the Inflation Reduction Act to help support the development of utility-scale, long-duration energy storage, which is vital to ensuring reliability as utilities transition to renewable sources like wind and solar.
Additionally, the NPRM includes proposed rules around the inclusion of costs of interconnection-related property for lower-output clean energy installations, including the costs of upgrades to local transmission and distribution networks that are necessary to connect the clean energy. These modifications reflect another critical change in the Inflation Reduction Act, with the goal of reducing the costs and avoiding delays for new, smaller clean energy installations to connect to the grid and start producing power.
Lastly, the NPRM proposes updates to a range of other technical definitions and rules that will further support clarity and certainty for clean energy project developers.
US renewable sector views
The US renewable energy industry applauds this step forward in facilitating investment in clean energy projects, but warns that much work remains to be done.
According to Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA), “the proposal provides more clarity and will help to drive clean energy deployment in the United State”. “Solar and storage companies have announced over $100 billion of investments since the Inflation Reduction Act (IRA) was enacted, but this economic growth can’t materialize without clear rules for each provision in the law,” she said.
“The announcement is good news for America’s clean energy economy. However, given the economic headwinds that many solar and storage companies are facing, we are continuing to fully evaluate the details in this guidance to guard against any potential unintended consequences that might undermine our ability to rapidly deploy clean energy projects of all sizes”, she added.
For American Clean Power (ACP) Chief Advocacy Officer, JC Sandberg, “There is seven times more utility-scale energy storage capacity today compared to the end of 2020”. The Treasury guidance will continue that momentum, providing necessary certainty for this growing industry”.
“The guidance is also welcome news for the offshore wind sector, providing long-awaited clarity on which components qualify for the ITC. This announcement is important for the 30 offshore wind projects currently in development, but more work remains. We look forward to partnering with the administration to finish the job,” he said.