The U.S. Department of the Treasury and Internal Revenue Service have released proposed guidance on the Clean Electricity Production Credit and Clean Electricity Investment Credit established by President Biden’s Inflation Reduction Act (IRA). 

The IRA sunsets the existing Production Tax Credit and Investment Tax Credit by limiting their availability to projects beginning construction before next year and transitioning to the Clean Electricity Production Credit and the Clean Electricity Investment Credit for projects placed in service after December 31.

These new Clean Electricity credits are meant to provide incentives for the first time to any clean energy facility that achieves net zero greenhouse gas emissions. They are also meant to provide the ability for new zero greenhouse gas emissions technologies to develop over time, while also providing long-term clarity and certainty to investors and developers of clean energy projects.

The Notice of Proposed Rulemaking (NPRM) identifies specific technologies meeting the standards set out in the IRA and would qualify as zero greenhouse gas emissions for the purposes of the Clean Electricity Production Credit and Clean Electricity Investment Credit. The technologies recognized include wind, solar, hydropower, marine and hydrokinetic.

The proposed guidance also clarifies how energy storage technologies would qualify for the Clean Electricity Investment Credit. The proposed rules released seek comment on important questions related to the required lifecycle analysis for combustion and gasification technologies.

Treasury, in consultation with interagency experts, will review comments received and continue to evaluate how additional clean energy technologies, including combustion and gasification technologies, will be able to qualify for the clean electricity credits.

“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,” says U.S. Secretary of the Treasury 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 lower utility bills over the long-run.”

These proposed rules generally follow rules from the existing Production and Investment Tax Credits, aimed at providing clarity and certainty to developers as they move forward with clean energy production projects.

The guidance proposes that any future changes to the set of technologies designated as zero greenhouse gas emissions or the designation of lifecycle analysis models that may be used to determine greenhouse gas emissions rates must be accompanied by an analysis prepared by the U.S. Department of Energy (DOE)’s National Labs, in consultation with agency technical experts and other experts.

The NPRM also proposes a process by which taxpayers can request a Provisional Emissions Rate, which DOE would administer in consultation with the National Labs and other experts as appropriate.

Additionally, the NPRM includes proposed rules that provide clarity on the inclusion of costs of interconnection-related property for lower-output clean energy facilities that take the Clean Electricity Investment Tax Credit. 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.

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Treasury, IRS Release Proposed Guidance to Support Clean Energy Production