Janet Yellen Secretary of the Treasury | Twitter Website
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have released proposed guidance on the Clean Electricity Production Credit and Clean Electricity Investment Credit, established under President Biden’s Inflation Reduction Act. This move aims to provide clarity to developers of clean electricity projects, furthering President Biden’s Investing in America Agenda, supporting American jobs, and enhancing energy production and security while reducing energy costs for consumers.
The Inflation Reduction Act transitions from the existing Production Tax Credit (section 45) and Investment Tax Credit (section 48) to the new Clean Electricity Production Credit (section 45Y) and Clean Electricity Investment Credit (section 48E) for projects placed in service after December 31, 2024. These new credits incentivize any clean energy facility that achieves net-zero greenhouse gas emissions, offering long-term clarity and certainty to investors and developers.
Following extensive consultation with interagency experts, today’s Notice of Proposed Rulemaking (NPRM) identifies specific technologies meeting high environmental standards set out in the Inflation Reduction Act. Recognized technologies include wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal, and certain types of waste energy recovery property (WERP). The guidance also clarifies how energy storage technologies would qualify for the Clean Electricity Investment Credit. Technologies relying on combustion or gasification must undergo a lifecycle greenhouse gas analysis to demonstrate net-zero emissions.
“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,” said 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.”
John Podesta, Senior Advisor to the President for International Climate Policy, emphasized that these credits are crucial for tackling the climate crisis: “Today’s initial guidance from Treasury will help provide long-term certainty to investors and developers.”
Assistant to the President and National Climate Advisor Ali Zaidi noted that these measures will support American manufacturing: “Thanks to the Biden-Harris Administration’s efforts, American families are expected to save up to $38 billion on their electricity bills by 2030.”
The proposed rules generally follow existing Production and Investment Tax Credits rules, providing clarity for developers moving forward with clean energy projects. Any future changes or designations related to zero greenhouse gas emissions technologies must be accompanied by an analysis prepared by DOE's National Labs.
The NPRM also includes proposed rules clarifying costs related to interconnection-related property for lower-output clean energy facilities eligible for the Clean Electricity Investment Tax Credit. Public comments on these proposed rules will be accepted for 60 days following publication in the Federal Register, with a public hearing scheduled on August 12-13.
Studies indicate that these credits are vital for accelerating U.S. emissions reductions. A Rhodium Group study predicts that by 2035, these credits could reduce power sector carbon emissions by up to 73% below 2022 levels.
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