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Inflation Reduction Act and renewable energy development: its advantages and limitations

The Inflation Reduction Act of 2022 ("IRA") was signed into law by President Joe Biden on Aug. 16. The IRA represents a significant investment by the federal government in renewable energy and related technologies and provides welcome relief to developers of and investors in renewable energy projects.

Many of the renewable energy provisions in the IRA are similar to provisions that were originally proposed in the Build Back Better Act, which failed to gain legislative traction at the end of 2021, but there are significant differences.

 

Some of the highlights of the IRA include:

•An extension through 2024 of the existing 30% investment tax credit ("ITC") for solar, qualified fuel cell, waste energy recovery, geothermal and other designated electricity generation facilities. Under prior law the 30% ITC for solar energy property was scheduled to phase down between 2020 and 2023. Certain solar projects placed in service before 2022, however, may qualify only for a 26% ITC.

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•An extension through 2024 of the existing production tax credit ("PTC") for wind, biomass, landfill gas, trash, qualified hydropower, and other designated electricity generation facilities. Under prior law the PTC for wind facilities phased out between 2017 and 2021.

•Creation of two new tax credits for projects that are placed in service after 2024: the Clean Electricity Investment Credit and the Clean Electricity Production Credit. These credits operate similarly to the existing ITC and PTC but are technology neutral. The new credits would apply to any electricity generating facility of a type that the Secretary of Treasury determines on an annual basis has an "anticipated greenhouse gas emissions rate" that is not greater than zero. The Clean Electricity Investment Credit will also apply to standalone battery storage technology. The new credits are scheduled to phase out for any qualified facility with respect to which construction begins after the later of 2032, or the year in which the Secretary of Treasury determines that annual greenhouse gas emissions from electricity production in the U.S. is less than 25% of 2022 levels.

 https://www.reuters.com/legal/legalindustry/inflation-reduction-act-renewable-energy-development-its-advantages-limitations-2022-09-23/

 

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