Biden widens IRA tax credits beyond wind and solar in new green parting shot

Outgoing President Joe Biden’s administration has released guidance today extending solar and wind power tax credits to several other clean energy sources.

The Treasury Department's the new guidance issued today extends Inflation Reduction Act (IRA) production and investment tax credits (PTC/ITC) to a range of qualified clean energy technologies, including geothermal, hydropower, and nuclear energy.

“The final rules issued today will help ensure America’s clean energy investment boom, good-paying construction jobs, and strengthening energy security by making the US more resistant to price shocks,” Treasury secretary Janet Yellen said.

Neither biomass nor energy storage are included in Treasury's list of qualifying technologies, however.

“Today’s final guidance helps provide clean energy producers the clarity needed to deploy more clean energy solutions at scale to drive down costs for more American families and deliver future-facing careers for America’s workforce,” said Energy secretary Jennifer Granholm.

The move is the latest by the outgoing administration to firm up the nation’s transition to clean energy as renewables skeptic Donald Trump is set to be inaugurated 20 January.

“The United States must adopt an all-of-the-above energy strategy to meet surging demand for electricity across the country," said Abigail Ross Hopper, CEO of Solar Energy Industries Association, a national trade group.

“This tax credit is critical for driving investments in American-made energy projects across a range of technologies, particularly solar, which is adding more capacity to the energy grid than any other fuel source,” she added.

“At long last, we have a well-designed, technology-neutral, level playing field for energy tax policy that will lead to significant economic growth, job creation, and lower costs,” said Ray Long, CEO of American Council on Renewable Energy.

Jason Grumet, CEO of ACP, said: “The transition from technology specific incentives to a performance-based system is key to encouraging broad technology innovation and increasing overall program effectiveness.”

IRA tax credits

Under the terms of the IRA, included technologies will have the option to choose either ITCs or PTCs. To avoid market confusion, the technology-neutral incentives will continue the current ITC value of 30% of project capital investment and $27.50/MWh for the PTC, although this will be adjusted for 2024 inflation.

Both credits will have potential adders or penalties against each and be subject to identical wage and apprenticeship, domestic content, energy community, and other criteria. ITC value could be as low as 6% or as high as 50%, and perhaps 60% in limited cases, while PTC value range is an inflation-adjusted $3/MWh to $33.50/MWh.

The technology-neutral credits are scheduled to phase out either at the end of 2032 or when national electricity sector greenhouse gas emissions fall below 25% of the 2022 level, whichever occurs later.

If the 2032 target is met, the ITCs and PTCs will begin to sunset starting in 2034. Projects starting construction that year will be entitled to 75% of their value, then 50% in 2035, and zero in 2036.

If not, this proposed timeline would be extended.