As published on: 4coffshore.com, Monday 20 November, 2023.
The U.S. Department of the Treasury and Internal Revenue Service (IRS) have unveiled comprehensive guidance on the Investment Tax Credit (ITC) under Section 48 of the Internal Revenue Code, designed to catalyze the investment surge spurred by President Biden’s Inflation Reduction Act.
This guidance offers crucial clarity and certainty to the private sector, empowering informed investment decisions for clean energy projects. With the Inflation Reduction Act introducing new and expanded incentives, this clarification becomes pivotal as companies seek financing for clean energy endeavors, foster employment opportunities nationwide, and fortify the country’s energy resilience.
Deputy Secretary of the Treasury Wally Adeyemo remarked, “To sustain the investment and job growth instigated by the Inflation Reduction Act, Treasury has prioritized providing companies with the clarity and certainty required to secure funding and propel clean energy initiatives across the nation. Today’s guidance specifically addresses offshore wind and battery storage projects, along with smaller-scale projects reliant on grid connectivity. Facilitating the efficient progression of these projects stands as a cornerstone in creating well-paying jobs within the clean energy sector and reducing Americans’ utility expenses.”
John Podesta, Senior Advisor to the President for Clean Energy Innovation and Implementation, highlighted, “The Inflation Reduction Act has already ignited a surge in clean energy investments in America. The guidance released today by Treasury regarding the Investment Tax Credit empowers clean energy developers with enhanced clarity and confidence to sustain their momentum.”
The Notice of Proposed Rulemaking (NPRM) brings forth clarity on the eligibility of power conditioning and transfer equipment, such as subsea export cables used in offshore wind projects, and certain power conditioning equipment situated in onshore substations.
Furthermore, the NPRM outlines proposed rules concerning the eligibility of stand-alone battery storage for the ITC. This aligns with a crucial provision in the Inflation Reduction Act aimed at bolstering the development of utility-scale, long-duration energy storage, vital for ensuring reliability as utilities transition to renewable sources like wind and solar.
Moreover, the NPRM includes proposed rules concerning the inclusion of costs associated with interconnection-related property for lower-output clean energy installations, encompassing upgrades to local transmission and distribution networks necessary for clean energy integration. These modifications align with pivotal changes in the Inflation Reduction Act, aiming to minimize costs and circumvent delays for new, smaller clean energy installations seeking grid connectivity to commence power production.
Finally, the NPRM proposes updates to various technical definitions and rules, further fostering clarity and certainty for developers of clean energy projects. Treasury and the IRS will welcome comments on the NPRM for a period of 60 days, meticulously considering all feedback as part of the rulemaking process.