U.S. Treasury to Open Applications for Advanced Energy Tax Credits
The U.S. Treasury has announced that it will be launching applications for advanced energy manufacturing and decarbonization projects worth $4 billion in tax credits. Out of the total, $1.6 billion is reserved for communities affected by the closure of coal mines or coal-fired power plants.
Expanding U.S. Manufacturing Capacity with Clean Energy Technologies
The Treasury has issued initial guidance for the Inflation Reduction Act program aimed at expanding U.S. manufacturing capacity and job creation in clean energy technologies. The program also offers tax incentives for small-scale solar and wind power projects in low-income and disadvantaged communities.
Qualifying Projects and Eligibility Criteria
Congress has approved a total of $10 billion worth of advanced energy project tax credits, with $4 billion set aside for coal communities. To be eligible, applicants must submit a “concept paper” to the Department of Energy by July 31st. Qualifying projects include those that capture or sequester carbon dioxide, produce hydrogen with zero or low-emissions energy, produce renewable biofuels, battery electric vehicles, and charging infrastructure.
Low-Income Communities to Receive Bonus Tax Credits
The IRA program also offers a bonus 10% or 20% tax credit on top of the general 30% tax credit for wind and solar projects in low-income and disadvantaged “environmental justice” communities. The Treasury has estimated that this bonus credit could drive more than 1,000 new projects annually.
Allocating Project Capacity for Low-Income Communities
For 2023, 700 megawatts of project capacity will be allocated for facilities located in low-income communities with a poverty rate of at least 20% and median income less than 80% of its state average. Another 700 megawatts of capacity will be reserved for households with incomes below 200% of the poverty line or below 80% of the area median income.
Application Process for Low-Income Communities Bonus Credit
The application process for the Low-Income Communities Bonus Credit program will open in 2023 in two phases. Applications for facilities that are part of low-income residential buildings and those that benefit low-income households will be accepted first, followed by applications for other projects.