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Renewable Energy & Low-Carbon Fuels, Electrification, End-Use Emissions Reductions | Key Opportunities
from Legence - The U.S. Inflation Reduction Act (IRA): Key Provisions Impacting the Built Environment
by Legence
IRA STATUTORY LOCATION:
13102 (SECT. 48) | INVESTMENT TAX CREDIT FOR ENERGY PROPERTY
PERIOD OF AVAILABILITY: Projects beginning construction prior to January 1, 2025. For geothermal heat property, the base investment tax credit is 6 percent for the first 10 years, scaling down to 5.2 percent in 2033 and 4.4 percent in 2034.
Prevailing wage and apprenticeship requirements go into requirement for projects started on or after January 30, 2023.
AMOUNT: Base credit of 6 percent of qualified investment (basis of energy property), with eligibility for bonus credits.
Bonus Credit Amount: Credit is increased by up to 10 percentage points for projects meeting certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by up to 10 percentage points if located in an energy community.
Prevailing wage and apprenticeship requirements take effect for projects larger than 1MW that begin construction on or after January 30, 2023. The bonus rate will increase to 30 percent.
DESCRIPTION: Extends and modifies the energy investment tax credit for investment in renewable energy projects.
ELIGIBLE RECIPIENTS: Fuel cell, solar, geothermal, small wind, energy storage, biogas, microgrid controllers, and combined heat and power properties. For solar, includes (1) equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, to provide solar process heat, and (2) equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight or electrochromic glass that uses electricity to change its light transmittance properties in order to heat or cool a structure.
IRA STATUTORY LOCATION:
13101
(SECT. 45) | PRODUCTION TAX CREDIT FOR ELECTRICITY FROM RENEWABLES
PERIOD OF AVAILABILITY: Projects beginning construction prior to January 1, 2025
AMOUNT: Base credit of $0.03/kW (inflation-adjusted), with bonus credit eligibility
Bonus Credit Amount:
Credit is increased by 10 percent if the project meets certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by 10 percent if located in an energy community.
Prevailing wage and apprenticeship requirements take effect for projects larger than 1MW that begin construction on or after January 30, 2023. The bonus rate will increase to 30 percent.
DESCRIPTION: Extends and modifies the existing production tax credit for production of electricity from renewable sources.
ELIGIBLE RECIPIENTS: Facilities generating electricity from wind, biomass, geothermal, solar, small irrigation, landfill and trash, hydropower, and marine and hydrokinetic renewable energy.
IRA STATUTORY LOCATION:
13702(H)
(SECT. 48E) | [TECHNOLOGY-NEUTRAL] CLEAN ELECTRICITY INVESTMENT TAX CREDIT
PERIOD OF AVAILABILITY: Facilities placed in service after December 31, 2024. Phase-out starts the later of (a) 2032 or (b) when U.S. GHG emissions from electricity are 25 percent of 2022 emissions or lower.
AMOUNT: Base credit of 6 percent of qualified investment, with eligibility for bonus credits, including IRA Sect. 13703.
Bonus Credit Amount:
Credit is increased by 10 percent if the project meets certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by 10 percent if located in an energy community.
Prevailing wage and apprenticeship requirements take effect for projects larger than 1MW that begin construction on or after January 30, 2023. The bonus rate will increase to 30 percent.
DESCRIPTION: Provides a technology-neutral tax credit for investment in facilities that generate clean electricity. Replaces the investment tax credit for facilities generating electricity from renewable sources (extended in Section 13202 through 2024).
ELIGIBLE RECIPIENTS: Facilities that generate electricity with a greenhouse gas emissions rate that is not greater than zero and qualified energy storage technologies.
Additional Information: Section 13703 offers an additional tax deduction for facilities or property qualifying for this tax credit. These facilities or property will be treated as a 5-year property for purposes of cost recovery; meaning, they will be able to deduct from their taxable income the depreciating value of their business assets, such as equipment, faster than the value actually declines. In practical terms, qualifying facilities or property will be able to take bigger deductions—leaving them with lower taxable income—in the earlier years of a clean energy investment.
IRA STATUTORY LOCATION: 13701 (SECT. 45Y) | [TECHNOLOGY-NEUTRAL] CLEAN ELECTRICITY PRODUCTION TAX CREDIT
PERIOD OF AVAILABILITY: Facilities placed in service after December 31, 2024. Phase-out starts the later of (a) 2032 or (b) when U.S. GHG emissions from electricity are 25 percent of 2022 emissions or lower.
AMOUNT: Base credit of $0.03/kW (inflation-adjusted), with bonus credit eligibility, including IRA Sect. 13703.
Bonus Credit Amount: Credit is increased by 10 percent if the project meets certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by 10 percent if located in an energy community.
Prevailing wage and apprenticeship requirements take effect for projects larger than 1MW that begin construction on or after January 30, 2023. The bonus rate will increase to 30 percent.
DESCRIPTION: Provides a technology-neutral tax credit for production of clean electricity. Replaces the production tax credit for electricity generated from renewable sources (extended in Section 13201 through 2024).
ELIGIBLE RECIPIENTS: Facilities generating electricity for which the greenhouse gas emissions rate is not greater than zero.
Additional Information: Section 13703 offers an additional tax deduction for facilities or property qualifying for this tax credit. These facilities or property will be treated as a 5-year property for purposes of cost recovery; meaning, they will be able to deduct from their taxable income the depreciating value of their business assets, such as equipment, faster than the value actually declines. In practical terms, qualifying facilities or property will be able to take bigger deductions—leaving them with lower taxable income—in the earlier years of a clean energy investment.
IRA STATUTORY LOCATION: 13404
(SECT. 30C) | ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY CREDIT
PERIOD OF AVAILABILITY: From January 1, 2023 to December 31, 2032
AMOUNT: Base credit of 6 percent of the cost for businesses, limited to a $100,000 credit per item of property for businesses. Eligible for bonus credits.
Bonus Credit Amount: Businesses can claim a 30 percent credit for projects meeting prevailing wage and registered apprenticeship requirements. This form can be used to calculate general business credits.
DESCRIPTION: Provides a tax credit for alternative fuel vehicle refueling and charging property in low-income and rural areas. Alternative fuels include electricity, ethanol, natural gas, hydrogen, biodiesel, and others.
ELIGIBLE RECIPIENTS: The qualified alternative fuel vehicle refueling property credit must be for clean-burning fuels, as defined in the statute, and must be located in low-income or rural areas.
IRA STATUTORY LOCATION: 60101 | CLEAN HEAVY-DUTY
Vehicles
PERIOD OF AVAILABILITY: To remain available until September 30, 2031
AMOUNT: $1,000,000,000
FUNDING MECHANISM: Competitive grants and rebates
DESCRIPTION: To provide funding to offset the costs of replacing heavy-duty Class 6 and 7 commercial vehicles with zero-emission vehicles; deploying infrastructure needed to charge, fuel, or maintain these zero-emission vehicles; and developing and training the necessary workforce.
ELIGIBLE RECIPIENTS: Program covers up to 100 percent of costs for (1) incremental cost of replacing an existing heavy-duty vehicle with zero-emission vehicle; (2) purchasing and operating associated infrastructure; (3) workforce development and training; (4) planning and technical activities.
IRA STATUTORY LOCATION: 13501 (SECT. 48C) | ADVANCED ENERGY PROJECT CREDIT
PERIOD OF AVAILABILITY: The credit is available when the application and certification process begins and ends when credits ($10,000,000,000) are fully allocated.
Per guidance released by the U.S. Department of Treasury in February 2023, the first allocation round (Round 1) will begin on May 31, 2023, and will allocate $4 billion of qualifying advanced energy project credits with approximately $1.6 billion allocated for projects located in certain energy communities.
AMOUNT: Base credit of 6 percent of qualifying investment, with eligibility for bonus credits.
Bonus Credit Amount: Businesses can claim a 30 percent credit for projects meeting prevailing wage and registered apprenticeship requirements.
DESCRIPTION: Provides a tax credit for investments in advanced energy projects, as defined in 26 USC § 48C(c)(1)
ELIGIBLE RECIPIENTS: A project that (1) re-equips, expands, or establishes an industrial or manufacturing facility for the production or recycling of a range of clean energy equipment and vehicles;
(2) re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent; or (3) re-equips, expands, or establishes an industrial facility for the processing, refining, or recycling of critical minerals.
