U.S. Treasury Proposes Guidelines for Clean Electricity Tax Credits

The U.S. Department of the Treasury and Internal Revenue Service (IRS) have unveiled proposed guidance on the Clean Electricity Production Credit and Clean Electricity Investment Credit, established under President Biden’s Inflation Reduction Act. The move aims to offer clarity to developers of clean electricity projects, supporting the administration’s Investing in America Agenda while bolstering energy production, security, and job creation.

Under the Inflation Reduction Act, existing Production and Investment Tax Credits will be phased out and replaced by the Clean Electricity credits, limited to projects beginning construction before 2025. These new credits incentivize any clean energy facility achieving net zero greenhouse gas emissions, providing long-term certainty to investors and developers.

The proposed guidance identifies specific technologies meeting high environmental standards set by the Act, including wind, solar, hydropower, nuclear, geothermal, and waste energy recovery property (WERP). Energy storage technologies also qualify for the Clean Electricity Investment Credit.

Treasury Secretary Janet L. Yellen highlighted the Act’s role in driving investment, reducing consumer energy costs, and curbing emissions. Senior Advisor to the President John Podesta emphasized the guidance’s significance in supporting zero-emission innovations and achieving climate goals.

Assistant to the President and National Climate Advisor Ali Zaidi noted the expected benefits, including reduced electricity costs and increased clean energy deployment. The proposed rules, modeled after existing tax credits, offer clarity and certainty to developers.

The Treasury encourages public feedback on the proposed rules, which will be accepted for 60 days following publication in the Federal Register. A public hearing is scheduled for August 12 and 13. The Clean Electricity Production and Investment Credits are seen as crucial for accelerating emissions reductions and advancing clean energy objectives, according to external studies.