Final Rules for Tax Credits to Spur Clean Energy Investments in US
The final rules clarify which clean energy technologies qualify for the credits
January 13, 2025
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The U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) have released final rules for the clean electricity investment and production tax credits (technology-neutral credits).
The new rules are detailed in the tax code’s sections 45Y, which establishes a ‘clean electricity production tax credit’ and 48E, incentivizing investments in facilities that generate clean electricity.
The Treasury and IRS had proposed the technology-neutral credits in June 2024.
The final rules clarify which clean electricity zero-emissions technologies qualify for the credits. These include wind, solar, hydropower, marine and hydrokinetic, geothermal, nuclear, and specific waste energy recovery technologies.
They also clarify how combustion and gasification technologies can qualify in the future and how lifecycle analysis assessments compliant with the statute will be conducted.
Technology-neutral clean electricity production and investment tax credits are also eligible for bonus credits related to existing projects in energy communities and meeting domestic content standards.
These credits aim to utilize affordable power to reduce energy costs for American families and businesses to meet the growing demand created by significant investments in the U.S. economy.
The existing production and investment tax credit will be available to projects that began construction before 2025. Qualifying projects in service after December 31, 2024, will be eligible for the new clean electricity credits.
According to the Department of Energy, the tech-neutral credits and other Inflation Reduction Act and Bipartisan Infrastructure Law provisions target saving American families up to $38 billion on electricity bills through 2030.
Clean electricity credits encourage innovation by allowing new zero-emissions technologies to develop over time and providing durable incentives for companies to invest in clean energy technologies, which is already contributing to the clean energy investment and manufacturing boom.
The Treasury and the IRS are expected to release the first annual table confirming the list of qualifying technologies soon.
The final rules also stipulate that future changes to the list of zero-emissions technologies will require an analysis from the U.S. Department of Energy’s National Labs in consultation with inter-agency and other experts.
The National Labs are analyzing the lifecycle emissions of electricity production using biomass technologies based on the requirements in the final rules.
To receive the full value of the credits, applicants must meet the standards for paying prevailing wages, employing registered apprentices, and ensuring growth in the clean energy job sector.
Treasury and IRS also released final rules and procedural guidance for the Section 48E(h) Clean Electricity Low-Income Communities Bonus Credit Amount Program. This program expands the first-of-its-kind 48(e) bonus credit, designed to lower home energy costs and spur clean energy investments in low-income communities and benefit low-income households.
Mixed Reactions
The final rules drew a mixed response from stakeholders.
Solar Energy Industries Association president Abigail Ross Hopper said the tax credit is critical for driving investments in American-made energy projects across various technologies, specifically solar. She expects the U.S. solar and storage industry to add over 200 GW of new capacity to the grid, nearly doubling its current size.
American Council on Renewable Energy president Ray Long expects the technology-neutral tax credit to decrease the average annual electric bill by $29 to $74 per household by 2031 and $42 to $95 by 2035.
In December 2024, The U.S. Department of the Treasury issued final regulations for the Section 48 Energy Credit which typically provides a 30% tax credit for clean energy projects.