President Biden signed the Inflation Reduction Act of 2022 (HR 5376) (the Act) into law on August 16, 2022. This update provides a high level overview of the Act’s incentives for the energy sector. We have published a separate update regarding the Act’s energy storage incentives.
The Act provides $750 billion for a range of issues, including $400 billion for energy and climate. The Act—a slimmed down version of the Build Back Better bill—also makes substantial policy changes. It should have an immediate effect on the wind and solar industries, as well as other energy projects. The Act contains numerous tax credits, rebates, and other incentives.
The following incentives are provided (note that the details are particularly important, because the Investment Tax Credit (ITC) and the Production Tax Credit (PTC) have additional strings attached, as well as bonuses, as further described below).
There are two significant strings attached. First, to receive the ITC or PTC, a project must pay prevailing wages during construction and the initial period of operation (first five years for the ITC, or ten years for the PTC). Second, 10-15% of the project’s labor hours must be performed by “qualified apprentices” participating in a registered program under the National Apprenticeship Act. (If either requirement is not satisfied, a project can still qualify for the full ITC or PTC by paying a penalty to the IRS.) Failure to meet these conditions will reduce the tax credit by 80%.
A project that qualifies for all bonuses could receive a 50% tax credit.
Energy Security and Domestic Manufacturing
The Act includes the Advanced Manufacturing Production Credit, which will be available to companies that manufacture clean energy equipment in the U.S., such as PV cells and wafers, polysilicon, solar modules, wind energy components, battery cells, battery modules, and critical minerals.
The Act provides $60 billion for domestic manufacturing of clean energy and transportation technologies, including:
The Act is expected to reduce emissions in every sector of the U.S. economy. It mandates a Methane Emissions Reduction Program to reduce the leaks from the production and distribution of natural gas. It also provides tax credits and grants for clean fuels and clean commercial vehicles, including a Clean Fuel Production Credit.
Funding is projected to include:
Transportation Infrastructure and Community Investment
The Act is expected to provide over $60 billion for environmental justice initiatives relevant to companies in multiple industries, including energy and transportation. Funding under the Act includes:
The Act will provide funding to mitigate the high cost of energy, including consumer incentives to buy electric appliances, clean vehicles, residential solar, and home energy efficiency:
The Act also supports agriculture, forest management, and land conservation:
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.
Copyright © JD Supra, LLC