By David Lawder
WASHINGTON (Reuters) – The U.S. Treasury Department said on Monday it is overwhelmed by applications for clean energy tax credits in low-income communities, with officials estimating that the energy generated by proposed wind and solar projects will exceed the targeted allocation would surpass this year’s by more. then four times.
THE TAKE:
The clean energy tax credits in President Joe Biden’s Inflation Reduction Act of 2022 are designed to provide a 10-20% bonus on top of the base 30% tax credit if projects are located in low-income communities, on Native American lands or on some affordable housing projects. The aim was to stimulate investment to economically disadvantaged groups that have long suffered from job losses.
Data released Monday shows robust demand for the additional tax credit, for projects estimated to be worth billions of dollars. With demand exceeding available capacity, Treasury will prioritize those owned by nonprofits, local or tribal governments or worker cooperatives, in addition to location criteria, a Treasury spokesperson said. The spokesperson added that a lottery system could also be used for allocations that meet similar criteria.
BY THE NUMBERS:
During its initial 30-day application period, the IRA’s Low-Income Communities Bonus Credit Program received more than 46,000 applications for new wind and solar projects, representing more than 8 gigawatts of proposed capacity. The allocation for the 2023 program is only 1.8 gigawatts.
Clean energy developers will still get the 30% base tax credit for these projects if they move forward this year. They may also be able to wait until the 2024 program opens for another 1.8 gigawatts of capacity.
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KEY QUOTE:
“One of the goals of President Biden’s Inflation Reduction Act is to ensure that all Americans benefit from the growth of the clean energy economy,” Deputy Treasury Secretary Wally Adeyemo said in a statement. “The skyrocketing demand for this new program shows that communities long held back by a lack of investment will see significant benefits from these resources.”
PROGRAM PARAMETERS
The program is available for four categories of qualified wind and solar energy facilities with a maximum capacity of less than five megawatts.
The Internal Revenue Service has announced its intention to allocate up to 700 megawatts of capacity to low-income communities; 200 megawatts for Indian territories, 200 megawatts for federally subsidized residential buildings; and 700 megawatts for projects where half of the financial benefits go to low-income households.
The IRS could choose to reallocate some of the 2023 program capacity to different categories, the Treasury Department said.
