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The United States has allocated $4 billion in tax credits, with $2.7 billion designated for energy manufacturing and recycling, through the 48C program.

published: 2024-04-11 16:42

The U.S. Department of Energy (DOE), the U.S. Department of Treasury, and the Internal Revenue Service (IRS) have jointly announced the allocation of $4 billion in tax credits for more than 100 projects in 35 states. The aim is to expedite the development of domestic clean energy manufacturing and reduce greenhouse gas emissions at industrial facilities. These projects, which are supported by the Qualifying Advanced Energy Project Tax Credit (48C) under President Biden’s Inflation Reduction Act, encompass a wide range of businesses, state and local governments, and are subject to prevailing wage and apprenticeship requirements in order to receive a 30% investment tax credit.

Out of the $4 billion tax credits, $1.5 billion will be directed towards projects in historic energy communities. These initiatives are expected to generate well-paying jobs, decrease energy expenses, and contribute to the climate, supply chain, and energy security objectives of the Biden-Harris Administration’s Investing in America agenda.

U.S. Secretary of Energy Jennifer M. Granholm emphasized the significance of the President’s Investing in America agenda in making the country an attractive location for investment in clean energy manufacturing. The agenda places particular emphasis on communities that have historically powered the nation, ensuring that they benefit economically from the transition to clean energy and continue to play a pivotal role in developing the next generation of energy sources.

The Qualifying Advanced Energy Project Tax Credit (48C), funded by the President’s Inflation Reduction Act, is being implemented through a partnership between the DOE, Treasury, and IRS. The DOE’s Office of Manufacturing & Energy Supply Chains (MESC) is responsible for managing the § 48C Program on behalf of the IRS and Treasury. Originally established by the American Recovery and Reinvestment Act of 2009, the § 48C Program has been expanded with a $10 billion investment under the Inflation Reduction Act of 2022. At least $4 billion of the total $10 billion will be earmarked for projects in designated § 48C energy communities—communities with closed coal mines or coal plants as defined in Appendix C of IRS Notice 2023-44. The § 48C Program offers an investment tax credit of up to 30% of qualified investments for certified projects that meet prevailing wage and apprenticeship requirements.

The § 48C Program garnered significant interest from the industry in Round 1. Applicants submitted concept papers—a project proposal—seeking a total of nearly $42 billion in tax credits across all project categories, including nearly $11 billion for projects in designated energy communities census tracts. DOE received approximately 250 full applications from projects requesting a total of $13.5 billion in tax credits. The applications varied widely in terms of the size and scope of the projects, with requests for tax credits ranging from under $1 million to over $100 million.

  • 48C(e) Round 1 allocations and application overview

Clean energy manufacturing and recycling: $2.7 billion in tax credits (67% of round 1 tax credits)

  • Selected from applications requesting support for the buildout of U.S. manufacturing capabilities critical for clean energy deployment and span clean hydrogen (e.g., electrolyzers, fuel cells, and subcomponents), grid (e.g., cables, conductors, transformers, and energy storage), electric vehicles (e.g., battery components, power electronics), nuclear power, solar PV, and wind energy (including offshore wind components), among other industries and components critical to supporting secure and resilient domestic clean energy supply chains. 

Critical materials recycling, processing, and refining: $800 million in tax credits (20% of round 1 tax credits) 

  • Selected projects are investing in multiple electrical steel applications, lithium-ion battery recycling, and rare earth projects, all critical areas for maintaining a secure, reliable energy system and advancing the clean energy transition. 

Industrial decarbonization: $500 million in tax credits (13% of round 1 tax credits)

  • Selected projects would implement decarbonization measures across diverse sectors, including chemicals, food and beverage, pulp and paper, biofuels, glass, ceramics, iron and steel, automotive manufacturing, and building materials. Low-carbon fuels, feedstocks, and energy sources are well-represented as a solution for decarbonization across these projects. 

The §48C program aims to facilitate the nation's fair transition to a clean, secure, affordable, and resilient energy system, while also reducing industrial greenhouse gas emissions and generating high-quality jobs nationwide.

For selected projects to qualify for the tax credit, project details must be submitted to the 48C portal within two years for certification. Subsequently, the project must be put into operation within an additional two years following certification.

As mandated by law, the §48C(e) program will disclose the names of all organizations with certified projects and the corresponding allocation amounts after the projects are certified. Prior to certification, the program is prohibited by law from disclosing identifying information about allocation recipients or their projects without the applicant's consent. Allocation recipients are not currently obligated to publicly share information about their allocation, although some may choose to do so voluntarily. Those interested in voluntarily participating in forthcoming DOE announcements may reach out to the DOE, and such participation will not impact the recipient's allocation in any way.

The U.S. Department of Treasury and Internal Revenue Service will release a notice for the second round of the §48C program in the coming months, with the concept paper submission window expected to open this summer.

Source:U.S. Department of Energy

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