In an effort to continue the investment boom in clean energy production, the U.S. Department of the Treasury and Internal Revenue Service (IRS) have released proposed guidance on the Clean Electricity Production Credit and Clean Electricity Investment Credit. These credits were established under President Biden's Inflation Reduction Act and are aimed at supporting clean electricity projects, creating jobs, and enhancing energy production and security while reducing costs for consumers.

The Inflation Reduction Act replaces the existing Production Tax Credit and Investment Tax Credit with the Clean Electricity Production Credit and Clean Electricity Investment Credit for projects placed in service after December 31, 2024. These new credits represent a significant reform, offering incentives to any clean energy facility that achieves net-zero greenhouse gas emissions.

To provide clarity and determine eligibility, the proposed guidance identifies specific technologies that meet the environmental standards outlined in the Inflation Reduction Act. These technologies include wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal, and certain types of waste energy recovery property.

The guidance also addresses the inclusion of energy storage technologies for the Clean Electricity Investment Credit. Clean energy technologies that rely on combustion or gasification to produce electricity must undergo a lifecycle greenhouse gas analysis to demonstrate net-zero emissions. The proposed rules seek public comment on the requirements for combustion and gasification technologies.

U.S. Treasury Secretary Janet L. Yellen emphasized the positive impact of the Clean Electricity Tax Credits, stating that they provide certainty to the market and are poised to drive substantial growth while lowering utility bills in the long run. John Podesta, Senior Advisor to the President for International Climate Policy, hailed the guidance as a meaningful step towards tackling the climate crisis and fostering innovation in zero-emission technologies.

The guidance aligns with President Biden's goal of achieving a 100 percent clean power sector. According to Ali Zaidi, Assistant to the President and National Climate Advisor, the U.S. is projected to build more new electric generation capacity this year than in the past two decades, with 96 percent of it being clean. These efforts are expected to result in estimated savings of up to $38 billion on electricity bills for American families and a 15% decrease in electricity costs for businesses by 2030.

Treasury is soliciting written comments from the public on the proposed rules, and a public hearing will be held on August 12 and 13. The department will carefully consider these comments before finalizing the rules. The guidance also emphasizes the importance of grounding the rules in scientific analysis and transparency, proposing that any changes to the designated technologies or greenhouse gas emissions models must be accompanied by an analysis from the U.S. Department of Energy's National Labs.

Independent studies have shown that the Clean Electricity Production and Investment Credits play a crucial role in accelerating U.S. emissions reductions. A recent Rhodium Group study indicates that these credits could reduce power sector carbon emissions by 43-73% below 2022 levels by 2035, save consumers up to $34 billion in annual electricity costs, and add nearly 650 gigawatts of clean electricity to the grid.

Overall, the proposed guidance sets the stage for increased investment in clean energy projects, ensuring long-term clarity for investors and developers. By promoting the deployment of zero-emission technologies, the U.S. aims to address climate change, bolster economic growth, and secure a sustainable future for generations to come.