The US Department of the Treasury and the Internal Revenue Service (IRS) have released the final rules for the Section 48 Energy Credit, also known as the Investment Tax Credit (ITC), which keep the core framework of the rules proposed in November 2023, but include clarifications in response to stakeholder comments.
The final rules will provide additional clarity and certainty to the developers of clean energy projects, the Treasury said last week.
The ITC has supported US clean energy with a tax credit covering 30% of project costs, but its effectiveness was limited by the need for recurring extensions, the department explained. The Inflation Reduction Act extended the ITC and the Production Tax Credit (PTC) until 2025, after which both credits will become tech-neutral and will be available for projects starting construction at least through 2033.
“By ending short-term legislative extensions for the Investment Tax Credit, the Inflation Reduction Act has given clean energy project developers clarity and certainty to undertake major investments and produce new clean power to meet growing electricity demand,” said US Deputy Secretary of the Treasury Wally Adeyemo.
With respect to offshore wind, the final rules keep the clarification made in the proposed rules that owners of offshore wind farms can claim the credit for power conditioning and transfer equipment, such as subsea cables, that they own.
The final rules also clarify that a section 48 credit may be claimed for energy storage technology that is co-located with and shares power conditioning equipment with a qualified facility for which a section 45 credit is claimed.
The issues addressed in the final rules further include a clarification that hydrogen energy storage property does not need to store hydrogen that is solely used as energy and not for other purposes.
The Fuel Cell & Hydrogen Energy Association (FCHEA) welcomed the announcement in a Linkedin post, saying that the final guidance includes several key changes championed by the association, among them removing the energy only use requirement for hydrogen storage equipment and expanding the list of supported equipment under the credit to include limited hydrogen pipelines and liquefaction equipment.
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