IRA Section 13701 – Clean Electricity Production Credit

Section 13701 of the IRA inserts a new section 45Y into the IRC, establishing a Clean Electricity Production Credit for qualifying facilities generating clean energy. To qualify, a facility must be placed in service after December 31, 2024, used to generate electricity, and have a greenhouse gas emissions rate of zero. The term “greenhouse gas emissions rate” is defined to mean “the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity.” The definition expressly states that carbon dioxide captured and “disposed of . . . in secure geologic storage or used” in approved ways will not be treated as “emitted into the atmosphere.” The Secretary of the Treasury is required to “annually publish a table setting out the greenhouse gas emissions rates for types or categories of facilities.”

The credit starts at a base rate of 0.3 cents per kilowatt hour of electricity produced at a qualified facility and sold to an unrelated person. A higher base rate (1.5 cents) applies to small facilities, with a maximum output of less than 1 megawatt, that meet certain wage and apprenticeship requirements. The rate will be adjusted for inflation. The Secretary of Treasury must publish a schedule of inflation adjusted rates annually.

A qualifying facility may claim the credit for 10 years from the date it is first placed into service. The credit will begin phasing out in 2032 or when greenhouse emissions from electricity production in the United States are equal to or less than 25 percent of 2022 emissions (whichever is later). The credit will be fully phased-out four years after that time.

This credit effectively extends the section 45 production tax credit to facilities placed in service after 2024.