IRA Section 13702 – Clean Electricity Investment Credit

Section 13702 of the IRA inserts a new section 48E into the IRC, establishing a Clean Electricity Investment Credit for investments in qualifying zero-emission electricity generating facilities and qualifying energy storage facilities. Qualifying zero-emission electricity generating facilities are defined as facilities that are placed in service after December 31, 2024, used to generate electricity, and have an anticipated greenhouse gas emissions rate of zero or less. 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.”

Qualifying energy storage facilities are defined as facilities that receive, store, and deliver energy for conversion to electricity (or, in the case of hydrogen, which store energy), and have a nameplate capacity of not less than 5 kilowatt hours. The definition also includes thermal energy storage facilities comprising a system which is directly connected to a heating, ventilation, or air conditioning system, removes heat from, or adds heat to, a storage medium for subsequent use, and provides energy for the heating or cooling of the interior of a residential or commercial building.

Clean Electricity Investment Credit starts at a base rate of 6%, with a bonus rate of 30% for facilities meeting certain wage and apprenticeship requirements. In addition, the rate increases to up to 10% for facilities in energy communities and 10% for facilities in low-income communities or on Indian land, with a bonus rate of 20% for facilities that are part of a low-income residential building project or qualified low-income economic benefit project. Facilities must be placed in service after 2024 to qualify for the credit. 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.

The Department of Treasury must establish a program to allocate environmental justice capacity limitation among facilities (no deadline), issue guidance for recapturing any benefit for property no longer eligible (no deadline), and issue guidance on implementation (by 2025). Treasury should also publish guidance on the wage and apprenticeship requirements.

This credit effectively extends the IRC section 48 investment tax credit to include facilities placed in service after 2024.