
Inflation Reduction Act Updates: New Guidance Enhances Domestic Content Bonus for Clean Energy Projects
Jan 17
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The U.S. Department of the Treasury and Internal Revenue Service (IRS) have released critical updates to the Inflation Reduction Act’s (IRA) domestic content bonus (45X) rules for the Production Tax Credit (PTC) and Investment Tax Credit (ITC). These updates aim to streamline clean energy project development while promoting domestic manufacturing, particularly for solar, wind, and battery energy storage systems.
Updated Safe Harbor Tables for Developers
The updated guidance builds upon the existing domestic content safe harbor provision, enabling clean energy developers to determine eligibility for the domestic content bonus through default cost percentages provided by the Department of Energy (DOE). These improved values are more reflective of real-world project costs and components, reducing reliance on direct cost information from suppliers.
For solar projects, new optional alternative cost percentages are introduced, especially for developers using solar cells made from domestically-produced wafers. This adjustment provides a significant incentive to onshore wafer manufacturing, enhancing the U.S. solar supply chain.
Key Updates Across Sectors
Solar Energy
The guidance updates cost percentages in solar tables, refines component definitions, and offers clearer classifications for project components. Notably, projects using domestic wafers in solar cells can now leverage new cost percentage options, boosting incentives for local production.
Land-Based Wind
Developers of land-based wind projects will see minor adjustments in the characterizations of applicable components, aligning cost estimates with current industry standards.
Battery Energy Storage Systems (BESS)
The updated tables for BESS projects refine cost percentages and component definitions, ensuring that energy storage developers can better navigate tax credit eligibility.
Clarity for Emerging Project Types
In addition to sector-specific updates, the guidance provides clarity for:
Retrofitted projects: Defines how updates to existing installations can qualify.
Elective or direct pay projects: Clarifies the use of tax credits when electing for direct payments.
Carport and floating solar projects: Includes new guidelines for these emerging solar applications.
Developers have 90 days from the issuance of further guidance to leverage the safe harbor tables for projects under construction.
Encouraging Domestic Manufacturing and Clean Energy Growth
This updated guidance reflects the federal government’s commitment to fostering a robust domestic clean energy supply chain. By incentivizing the use of American-made components like solar wafers and streamlining the eligibility process for tax credits, these updates aim to bolster U.S. manufacturing, create jobs, and accelerate the country’s transition to renewable energy.