Inflation Reduction Act Does Not Forget the ‘Coal Economy’
While the Inflation Reduction Act (IRA) has a lot of benefits for renewable energy projects and other advanced energy technologies, it is not forgetting utilities and communities that have been heavily relying on coal.
In late February, the U.S. Treasury Department, the U.S. Department of Energy, and the Internal Revenue Service released information on key provisions of the IRA designed to incentivize investment in underserved communities and hard-hit coal communities.
According to the Treasury Department, “the Inflation Reduction Act ensures all Americans benefit from the growth of the clean energy economy by driving investment in communities that have often been overlooked and left behind. These investments will create good-paying jobs in vital fields like clean energy manufacturing, critical minerals processing, and solar installation,” Additionally, IRA investments will allow for existing energy infrastructure to be retooled for the clean energy economy and lower energy costs for customers.
The guidance offered by the three agencies is designed to get two programs in these areas off the ground:
1 – The Qualifying Advanced Energy Project Credit program will strengthen the nation’s clean energy supply chains.
2 – The Low-Income Communities Bonus Credit program will encourage clean energy businesses to make targeted investments that will deliver on a more equitable energy transition.
In sum, these two IRA programs are designed to expand access to clean energy solutions and accelerate investments in manufacturing, particularly in traditional energy communities, that are crucial to advancing U.S. energy security. The Treasury Department and the IRS will administer the programs, working in close collaboration with the Department of Energy.
The Qualifying Advanced Energy Project Credit: This program renews and expands an investment tax credit initially included in the American Recovery and Reinvestment Act of 2009. It provides incentives for clean energy property manufacturing and recycling, industrial decarbonization, and critical materials processing, refining, and recycling. There are a broad range of projects eligible to apply for an investment tax credit of up to 30 percent, including manufacturing of fuel cells and components for geothermal electricity and hydropower, equipment for carbon capture, and critical minerals processing facilities.
The IRA provides $10 billion in new funding for this program, at least $4 billion of which will be reserved for projects in communities with closed coal mines or retired coal-fired power plants. The application process for the Qualifying Advanced Energy Project Credit program will begin on May 31, 2023.