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Inflation Reduction Act Tax Credit Opportunities for Hydropower and Marine Energy [1]
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Date: 2024-11
Production tax credits (PTCs) allow a taxpayer to reduce its tax liability based on the amount of electricity it generates. The IRA extended the renewable electricity PTC (§45 PTC) for facilities that begin construction before 2025. Hydropower is now eligible for the full PTC value, and the eligibility threshold has been reduced from 150 kilowatts (kW) to 25 kW. Eligible technologies include hydropower (and pressurized conduits) and marine and hydrokinetic projects but do not include pumped storage hydropower.
This technology-specific PTC ends in 2024 and is replaced by a new technology-neutral PTC (§45Y) starting in 2025. Hydropower and marine energy facilities that generate electricity, are placed in service in 2025 or later, and have a zero or net-negative lifecycle emissions rate may qualify for the clean electricity PTC. A final technology eligibility determination will be published by the IRS. Credits are available until the four-year phase out is triggered in the later of 2032 or the year that power-sector emissions are 25% of 2022 levels.
The current base PTC value is $5.50/megawatt-hour (MWh) and the enhanced value is $27.50/MWh for projects meeting the prevailing wage and apprenticeship requirements or for those less than 1 megawatt (MW). The credit is inflation adjusted and available for the first 10 years of electricity production. In addition, projects can increase the credit value by 10% for meeting domestic content requirements and by 10% for projects located in energy communities (defined as brownfield sites or fossil fuel communities). The base incentive for the clean electricity PTC varies based on a project’s size, location, and construction practices, as summarized in Table 1.
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[1] Url:
https://www.energy.gov/eere/water/inflation-reduction-act-tax-credit-opportunities-hydropower-and-marine-energy#:~:text=Investment%20tax%20credits%20(ITCs)%20allow,that%20begin%20construction%20before%202025.
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