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The Swiss Army Knife of Clean Energy Tax Credits Goes Into Effect Next Year

These can really do it all — almost.

A dam.
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Before and for the first year or so after the Inflation Reduction Act, clean energy in the United States was largely developed under the aegis of two tax credits: the Production Tax Credit, which primarily useful for wind power, and the Investment Tax Credit, which is primarily used for solar power. (The actual eligibility for each tax credit for each technology has changed various times over the years, but that’s the gist.)

Starting in 2025, however, and lasting (absent any change in the law) through at least 2032, that tax credit regime will be made “technology neutral.” Goodbye, existing credits with their limited applicability. Hello, new tax credits that apply to “any clean energy facility that achieves net-zero greenhouse gas emissions,” according to a release issued Wednesday by the Treasury Department.

“For too long, the U.S. solar and wind markets have been hampered by uncertainty due to the on-again-off-again nature of key tax credits,” Treasury Secretary Janet Yellen said on a call with reporters. “Periods of indecision and the credits being repeatedly allowed to elect to lapse made it too difficult for companies to plan and invest in clean energy projects.”

About that “at least”: The tax credits only start to phase out when Treasury determines that electricity-related greenhouse gas emissions have been reduced 75% from their 2022 levels or in 2032, whichever comes later, making this the rare tax code provision with an outcome-based timeline.

In preparation for the new Clean Electricity Production Credit and Clean Electricity Investment Credit, a.k.a. sections 45Y and 48E of the U.S. tax code, to go into effect, Treasury proposed guidance outlining what would qualify for the tax credits and soliciting comments on forms of power generation whose true carbon abatement potentials are more in doubt. The notice and subsequent publication in the Federal Register kicks off a 60-day public comment period, after which Treasury and the Internal Revenue Service will write the final rules.

The new list of eligible technologies includes “hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal,” along with “certain types of waste energy recovery property” as among the technologies that will be “categorically” eligible for the new tax credits. The point here isn’t to create more exclusivity, but rather to “provide clarity and certainty to developers,” Treasury said in the release. Yellen added that, “for the first time, these incentives are tied explicitly to electricity generation with zero emissions instead of specific technologies.”

What this announcement does not clarify, however, is what to do about energy sources that involve combustion, such as biomass or harnessing methane emitted from landfills. Here is where the Treasury Department is asking for help from outside — many of the questions included in the proposed rulemaking are devoted to figuring out exactly how these forms of energy might or might not be made zero-emission.

Many environmental groups are skeptical of any combustion-based energy sources, and Treasury said that generation methods which “rely on combustion or gasification to produce electricity” will have to “undergo a lifecycle greenhouse gas analysis to demonstrate net-zero emissions.”

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Sparks

These 21 House Republicans Want to Preserve Energy Tax Credits

For those keeping score, that’s three more than wanted to preserve them last year.

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Those who drew hope from the letter 18 House Republicans sent to Speaker Mike Johnson last August calling for the preservation of energy tax credits under the Inflation Reduction Act must be jubilant this morning. On Sunday, 21 House Republicans sent a similar letter to House Ways and Means Chairman Jason Smith. Those with sharp eyes will have noticed: That’s three more people than signed the letter last time, indicating that this is a coalition with teeth.

As Heatmap reported in the aftermath of November’s election, four of the original signatories were out of a job as of January, meaning that the new letter features a total of seven new recruits. So who are they?

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The Country’s Largest Power Markets Are Getting More Gas

Three companies are joining forces to add at least a gigawatt of new generation by 2029. The question is whether they can actually do it.

Natural gas pipelines.
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Two of the biggest electricity markets in the country — the 13-state PJM Interconnection, which spans the Mid-Atlantic and the Midwest, and ERCOT, which covers nearly all of Texas — want more natural gas. Both are projecting immense increases in electricity demand thanks to data centers and electrification. And both have had bouts of market weirdness and dysfunction, with ERCOT experiencing spiky prices and even blackouts during extreme weather and PJM making enormous payouts largely to gas and coal operators to lock in their “capacity,” i.e. their ability to provide power when most needed.

Now a trio of companies, including the independent power producer NRG, the turbine manufacturer GE Vernova, and a subsidiary of the construction firm Kiewit Corporation, are teaming up with a plan to bring gas-powered plants to PJM and ERCOT, the companies announced today.

The three companies said that the new joint venture “will work to advance four projects totaling over 5 gigawatts” of natural gas combined cycle plants to the two power markets, with over a gigawatt coming by 2029. The companies said that they could eventually build 10 to 15 gigawatts “and expand to other areas across the U.S.”

So far, PJM and Texas’ call for new gas has been more widely heard than answered. The power producer Calpine said last year that it would look into developing more gas in PJM, but actual investment announcements have been scarce, although at least one gas plant scheduled to close has said it would stay open.

So far, across the country, planned new additions to the grid are still overwhelmingly solar and battery storage, according to the Energy Information Administration, whose data shows some 63 gigawatts of planned capacity scheduled to be added this year, with more than half being solar and over 80% being storage.

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Sparks

An Emergency Trump-Coded Appeal to Save the Hydrogen Tax Credit

Featuring China, fossil fuels, and data centers.

The Capitol.
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As Republicans in Congress go hunting for ways to slash spending to carry out President Trump’s agenda, more than 100 energy businesses, trade groups, and advocacy organizations sent a letter to key House and Senate leaders on Tuesday requesting that one particular line item be spared: the hydrogen tax credit.

The tax credit “will serve as a catalyst to propel the United States to global energy dominance,” the letter argues, “while advancing American competitiveness in energy technologies that our adversaries are actively pursuing.” The Fuel Cell and Hydrogen Energy Association organized the letter, which features signatures from the American Petroleum Institute, the U.S. Chamber of Commerce, the Clean Energy Buyers Association, and numerous hydrogen, industrial gas, and chemical companies, among many others. Three out of the seven regional clean hydrogen hubs — the Mid-Atlantic, Heartland, and Pacific Northwest hubs — are also listed.

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