January 2025 / United States

According to the analysis by the Department of Energy, the credits aim to lower energy costs and boost power production, potentially saving American families up to USD 38 billion on electricity bills by 2030.

The finalized rules detail the eligibility criteria for the clean electricity production credit (Section 45Y) and the investment credit (Section 48E). The existing Production Tax Credit (Section 45) and Investment Tax Credit (Section 48) will be available to projects that began construction before 2025. Qualifying projects placed in service after 31 December 2024 will be eligible for the new Clean Electricity Credits.

Key provisions from the proposed regulations, released in May 2024, were retained with a few minor adjustments.

The rules maintain the classification of clean energy facilities into two groups: those using combustion or gasification technologies and those that do not. Facilities in the first category must conduct a lifecycle analysis of greenhouse gas emissions. Wind, solar, and hydropower technologies, assumed to have zero emissions, are exempt from this requirement. Treasury will publish an annual table identifying eligible zero-emission technologies, with the first installment expected imminently. In a change from the proposed rules, nuclear fission facilities will not be considered combustion or gasification facilities.

The preamble to the regulations clarified that the "80/20 rule" governs eligibility for new additions to existing facilities. The 80/20 rule allows a facility that includes pre-existing or previously placed in service parts or elements to qualify for credits so long as new elements constitute at least 80% of the total value of the facility. The IRS also clarified that ownership requirements specify that taxpayers must directly own at least a fractional interest in an entire qualifying facility or energy storage unit, and not just an interest in integral property that is a component of such a facility, to claim Section 48E credits. These ownership rules are significant for offshore wind projects.

One notable adjustment from the proposed regulations was the removal of an end-use requirement for hydrogen storage projects. Initially, only hydrogen storage used for electricity qualified for credits. Following industry feedback, the restriction was lifted, acknowledging that storage providers cannot always determine hydrogen's end use. To claim the full value of the credits, projects must adhere to prevailing wage and apprenticeship requirements. Rules on those requirements were issued in June 2024.

The regulations were finalized by the Treasury Department and IRS on 7 January 2025, and have been published here