by John R. Kirkwood, Christopher B. Berendt, Matthew R. Levy, Jason Deppen, Joshua L. Andrews, Aaron L. Szabo, Brian S. Fennerty, Bryan Michael Allen, Wendy Yan, Virginia M. Speck (Faegre Drinker Biddle & Reath/Biofuels Digest) The next round of funding for the qualified advanced energy project tax credit — known as 48C — is expected to open next year for a total of $6 billion, significantly larger than the first round of $4 billion. Applications for the first round of 48C tax credits totaled $42 billion, 10 times what was allocated for the first round. While the first round of funding for 48C is oversubscribed, that does not necessarily prevent new companies from applying in the second round of funding. Companies can learn from the first round of funding to improve their concept papers and applications and help enhance their position to receive funding in the second round.
...
The total funding available for this first round is $4 billion, with at least $1.6 billion reserved for energy communities, or areas that have historically depended upon oil and gas or coal production and have higher than average unemployment, among other factors.
...
The 48C tax credit was envisioned to incentivize companies and communities to develop projects such as clean energy manufacturing and recycling projects; industrial decarbonization (greenhouse gas (GHG) emission reduction projects); and critical material processing, refining, and recycling projects. Broadly, the 48C tax credit provides for up to 30% of investments in advanced energy projects, as defined in 26 USC § 48C(c)(1). As with many of the programs authorized under the IRA, certain aspects of the Biden Administration’s larger social priorities, such as incorporation of labor and other stated priorities, can affect the standing of individual applications.
DOE requires concept papers before an application can be submitted. The applicant is required to provide a discussion of the following criteria: (1) project in general; (2) commercial viability; (3) GHG impacts; (4) U.S. supply chain and domestic manufacturing impacts; and (5) workforce and community engagement. While the document is not supposed to be longer than 4–5 pages, the applicant is also expected to complete data sheets that are provided as part of the concept paper application process.
...
After reviewing the full applications, DOE will provide recommendations to the U.S. Internal Revenue Service (IRS) who will then provide either an allocation or denial letter to the applicants.
...
The second round of funding is expected to be announced in early 2024, after the determinations of the first round, giving future applicants time to build a concept paper and an application that has the highest likelihood of success. The application process is expected to open in late 2024. The second round of funding is likely to be $6 billion with a $2.4 billion energy community set aside, significantly more than the first round of funding of $4 billion. All rounds have a required 40% minimum set aside for energy communities. READ MORE
Related articles
- Environmental Groups Ask DOE To Block Wood Pellet Producers From Accessing 48C Tax Credit (Biomass Magazine)
- Senate Hearing Focuses On Landfill Gas Emissions, Addresses Problematic Section 48 Language (Biomass Magazine)
Excerpt from Biomass Magazine: A coalition of environmental groups is working to prevent U.S. wood pellet producers from accessing the 48C Qualifying Advanced Energy Project Credit, a tax credit that aims to strengthen U.S. industrial competitiveness and clean energy supply chains.
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Qualifying projects are those that re-equips, expands or establishes an industrial or manufacturing facility to produce or recycle specified advanced energy property; installs technology in an industrial or manufacturing facility to reduce greenhouse gas (GHG) emissions by at least 20 percent; or re-equips, expands or establishes an industrial facility to process, refine or recycle critical materials.
...
Enviva is among the companies pursuing the tax credit. During a second quarter earnings call held Aug. 3, Enviva Chief Financial Officer Shai Even confirmed the company has applied for the 48C tax credit in relation to the company’s wood pellet plants under development in Epes, Alabama, and Bond, Mississippi. The Epes plant is under construction and expected to be operational in mid-2024. Enviva is working to finalize an EPC contract for the Bond facility with an expected in-service date in 2026, according to comments made by company officials during the Q2 earnings call. If the company’s efforts to secure the 48C tax credit are successful, Even said the company could be awarded a credit that can be monetized for a value ranging from 6 percent to 30 percent of the total eligible capital investment cost of each project.
The coalition of environmental groups on Sept. 27 sent a letter to Energy Secretary Jennifer Granholm urging the Biden administration to prevent Enviva and other wood pellet producers from accessing the benefits of the 48C tax credit. Within the letter, the groups make the often-debunked claim that biomass energy is more carbon intensive than fossil-based energy sources. A full copy of the letter is available on the Friends of the Earth website. READ MORE
Excerpt from Biomass Magazine: The Senate Committee on Environmental & Public Works on Jan. 31 held a hearing on avoiding, detecting and capturing methane emissions from landfills. The hearing, in part, addressed a Treasury Department proposal that would limit the ability of biogas projects to benefit from the Section 48 tax credit.
The Internal Revenue Service on Nov. 22 issued a proposed rule implementing amendments to the Section 48 energy investment tax credit (ITC) as directed by the Inflation Reduction Act. As currently written, the proposed rule would exclude gas cleaning and conditioning equipment from being eligible to obtain the ITC.
A public comment period on the proposed rule was open through Jan. 22. Approximately 300 public comments were filed on the proposal, according to information posted to the Regulations.gov website. The American Biogas Council and Coalition for Renewable Natural Gas (RNG Coalition) were among those who filed comments, calling on the agency to update the regulatory language.
Testimony offered during the Jan. 31 congressional hearing offered insight into how the proposed IRS language would negatively impact efforts to reduce landfill gas emissions. Anne Germain, chief operating officer and senior vice president of regulatory affairs at the National Waste & Recycling Association, said the sector she represents worked hard to advocate for the tax credit and has relied on the availability of it in planning multi-billion-dollar investments in biogas processing infrastructure. As currently written, the IRS regulations would disincentivize methane abatement solutions in the landfill gas sector, as well as other biogas sectors, such as anaerobic digestion, Germain confirmed.
The hearing also featured testimony from Tia Scarpelli, research scientists and waste sector lead at Carbon Mapper, and Tom Frankiewicz, a subject matter expert in waste methane at the Rocky Mountain Institute. In addition to the Section 48 tax credit, the hearing also addressed a range of other issues, including emissions monitoring, abatement strategies, and current and planned regulatory actions.
A full replay of the hearing and written testimony submitted by witnesses is available on the Senate Committee on Environment and Public Works website. READ MORE
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