Energy Efficiency, GHG Emissions, Industrial - January 14, 2025
IRS Provides $6 Billion in Tax Credits for Energy Programs
The Internal Revenue Service (IRS) announced $6 billion in tax credits for the second round of the Inflation Reduction Act’s (IRA) 48C Qualifying Advanced Energy Project Tax Credit (48C Program).
The 48C Program is managed by the IRS with assistance from the Department of Energy’s (DOE) Office of Manufacturing & Energy Supply Chains (MESC) and was expanded with a $10 billion investment under the IRA, according to a statement.
Of this $10 billion, 40% is reserved for projects in designated 48C energy communities — communities with closed coal mines or coal plants.
The objective of this program is to fund critical projects that:
- Expand U.S. clean energy manufacturing and recycling capacity
- Expand U.S. critical materials processing and refining capacity
- Drive process efficiency and reduce GHG emissions at U.S. industrial facilities
In the second round of the 48C Program, the IRS allocated the remaining $6 billion in tax credits to projects in over 30 states. This is in addition to the $4 billion in tax credits allocated to Round 1 projects across more than 30 states in March 2024.
In Round 2, the IRS allocated roughly $2.5 billion to approximately 50 projects located in 48C energy communities, totaling $4 billion allocated to projects in these communities across both rounds. Round 2 supported a wide scope and scale of projects, with tax credit allocations ranging from under $10 million to over $100 million.
The 48C Round 2 awards, which are also known as allocations, include the following:
Clean energy manufacturing and recycling: $3.8 billion in tax credits (63% of Round 2 tax credits), which includes projects in the Low Carbon Intensity materials category to support new manufacturing facilities that will produce energy-intensive materials at carbon intensity levels at least 30% below the baseline.
The selected projects will support the buildout of U.S. manufacturing capabilities critical for clean energy deployment and low-emissions materials and include clean hydrogen (e.g., electrolyzers, fuel cells, and subcomponents), grid (e.g., cables, conductors, circuit breakers, transformers, and subcomponents), electric vehicles (e.g., power electronics, powertrain and drivetrain components, and final assembly), batteries, nuclear power, solar PV, and wind energy.
Critical materials for recycling, processing and refining: $1.5 billion in tax credits (25% of Round 2 tax credits) to projects that are investments in facilities that refine and process lithium, copper and rare earth elements and recycling of those materials.
Industrial decarbonization: Includes $700 million in tax credits (12% of round 2 tax credits) and represents sectors such as chemicals, food and beverage, district energy systems, pet products, aluminum, ceramics, and building materials. The selected projects reflect adoption of heat pumps, electric boilers, and thermal storage technologies, among other solutions, to decarbonize industry that once implemented will eliminate roughly 2.8 million tons of CO2.
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