The Inflation Reduction Act (IRA), signed into law by US President Joe Biden, represents the single largest investment in clean energy, GHG emissions reduction, and climate resilience in the country’s history by providing around US$370 billion for green energy tax credits and other incentives to spur large-scale development of solar energy technologies to electrify the US’s digitization.
September 28, 2022
The Production Tax Credit (PTC) has been reinstated for solar projects under the IRA. This allows solar projects to choose between the PTC and the Investment Tax Credit (ITC) to maximize their economics. The IRA also introduces a new “technology neutral” PTC and ITC for solar projects that generate electricity and yield zero greenhouse emissions by types of facilities that are defined as causing zero greenhouse emissions. The tax credit is expected to accelerate solar generation over the next decade with facilities placed in service after December 31, 2024, and phasing down by 2032, or when the US’s electricity sector emissions are 75% below 2022 levels.
The IRA generally allows for the transfer of solar tax credits between taxpayers, provided, for example, the tax credits are paid for in cash and provided the amount paid is neither calculated as income by the seller nor deducted by the buyer. There are limited exceptions to this ability to transfer tax credits, including in the case of, for example, certain tax-exempt transferors and government entities that can take advantage of direct pay – a refund from the Treasury for the amount of tax credit claimed.
The IRA is expected to increase solar capacity installation by 67% over 10 years, which stood at approximately 2.5% of US electricity generation in 2021 according to Wood Mackenzie. The long-life span of these tax credits are expected to improve cash flow visibility for solar projects and the development of new technologies as laid out in a series of federal reports commissioned by the Biden Administration on Mar. 9, 2022 executive order 14067: “Ensuring Responsible Development of Digital Assets,” that support responsible digital asset development, in line with the country’s climate change objectives.
The report by the Technology Policy (OSTP) examines the connections between distributed ledger technologies (DLT) and energy transitions, the potential for these technologies to impede or advance efforts to tackle climate change at home and abroad, and the impacts these technologies have on the environment. Blockchain technology has the potential to transform the solar energy sector, which has been consistently catalyzed by innovations including rooftop solar, solar electric vehicles, and smart grid metering, and the US government has a responsibility to “protect” people from pollution and climate change caused by energy intensive blockchain technologies.
The OSTP Report and a study on layout blockchain technology applications in electricity smart microgrids look at promoting techno-socio-economic innovations for the restructuring of the sustainable …….