45/45Y: Clean Electricity Production Tax Credit

Federal Agency

Sub-Department

Internal Revenue Service (IRS)

Purpose

To invest in the production of clean electricity. Section 45 applies to projects beginning construction before January 1, 2025. Section 45Y applies to facilities beginning construction and placed in service after December 31, 2024.

Applicant and/or Project Eligibility Requirements

Eligible facilities are those generate electricity from wind, biomass, geothermal, solar, small irrigation, landfill and trash, hydropower, and marine and hydrokinetic renewable energy before 2025. After 2025, eligible facilities are those generate electricity and have the greenhouse gas emissions rate not greater than zero.

Decarbonization Considerations

Only electricity that has zero greenhouse gas emissions qualifies.

Equity Considerations

An additional 0.3 cents/kwh credit is added for projects meeting certain domestic content requirements for steel, iron, and manufactured products. An additional 0.3 cents/kwh credit is added if the facility is located in an energy community. Learn more on the bonuses here: https://cityrenewables.org/funding-guidance/understanding-available-incentives/leveraging-energy-transition-adders/

Helpful Tips

Direct Pay is eligible for this credit for tax-exempt entities. To learn more about how these tax credits work for entities with and without tax liability, check out our Funding Guidance here: https://cityrenewables.org/funding-guidance/understanding-available-incentives/tax-credits-for-renewable-energy/

Other Notes

Entities can only elect the ITC (48) or the PTC (45). For more information on the tax credits and which to select, see this resource from DOE: https://www.energy.gov/eere/solar/federal-solar-tax-credits-businesses For more information on prevailing wage and apprenticeship requirements, see here: https://www.irs.gov/credits-deductions/prevailing-wage-and-apprenticeship-requirements