Leveraging Energy Transition “Adders” - American Cities Climate Challenge
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Leveraging Energy Transition “Adders”

The Inflation Reduction Act created new ”adders” that incentivize projects that specifically advance elements of an equitable clean energy transition, including where projects are located, who benefits from them, and where materials are sourced. Your city may have multiple reasons for buying renewable energy as a part of your local energy transition. Accordingly, you should evaluate the following four adders that build on the ITC and PTC. You should determine if one or more align with your city’s goals and design projects that can leverage these additional project incentives.

  • 1. Projects in Low-Income/Tribal Communities

    10% tax credit bonus for solar and wind facilities (up to 5 MW in capacity) located in qualifying low-income communities or on tribal land.

  • 2. Projects Financially Benefiting Low-Income or Tribal Communities

    20% tax credit bonus for solar and wind facilities projects (up to 5 MW in capacity) that financially benefit low-income or tribal communities, typically through a community solar structure or utility program like a green tariff or other partnership. Projects are defined as “benefiting” these groups if at least 50% of the financial benefits of the project go to households with incomes less than 200% of the poverty line or incomes less than 80% of an area’s gross median income.

    Note: Projects cannot claim both this adder and the 10% location-based mentioned above together. You should plan for the adder that best fits your project.

  • 3. Energy Communities

    10% tax credit bonus for solar and wind projects sited on brownfields; located in areas with significant employment in coal, oil, or gas extraction or processing since 2000; or located in or adjacent to a census tract where a coal mine closed since 2000 or coal unit retired since 2010.

  • 4. Domestic Content

    10% tax credit bonus if 100% of the project’s steel or iron used in the facility was produced in the United States and 40% of the project’s manufactured components were produced in the United States.

How These Incentives Stack Up

Designing projects that meet some of or all these additional factors may increase the price of your project. That’s why there are added incentives. These adders can be stacked to reward particularly innovative, equitable, and ambitious renewable energy projects. Regardless, you will want to carefully balance the tradeoffs of these costs with the available adders and plan projects that best meet the needs of your community.