Treasury Dept. Issues Final Rules on Clean Electricity Credits

WASHINGTON — The Treasury Department on Tuesday released its long-awaited final rules for the Clean Electricity Investment and Production Tax Credits first announced when the Inflation Reduction Act was signed into law in 2022.

The rules for the tax breaks, also known as technology-neutral credits, were drafted in partnership with the Internal Revenue Service.

According to analysis by the Department of Energy, the credits will not grow the economy by accelerating the growth of low-carbon manufacturing and the use of renewable energy, but will save U.S. consumers as much as $38 billion on their electricity bills through 2030.

Though much uncertainty surrounds the incoming Trump administration’s position on the credits, for now at least the rules provide some clarity around the clean energy and zero-emissions quality for the credits, including wind, solar, hydropower, marine, geothermal, nuclear and certain waste energy recovery properties.

The final rules also provide guidance to clarify how combustion and gasification technologies can qualify in the future — including on how life-cycle analysis assessments compliant with the statute will be conducted.

“The final rules issued today will help ensure America’s clean energy investment boom continues — driving down utility costs for American families and small businesses, creating good-paying construction jobs, and strengthening energy security by making the U.S. more resistant to price shocks,” said Treasury Secretary Janet Yellen in a written statement.

The existing Production Tax Credit and Investment Tax Credit will be available to projects that began construction before 2025. Qualifying projects placed in service after Dec. 31, 2024, will be eligible for the new Clean Electricity Credits.

To receive the full value of the credits, taxpayers must meet standards for paying prevailing wages and employing registered apprentices, helping ensure more clean energy jobs are good-paying jobs, and growing career opportunities for workers in the clean energy sector. 

The technology-neutral Clean Electricity Production and Investment Tax Credits are also eligible for bonus credits related to siting projects in energy communities and meeting certain standards for using domestic content, further supporting robust and geographically diverse job creation and economic opportunity in the growing clean energy sector.

All that said, not everyone was thrilled with the new rules.

Patrick Serfass, executive director of the American Biogas Council, said the announced credit regime utterly failed to recognize the benefits of biogas-derived electricity, and show “a complete disregard of climate science and a lack of understanding that biogas systems reduce carbon emissions more than any other technology.” 

“As a result, these rules — which Congress intended to be technology neutral — pick winners and losers, while departing from logic and sound GHG accounting,” Serfass said.

In practice, he said, the tax credit will provide little to no value, while creating economic barriers to recycling and encouraging low-cost disposal instead. 

“Small municipalities and rural agricultural communities will be hurt most, at a time when they are being asked to manage their wastes more sustainably. Meanwhile billions of tons of energy-rich waste will remain untapped,” he said.

“Existing biogas facilities can generate about 5 GWs of clean, firm electricity, but they represent just 12% of what’s possible if all potential biogas facilities were built,” Serfass continued. “That would mean U.S. biogas projects could create 40 GWs of generating capacity in total. 

“At a time when both waste and energy demand are rapidly increasing, the federal government should be doing all it can to incentivize the conversion of waste into domestic, clean and renewable energy. It’s a shame and a missed opportunity,” he said.

Also dismayed was Carrie Annand, executive director of the American Biomass Energy Association.

“The final rule functionally removes biomass eligibility from a program that we have participated in since 2004,” Annand said. “This bill, which originated in Sen. Ron Wyden’s office, was intended to be a ‘tech-neutral’ tax credit for zero emissions technologies based on a lifecycle analysis.

“What is ‘tech neutral’ about questioning eligibility for biomass, which meets this criteria and has relied on the PTC and ITC for the last 20 years?” Annand asked rhetorically. 

“In its last appropriations bill and in every appropriations bill since 2018, Congress has directed the federal government to consider biomass a carbon neutral energy source. The final rule for 45Y and 48E disregards the will of Congress,” she said.

Annand said her association’s members utilize otherwise unusable materials from the forestry and agricultural sectors to generate renewable energy, supporting livelihoods in rural America and helping to reduce wildfire risk.

“Biomass is among the few renewable energy sources that supply ‘baseload’ 24/7 electricity to the grid. With an ever-increasing 24/7 energy demand, it defies common sense to disincentivize baseload renewables like biomass,” she said.

“We look forward to working with President Trump and the 119th Congress to make this right,” she added.

An opposing view was offered by Heather Hillaker, senior attorney with the Southern Environmental Law Center.

“We are glad that the Department of Treasury listened to our comments and did not wrongly rubber stamp biomass energy companies’ request for millions in taxpayer dollars,” Hillaker said in a written statement. “Instead, today’s rules direct the Department of Energy to further study biomass energy and its impact on our climate.

“Burning forests for power releases more climate-warming carbon than burning coal, all while devastating Southern forests and polluting our communities,” she continued. “Allowing biomass energy companies to wrongly take advantage of these clean energy incentives would make it more difficult for companies to invest in proven climate solutions. 

“We urge the Department of Energy to follow the facts and make it clear that biomass energy is not clean energy,” Hillaker said.

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