More offshore wind projects in the United States will be able to claim tax credits under the Inflation Reduction Act, according to rules issued by the US Treasury Department and the Internal Revenue Service on March 22. The guidance comes days before the deadline for development proposals on the New England coast. and it follows months of industry cost impacts leading to delays and even cancellations.
The Inflation Reduction Act, which Congress passed and President Joe Biden signed into law in 2022, includes a 10 percent “energy community” bonus for clean energy projects built in areas that had coal mines. coal or coal-fired power plants; some employment in the fossil fuel sectors; or some abandoned places.
In the guidance, Treasury officials stipulate that an offshore wind project’s supervisory control and data acquisition (SCADA) system is also in an energy community to qualify for the tax credit, but the location of that critical equipment in a port would qualify. SCADA systems are “the heart of an offshore wind project,” according to Oceantic Network, an offshore wind advocacy group. The guidance also allows developments with multiple interconnection points to qualify if one of them is in a qualified energy community.
The guidance “creates an easier path to market for many offshore wind projects” and would channel a larger portion of project funding toward port development, Liz Burdock, CEO of Oceantic Network, said in a statement. Jason Grumet, CEO of the American Clean Energy Association, added that the changes would “encourage the growth of offshore wind by encouraging significant private sector investment and new jobs in historically disadvantaged communities.”
Treasury also added two USIC codes: 2212 (distribution of natural gas) and 23712 (construction of oil and gas pipelines and related structures) to the list of fossil fuel occupation types that will determine the eligibility of the energy community.
Officials released the guidance ahead of a March 27 deadline to submit bids for a round of offshore wind development in a new joint procurement by Connecticut, Massachusetts and Rhode Island. The original deadline for the proposal had been January.
But state officials, who have agreed to allow reviews of tied bids between two or three of the states for larger projects, pushed back the deadline in hopes the tax credit guidance would be issued. The Massachusetts Department of Energy Resources, which oversees the state bidding process, said in a statement that the guidance will give bidders more certainty as they finalize proposals.
The three states agreed to collaborate on offshore wind last year as the sector experienced turbulence related to inflation and supply chain disruptions. Developers canceled some East Coast wind projects. By allowing multi-state development, officials have said they aim to allow greater economic efficiencies to attract more projects and make them more viable.
“As our region solicits bids for the next round of offshore wind projects, this fiscal guidance represents a down payment on energy independence,” said Rebecca Tepper, Massachusetts Secretary of Energy and Environmental Affairs, in a statement “We expect to receive competitive bids next week and continue to move forward” the offshore wind sector.
Tthe delay of two months ithe final approval must be similarly delayed of bids submitted until the end of this year or the beginning of 2025 for projects expected to provide up to 25% of the states energy needs, Massachusetts Governor Maura Healey said that andin his State of the Commonwealth address on 20 March.
