As the Build Back Better Act (BBBA) foundered, a number of Democratic lawmakers – including President Joe Biden in his Jan. 19 press conference – began raising the idea of focusing on pieces of the bill that could gain the votes needed to get through the Senate in a reconciliation package. Among these are provisions dealing with climate change and renewable energy. Even Senator Joe Manchin, whose “no” vote killed the nearly $2 trillion BBBA has indicated he could support clean energy funding.
In my last post, I discussed three of the BBBA’s energy policies that could stand a good chance of passage – investment and production tax credits, prevailing wage and apprenticeship provisions and direct pay to developers of investment and production tax credits. In this post, I’ll touch on three more components of the act’s energy sections that could make it through to President Biden’s desk for signing. As I mentioned in the last post, this discussion is based on the most recent version of the BBBA. Sen. Manchin has said that he’d want any future discussions to start “with a clean sheet of paper,” so aspects of these provisions could shift if those discussions actually occur.
Domestic content credits
“Domestic content” refers to the materials used to fabricate components like wind towers, turbines, solar panels and racks that go into renewable energy development. To reap domestic content benefits, 100% of the steel and/or iron and 40% of the value of components of manufactured products must come from U.S. producers. Projects that qualify under these requirements could earn:
- A 2% bonus credit added onto any investment tax credit a project might be eligible for. (This is raised to a 10% credit if the prevailing wage and apprenticeship requirements I covered in the last post are met.)
- For solar projects opting for the production tax credit, companies could receive an added 10% of the credits for which they qualify.
Obviously, there could be multiple ways to interpret the definition of what qualifies as “domestic content.” It’s expected the U.S. Treasury Department would need to develop specific guidelines on this topic.
Energy storage that is charged by a connected solar installation already qualifies for the ITC. The BBBA expanded this benefit to include standalone systems installed after Jan. 1, 2022, that are charged by the connected grid. Similar to the new approach to the ITC I covered in my last post, the storage credit starts at a base level of 6%, which is multiplied by 5 (to 30%) if the installation project meets prevailing wage and apprenticeship requirements.
Transmission projects placed into service before Jan. 1, 2032, can also qualify for the ITC under the same 6%/30% arrangement if they meet both of the following requirements:
- They are capable of transmitting electricity at 275 kilovolts or higher.
- They have a transmission capacity of 500 megawatts or higher.
Additionally, the BBBA appropriated $2 billion to be used for grants and loans for new high-speed transmission lines that can transmit electricity:
- To or across any eligible intertie.
- From an offshore wind generating facility.
It’s uncertain how quickly legislators might begin looking at ways to re-address these provisions and others that might make their way into a resuscitated clean energy package. The more immediate priority is likely to be funding ongoing government expenses. A stopgap spending bill passed in December only runs through Feb. 18, meaning Congress must pass another short-term bill or finalize an agreement on a number of appropriations bills that would fund the government through the end of the current fiscal year, which ends in September.