The Treasury Department and the Internal Revenue Service have released guidance for developers of solar projects. Bonus credits for using domestic content Via Inflation Restrictions Act (IRA). The Department of Energy and Department of Transportation assisted in the guidance.
Solar cells at SolarWorld’s Oregon manufacturing facility.Archive photo from Oregon Department of Transportation
Projects using U.S.-made racks, ground screws, trackers, solar panels, inverters, and energy storage systems are eligible to receive bonus credits under certain requirements.
“U.S. workers and businesses will continue to benefit from President Biden’s investment policy in the U.S., as domestic content bonuses under the Control Inflation Act will boost U.S. manufacturing, including steel.” is key to driving investment and ensuring that all Americans share in the growth of the clean energy economy,” said Treasury Secretary Janet L. Yellen.
Projects that meet domestic content requirements can receive a 10% bonus on the production tax credit (PTC) and up to a 10% bonus on the investment tax credit (ITC). Projects under 1MW can receive bonusesAlternating currentconstruction begins or is completed before 29 January 2023 General wage and apprenticeship requirements.
In summary, projects under 1 MW using domestic products can receive bonus credits. Alternatively, large projects that pay regular wages, meet apprenticeship standards, and use domestic products can receive bonus credits.
Domestic content bonuses are applied to projects built using the required amount of domestically produced steel, iron and industrial products. Under this rule, any product for which 40% of the manufacturing cost (if used in a project that begins construction before 2025) is completed in the United States is considered “Made in the United States.” This rule increases to 55% for projects starting construction after 2026. Cost of U.S. goods is defined as “direct material and direct labor costs paid or incurred to manufacture U.S. goods.” Manufacturers of U.S. products are considered performers of the actual manufacturing process, not distributors or secondary sales departments.
All steel and iron manufacturing processes used for critical structural components must be in the United States to receive the bonus. This requirement does not apply to steel or iron subcomponents (nuts, bolts, screws, clamps, etc.). Racking, piles, ground screws, reinforcing bars, etc. used for foundations fall under “steel materials and iron products.”
Solar trackers, solar panels and inverters are classified as “manufactured products”. For US-assembled solar panels to receive the full credit amount, the solar cells, frame and backrails, glass, encapsulants, backsheets, junction boxes, edge seals, pottants, adhesives, bus ribbons, bypass diodes Such materials must be manufactured domestically. A representative for the Solar Energy Industry Association (SEIA) suggested that partial credit could be granted, but a more detailed review of IRS documents needs to be completed.
Also relevant for solar and energy storage projects, domestic battery packs (including cells, packaging, thermal management systems, BMS), battery enclosures, and inverters can receive this adder.
While industry determines product standards, the Treasury Department said industry provides a safe harbor for certain types of projects. The department welcomes comments on how to classify products and is willing to consider alternative approaches to classification, such as a tax-specific, technology-neutral principle-based approach.
“This long-awaited guidance from the Treasury Department is an important step forward and will trigger significant investment in U.S.-made clean energy equipment and components. We strongly support the domesticization of energy supply chains, and today’s guidance will complement the manufacturing renaissance that began with the historic IRA passage last summer,” said SEIA president and chief executive officer. (CEO) Abigail Ross Hopper said.