Offshore Wind Worldwide Regulatory Framework in Selected Countries 5th Edition 2024 - Flipbook - Page 363
Offshore Wind Worldwide 2024
V. Incentives for Investment
The Inflation Reduction Act (IRA), enacted in
the U.S. on August 16, 2022, provides a significant extension, and expansions, of U.S.
tax credits available to U.S. offshore wind
projects. This includes:
•
An investment tax credit (ITC) of 30% or
more of the cost of building an offshore
facility; and
•
As an alternative to the ITC, a production
tax credit—currently at a rate of 2.75
cents (indexed each year for inflation)
per kWh of wind production—available
for 10 years of electricity production
from the facility.
Both of these tax incentives are available
under the IRA until after the year in which
U.S. electric power sector greenhouse gas
emissions are 25% or less of 2022 emission
levels.
In order to qualify for the full 30% ITC or 2.75
cent PTC, developers must abide by prevailing wage and apprenticeship requirements
through the construction and operation of
the facility.
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Both the ITC and PTC base credit levels can
be increased as follows:
•
ITC by 10 percentage points, or PTC by
10%, if the turbines/facility satisfies domestic content requirements, i.e. is made
in the U.S.; and
•
ITC by another 10 percentage points, or
PTC by 10% if an interconnection facility
is located in an “energy community,” defined as a census tract (or adjacent one)
where there was a former coal mine or
coal power plant (under guidance issued
in 2024, offshore projects may qualify if
supervisory control and data acquisition
equipment is located in such an area).
Significantly, the IRA also for the first time
with respect to tax credits for green energy
allows all of these credits to be transferred to another U.S. taxpayer, allowing easy
monetization of the credits. The IRA also
allows tax exempt and government entities
to claim direct pay for the amount they are
due for these tax credits.
