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The Internal Revenue Service (IRS) and the Department of Energy (DOE) have selected dozens of projects across more than 30 states to receive the remaining $6 billion in tax credits allocated by the Inflation Reduction Act’s 48C Qualifying Advanced Energy Project Tax Credit Program.
The 48C Program, managed by the IRS with assistance from the DOE’s Office of Manufacturing & Energy Supply Chains, targets critical investments that expand domestic clean energy manufacturing and recycling capacity, expand U.S. critical materials processing and refining capacity, and reduce greenhouse gas (GHG) emissions at industrial facilities. The program was originally established by the American Recovery and Reinvestment Act of 2009 and subsequently expanded with a $10 billion investment under the IRA. Of the $10 billion, 40% was reserved for projects in designated § 48C energy communities– communities with closed coal mines or coal plants.
A $4 billion first round of 48C credits was announced last year, supporting everything from solar-grade polysilicon production to electric vehicle component manufacturing. With another Trump presidency looming larger than yesterday in the rearview mirror and no promise of any particular support for decarbonization or clean energy in sight, one can understand why the feds took their time dispatching the remaining $6 billion of credits- notwithstanding how quickly any of us might burn through $10 billion.
Round 2 projects
Just like the first round, the second tranche of 48C allocations attracted more mouths than could be fed, making for some tough decisions. In the summer of 2024, DOE received 800+ concept papers requesting in excess of $40 billion, more than six times the funding available. After the concept paper stage, the DOE says it received more than 350 applications by the October 2024 deadline, including more than 75 applications for projects in 48C energy communities, from more than 40 states requesting more than $16 billion in tax credits.
All projects selected must meet the prevailing wage and apprenticeship requirements to receive a 30% investment tax credit. In Round 2, the IRS allocated roughly $2.5 billion to approximately 50 projects located in 48C energy communities, totaling $4 billion allocated to projects in these communities across both rounds.
As required by statute, the feds will publish the names of all organizations with certified projects and the amount of that allocation after projects are certified. Prior to certification, the program is not allowed to provide identifying information about allocation recipients or their projects without the applicant’s consent. Allocation recipients are not required to publicly share information about their allocation at this time, but some may choose to do so voluntarily.
That aside, the DOE and IRS indicate Round 2 supported a wide scope and scale of projects, with tax credit allocations ranging from under $10 million to over $100 million. They’re expected to support 30,000 construction jobs over four years, 10,000 of them located in energy communities. In total, the IRS and DOE estimate the $10 billion in allocations provided by the 48C Program will support approximately 250 projects across more than 40 states, with project investments surpassing $44 billion dollars.
Round 2 allocations include investments in:
- Clean energy manufacturing and recycling:Â $3.8 billion in tax credits (63% of Round 2 tax credits), which includes projects in the Low Carbon Intensity materials category to support new manufacturing facilities that will produce energy-intensive materials at carbon intensity levels at least 30% below the baseline.
Selected projects will support the buildout of U.S. manufacturing capabilities critical for clean energy deployment and low-emissions materials. Selected projects, for example, span clean hydrogen (e.g., electrolyzers, fuel cells, and subcomponents), grid (e.g., cables, conductors, circuit breakers, transformers, and subcomponents), electric vehicles (e.g., power electronics, powertrain and drivetrain components, and final assembly), batteries, nuclear power, solar PV, and wind energy (including offshore wind components), among other industries and components critical to supporting secure and resilient domestic energy supply chains. - Critical materials recycling, processing, and refining:Â $1.5 billion in tax credits (25% of Round 2 tax credits)
Selected projects are, for example, investments in facilities that refine and process lithium, copper, and rare earth elements, and recycling of lithium-ion batteries, copper and aluminum, and rare earth elements. - Industrial decarbonization:Â $700 million in tax credits (12% of round 2 tax credits)
Selected Projects represent a diverse set of sectors, including, for example, chemicals, food and beverage, district energy systems, pet products, aluminum, ceramics, and building materials. The selected projects reflect the adoption of heat pumps, electric boilers, and thermal storage technologies, amongst other solutions to decarbonize industry and once implemented will eliminate roughly 2.8 million tons of CO2.
