On May 29, 2024, the U.S. Treasury Department and the Internal Revenue Service issued a notice of proposed rulemaking (“NPRM”) that includes guidance on two of the Inflation Reduction Act of 2022’s renewable electricity tax credits – but which notably failed to provide guidance with respect to the eligibility of clean electricity generated by biogas or renewable natural gas (“RNG”) for those credits, leaving RNG developers with lingering questions.
According to the NPRM, the existing Section 45 production tax credit and the existing Section 48 investment tax credit available to renewable electricity projects will be phased out by limiting their availability to projects beginning construction prior to 2025. The Section 45Y clean electricity production tax credit and the Section 48E clean electricity investment tax credit will replace them with respect to projects placed in service after December 31, 2024. Those replacement credits are designed to incentivize green energy facilities achieving net-zero greenhouse gas emissions.
Achieving net-zero status will require that projects relying on combustion or gasification processes to produce electricity undergo a lifecycle greenhouse gas emissions analysis. Those projects will include facilities that generate electricity from biogas, RNG, and other forms of biomass.
Pursuant to the NPRM, electricity-generating wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, and geothermal projects, and certain types of waste energy recovery projects, that achieve net-zero goals as determined by that analysis will qualify for the replacement credits. Although RNG projects are subject to that analysis, they are not specifically identified as eligible generators of electricity for purposes of producing the replacement credits.