Navigating Federal Policy for Clean Energy Development
August 12, 2024
The federal government continues to pursue mechanisms to advance a clean energy economy while enabling American manufacturing for the metal and machinery that will modernize the US electric grid. A diverse and complex system for power generation and delivery, though, necessitates detailed and distinct incentive programs for the various platforms utilized in the energy sector. The most recent updates to the Domestic Content tax adders of the Inflation Reduction Act (IRA) reflect engagement between the Treasury Department and industry stakeholders that has created a more actionable yet still complex set of eligibility requirements. Better-defined requirements should lead to more projects leveraging the tax benefits, leading to more clean energy on the grid and hopefully more American-made components in the plants.
Understanding the Framework
The initial attempt by the IRS to create standards under the Domestic Content provisions of the IRA for “manufactured products” left the market confused if not frustrated. The level of detail provided by the IRS fell short of reflecting the complexities of energy projects on the US grid. After receiving feedback from stakeholders, the IRS provided an updated and improved set of guidance this Spring. Despite the clarity and incentive, the decision to procure domestically manufactured project components will still require a careful cost-benefit analysis.
The Domestic Content tax adders of the IRA are meant to incentivize the use of American-made materials and equipment in energy projects. However, these incentives come with strict eligibility criteria that may not always align with the availability, quality and cost of the domestic sources. Strategic sourcing, including supply chain due diligence, and ENERGY MARKET MODELING that reflects the true costs and subsequent tax impacts of project components will be critical in precisely evaluating the financial viability of an energy project. The immediate availability of tax equity will need to be weighed against other criteria such as long-term supply chain dynamics and INTERCONNECTION timelines.
How Ulteig Can Support Your Project
Positioning our clients’ interests as a top priority enables us to help them navigate recent federal provisions and see their projects to successful completion.
OEM Relationships
We work closely with a variety of Original Equipment Manufacturers (OEMs). These vendor-agnostic relationships allow us to provide a wider range of options to client entities involved in project development, ensuring they’re not limited to a single supply chain.
Supply Chains and Design Flexibility
A flexible approach to equipment procurement can be mirrored in HOW WE DESIGN by providing multiple layouts for different technology and equipment procurement scenarios. This versatility can help project stakeholders meet the domestic content provisions and receive needed tax credits, while MAINTAINING PROJECT SCHEDULE despite uncertainty in supply chains.
Cost Projections
Understanding how changes in procurement strategy can affect overall project financials is essential for forecasting economics over the life of a project. We help participants in the development process assess changing capital spend under varying supply scenarios.
Navigating Federal Complexities
Recent IRS guidelines present their own set of challenges for project stakeholders. Understanding these guidelines, their implications for projects and the potential financial benefits can be daunting. We’re prepared to help clients navigate these complexities, keeping them fully informed and able to make the best decisions for their projects.
Turning Challenges into Opportunities
With careful planning, understanding and a trusted consulting partner, clean energy project stakeholders can successfully navigate the complexities and changes in a landscape shaped by federal policies. This can empower their efforts and lead to significant benefits for their business operations and the economy as a whole.
At Ulteig, we’re committed to helping our clients understand and adapt to these changes across all Lifeline Sectors®, enabling them to thrive in a dynamic environment.
CONTACT US TODAY to learn more.
WHAT MAKES ULTEIG DIFFERENT?
From global energy producers to locally funded cities and private developers to government agencies, the clients we serve encompass a broad range of relationships and projects. Find out why Ulteig is a leader in the engineering industry.
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