Navigating Federal Policy for Clean Energy Development
September 22, 2023
The federal government has prioritized not just advancing a clean energy economy but doing so with an American workforce utilizing American-made components. Familiar tax incentives are being extended and expanded to incentivize energy projects and workforce development priorities. However, the complex nature of the US power grid and the vast availability of new technologies has led to a complex tax framework that may be difficult for project sponsors to navigate. The Domestic Content tax credits of the Inflation Reduction Act represent a specific example of requirements that may not reflect the realities of the global marketplace and, therefore, may be difficult to satisfy.
Understanding the Framework
There is no shortage of available summaries on the initial Domestic Content guidance that the IRS released in the spring. The requirement for 100 percent domestic structural iron and steel is comparatively straightforward, though there are questions here about what is considered “structural.” The 40 percent of “manufactured products,” though, remains far more ambiguous. Additionally, for those developers who are able to meet the domestic sourcing requirements, they could ultimately experience an overall project cost increase that dilutes or even offsets the financial benefits provided by the tax credits.
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, interconnection timelines and the chance that the IRS may revise the Domestic Content requirements.
How Ulteig Can Help
Positioning our developer partners as a top priority enables us to help them navigate recent federal provisions and see their projects to completion.
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 our clients, 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 clients meet the domestic content provisions and receive needed tax credits, while maintaining project schedule despite uncertainty in supply chains.
Understanding how changes in procurement strategy can affect overall project financials is essential for forecasting economics over the life of a project. We help businesses assess changing capital spend under varying supply scenarios.
Navigating Federal Complexities
Recent IRS guidelines present their own set of challenges for developers. 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 the right partner, developers can successfully navigate the complexities and changes in a landscape shaped by federal policies. This can empower their efforts and lead to significant benefits.
At Ulteig, we’re committed to helping our clients understand and adapt to these changes across all Lifeline Sectors®, enabling them and their business operations 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.Contact Us