U.S. Treasury Allocates $6B For Clean Energy Projects

The United States Treasury Department and the Internal Revenue Service (IRS) have announced that $6 billion will be awarded in tax credits through the second round of the § 48C Qualifying Advanced Energy Project Tax Credit Program. This program marks the culmination of the IRA's commitment to invest $10 billion in clean energy manufacturing, critical materials processing, and industrial decarbonization projects.

The second-round allocations will support more than 140 projects, which means on top of the around 110 that have been supported already in the first round, it will sum up to a cumulative total of around 250 initiatives in more than 30 states. The projects focus on building robust clean energy ecosystems by going after renewable manufacturing and recycling/processing of critical materials while decarbonizing industrial processes.

The Round 2 funds will direct approximately $2.5 billion of its amount toward the disadvantaged areas under section 48C energy communities, regions affected by coal plant and mine closure. These are regions typically deprived of economic support; thus, this focused investment will truly profit from such projects, heralding economic restoration and employment in their communities that would bear the brunt of the energy shift.

The § 48C Program was introduced in 2009 and then expanded under the IRA. The program uses competitive tax credit allocations to encourage impactful infrastructure projects. Under Round 2, $3.8 billion was directed toward clean energy manufacturing and recycling, funding such technologies as hydrogen production, EV components, battery systems, and wind energy parts. The administration has also set aside $1.5 billion for critical materials recycling and refining, which will include lithium-ion battery recycling and rare earth elements processing necessary for clean energy technologies. In addition, the administration allocated $700 million to industrial decarbonization projects, such as heat pumps and thermal storage technologies. All of these decarbonization initiatives will reduce annual carbon dioxide emissions by 2.8 million tons.

Job creation is still a mainstay of the § 48C Program. The selected projects are expected to create 30,000 construction jobs over the next four years, with 10,000 of those jobs located in energy communities. Many projects have included labor agreements, providing workers with specialized training while bringing economic opportunities to communities.

The strong response to the second round reflects the high demand within the clean energy sector. More than 800 concept papers requesting $40 billion in credits—six times the available funding—were submitted, which reflected the industry's enthusiasm and readiness to transition to sustainable practices. After a rigorous evaluation process, 350 applications were submitted from over 40 states, with more than 75 applications coming from energy communities.

Looking forward, awardees will need to meet certain certification and operational milestones to be eligible to claim their awarded tax credits. These projects are well-positioned to greatly enhance the United States' clean energy infrastructure, reduce greenhouse gas emissions, and build economic resilience. By promoting clean energy manufacturing and critical materials processing in the United States, the program advances the Biden administration's commitment to a secure, sustainable, and equitable energy future.

The § 48C Program has had the cumulative impact of distributing $10 billion in tax credits across two rounds that leverage over $44 billion in total project investments across the country. This investment goes beyond just accelerating the transition to clean energy; it further ensures that the associated economic and environmental benefits are distributed fairly across communities that are affected, especially by this energy transition.

Simultaneously, the U.S. Treasury and IRS also continue to undertake complementary measures: the Clean Fuels Production Credit, for instance, is set to come into force in 2025. Overall, such initiatives are reflections of the holistic approach the federal government takes towards a clean energy economy, underpinned by innovation, jobs, and action on climate change.

The § 48C Program demonstrates the transformative power of targeted investments in clean energy and industrial decarbonization. As projects mature, they will be vital to the kind of future in which environmental sustainability and economic inclusivity are intertwined.