The Inflation Reduction Act passed by Congress August 12 will provide federal direct-pay credits to electric co-ops when they develop new energy technologies, including carbon capture, nuclear, energy storage, renewables and more.
The bill was signed into law by President Joe Biden Tuesday, August 16.
Direct-pay incentives to co-ops has been one of the top legislative goals for the nation’s electric cooperatives.
Until now, co-ops, which do not pay federal income taxes, have not been eligible for tax credits that bring down the cost of renewable resource projects. Instead, they have had to partner with for-profit businesses that are eligible for tax credits.
“Because co-ops had to deal with for-profit entities to develop renewable energy projects, the costs were higher,” explained CREA Executive Director Kent Singer. “The for-profit companies did not pass the full savings from the tax credits on to the co-ops, and instead retained a portion as their profit margin. Now, co-ops can realize the same benefit as for-profit entities.
“Electric cooperatives are leading the charge to reliably meet America’s future energy needs amid an energy transition that increasingly depends on electricity to power the U.S. economy,” said NRECA CEO Jim Matheson.
“As co-ops continue to innovate, access to tax incentives and funding for investments in new energy technologies are crucial new tools that will help reduce costs and keep electricity affordable for consumers.”
The legislation also creates a voluntary $9.7 billion grant and loan program designed specifically for electric co-ops that buy or build new clean energy systems. It will be administered by the U.S. Department of Agriculture.
The Inflation Reduction Act will provide funding for a wide range of projects, including renewable energy, carbon capture, battery storage, nuclear power and improvements to generation and transmission efficiency. Interested co-ops will be eligible to receive an award for up to 25% of their project costs, with a maximum of $970 million going to any one co-op.