The energy tax credit provisions in the Inflation Reduction Act (IRA) are broad reaching as the legislation extends the lives of the popular Investment Tax Credit (ITC) and the Production Tax Credit (PTC), expands the list of technologies eligible for these credits, and provides opportunities for utilities and project developers to increase the credits’ value by meeting certain criteria.
Renewable resource owners now have significant flexibility to pursue a variety of tax credit and monetization strategy combinations. But this flexibility introduces questions about which strategy combination maximizes value for resource owners. CRA, a leading energy consultancy, explored which factors influence the optimal ITC/PTC monetization strategy under various cost and operating conditions.
At the forefront of the IRA’s provisions are extensions and modifications to the ITC and PTC. The key differentiator between the ITC and PTC is the manner in which each credit is assessed, with the value of the ITC scaling with project capital costs and the value of the PTC scaling with a project’s energy production.