US to Promote Clean Energy Projects in Traditionally Coal-Producing Areas

Developers can claim higher investment and production tax credit under IRA


The United States Treasury Department will provide incentives to developers under the Inflation Reduction Act (IRA) for building clean energy projects and facilities in communities with a historical connection to energy production.

The developers would be entitled to up to a ten percentage point on top of the Investment Tax Credit and an increase of 10% for the Production Tax Credit.

The focus on coal communities is significant as they have been adversely impacted by the transition to clean energy. The Act seeks to ensure that these communities can participate in the growth of the clean energy economy and benefit from public investment in it.

To qualify, developers must locate projects in areas with historical energy connections, such as regions with closed coal mines or coal-fired power plants.

Additionally, areas with significant employment or local tax revenues from fossil fuels and higher-than-average unemployment are eligible. Properties contaminated by hazardous materials or other pollutants, known as brownfields, also qualify.

The announcement builds on the guidance issued in February for the Qualifying Advanced Energy Project Credit under Section 48C of the Internal Revenue Code, which sets aside at least $4 billion for investments in manufacturing in coal communities. Applications for the first round of funding for the 48C credit are planned to open by May 31, 2023.

The IRA’s energy community bonus and the Qualifying Advanced Energy Project Credit offer valuable incentives for investment and job creation in coal communities, providing developers with financial support to invest in clean energy projects.

These initiatives present a promising opportunity to promote the transition to clean energy while creating jobs in communities historically connected to energy production.

Treasury Secretary Janet L. Yellen said that coal communities have the knowledge and resources to lead in the growth of the clean energy economy, and additional public investment will catalyze this process.

The Interagency Working Group on Energy Communities has partnered with Treasury and the Internal Revenue Services (IRS) to provide a searchable mapping tool to identify areas eligible for the energy communities’ bonus. This tool will help developers to identify eligible areas and take advantage of the incentives offered by the IRA.

The U.S. government has made $1 billion in grants available to help agricultural producers and rural small businesses invest in renewable energy systems and improve energy efficiency through the Rural Energy for America Program. The USDA will hold quarterly competitions through September 30, 2024, to distribute the funds.

Since the passage of IRA in August 2022, clean energy companies in the United States have announced over 101,000 new green jobs in 31 states, with 90 new clean energy projects totaling $89.5 billion in investments. Most projects are in Arizona, Georgia, Michigan, Ohio, South Carolina, Tennessee, and Texas.