Inflation Reduction Act (IRA): Advanced Manufacturing Product Credit – A cheat sheet
The Inflation Reduction Act (IRA) includes a new “Advanced Manufacturing Production Credit” to support solar, wind and battery component manufacturers. As part of the transition to decarbonized energy sources, this production tax credit (PTC) is designed to support the development of a domestic supply chain for renewable energy technology and energy storage.
This PTC applies to both equipment and minerals produced in the U.S. and sold between December 31, 2022, and December 31, 2032. The equipment must be sold to an unrelated party as part of the taxpayer’s trade or business. The base rate of the credit depends on the specific eligible component being manufactured. There is a credit amount phase-out beginning in 2030 for only the manufactured components; however, there is NO phase-out associated with the production of critical minerals. Components produced at a facility for which an IRC Section 48C Qualifying Advanced Energy Project Credit was claimed are not eligible to claim the Section 45X PTC.
Advanced Manufacturing PTC – IRC 45X cheat sheet
| Asset | Tax Credit |
|---|---|
| PV = photovoltaic; AC = alternating current; DC = direct current | |
| SOLAR COMPONENTS | |
| Thin film PV Cell | $0.04 x capacity /W (DC) |
| Crystalline PV Cell | <$0.04 x capacity /W (DC) |
| PV Wafer | $12/m^2 |
| Solar Grade Polysilicon |
$3/kg
|
| Polymeric Backsheet | $0.40/m^2 |
| Solar Module | $0.07 x capacity /W (DC) |
| Solar Tracker Components | |
| Torque Tube | $0.87/kg |
| Structural Fastener | $2.28/kg |
| Wind Energy Components | |
| Component for Off-Shore Wind Vessel | 10% of the sale price of the vessel |
| Component for On-Shore Wind Vessel | Pre-determined amount for type of component x total rated capacity (/W) of the completed wind turbine |
| Blade | $0.02 x total rated capacity |
| Nacelle | $0.05 x total rated capacity |
| Tower | $0.03 x total rated capacity |
| Offshore Wind Foundation – Fixed Platform | $0.02 x total rated capacity |
| Offshore Wind Foundation – Floating Platform | $0.04 x total rated capacity |
| Inverters | |
| Inverter | Pre-determined amount for type of inverter x capacity of inverter (/W) (AC) |
| Central Inverter | $0.0025 x capacity |
| Utility Inverter | $0.015 x capacity |
| Commercial Inverter | $0.02 x capacity |
| Residential Inverter | $0.065 x capacity |
| Microinverter | $0.11 x capacity |
| Distributed Wind Inverter | $0.11 x capacity |
| Battery Components | |
| Electrode Active Materials | 10% of the costs to produce the materials |
| Battery Cell | $35 x capacity* of battery cell (kWh) |
| Battery Module (with Battery Cells) | $10 x capacity* of battery module (kWh) |
| Battery Module (without Battery Cells) | $45 x capacity* of battery module (kWh) |
| Critical Minerals | |
| Critical Mineral** | 10% of the costs to produce the mineral |
*The capacity determined with respect to a battery cell or battery module cannot exceed a capacity-to-power ratio of 100:1. The capacity-to-power ratio is the ratio of the capacity of the cell or module to the maximum discharge of the cell or module.
Phase out of Advanced Manufacturing PTC:
For components sold during the years comprising 2030-2032, the amount of credit gradually phases out. The credit amount available each year equates to:
- 2030 – the amount calculated via the chart x 0.75
- 2031 – the amount calculated via the chart x 0.5
- 2032 – the amount calculated via the chart x 0.25
- After 2032, the credit is eliminated.
**There is no phase-out for the credit for producing critical minerals.
Critical Minerals:
Platinum Group Metals: Palladium; Platinum; Rhodium; Ruthenium
Rare Earth Elements Group: Cerium; Gadolinium; Lanthanum; Neodymium; Praseodymium; Samarium
Remainder: Aluminum; Antimony; Arsenic; Barite; Beryllium; Bismuth; Cesium; Chromium; Cobalt; Dysprosium; Erbium; Europium; Fluorspar; Gallium; Germanium; Graphite; Hafnium; Holmium; Indium; Iridium; Lithium; Lutetium; Magnesium; Manganese; Nickel; Niobium; Rubidium; Scandium; Tantalum; Tellurium; Terbium; Thulium; Tin; Titanium; Tungsten; Vanadium; Ytterbium; Yttrium; Zinc; Zirconium
There are currently 50 critical minerals. Twenty-five minerals (not bolded) can be purified into multiple forms and still qualify as a critical mineral. The other 25 bolded minerals must be purified to a minimum purity of 99% by mass to qualify as a critical mineral and be eligible for the advanced production tax credit.
Helpful Definitions:
Electrode Active Materials: This means cathode materials, anode materials, anode foils, and electrochemically active materials, including solvents, additives, and electrolyte salts that contribute to the electrochemical processes necessary for energy storage.
Inverter: An end product that is suitable to convert direct current electricity from one or more solar modules or certified distributed wind energy systems in alternating current electricity.
Central Inverter: An inverter that is suitable for large utility-scale systems and has a capacity greater than 1,000 kW (per AC watt basis).
Commercial Inverter: An inverter which is suitable for commercial or utility-scale applications, has a rated output of 208V, 480V, 600V or 800V three-phase power and has a capacity between 20 kW and 125 kW (per AC watt basis).
Distributed Wind Inverter: An inverter used in residential or non-residential systems which utilizes one or more certified distributed wind energy systems and has a rated output that does not exceed 150 kW.
Microinverter: An inverter suitable to connect with one solar module, has a rated output of either i) 120V or 240V single-phase power or ii) 208V or 480V three-phase power and has a capacity that does not exceed 650W (per AC watt basis).
Residential Inverter: An inverter that is suitable for a residence, has a rated output of 120V or 240V single-phase power and has a capacity that does not exceed 20 kW (per AC watt basis).
Utility Inverter: An inverter that is suitable for commercial or utility-scale systems, has a rated output of that equates to or exceeds 600V three-phase power and has a capacity greater than 125kW but less than 1000 kW (per AC watt basis).
This is for informational purposes only. It is not intended to be legal advice and does not create or imply an attorney-client relationship.
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