RTC Policy Finder

Section 45Y Clean Electricity Production Credit

The Sec. 45Y Clean Electricity Production Credit was introduced through the Inflation Reduction Act in 2022. It effectively replaces the Sec. 45 Production Tax Credit starting in 2025 and aims to provide a technology-neutral incentive for clean electricity production and zero-carbon combined heat and power (CHP) for a 10-year window after the property is placed in service. Prior to IRS guidance, the text is unclear regarding exact technological applicability, but the credit could be used for on-site deployment of renewable electricity if it is equipped with a metering device maintained by a third party, as well as CHP using zero-carbon fuels. The base amount is 0.3 cents multiplied by the kilowatt hours of electricity produced by a facility unless the facility applies for the alternative amount of 1.5 cents. The credit cannot be granted to any facility that has received a credit under sections 45, 45J, 45Q, 45U, 48, 48A, or 48E. The credit will begin being phased out for facilities constructed beginning 2032 or the year following when greenhouse gas emissions from the production of electricity in the U.S. are equal to or less than 25% of 2022 levels, whichever is later. The credit will become 0% in the fourth calendar year after the determined applicable year. In the case of thermal storage, the credit only applies to systems used to heat or cool buildings.

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