Six US senators representing New England states with ambitious offshore wind programmes wrote a letter to Treasury Secretary Janet Yellen urging timeline clarity and expansion of climate law-linked tax credit guidance to boost development.
The senators from Connecticut, Massachusetts, and Rhode Island, all Democrats, asked Yellen to clarify timelines and strengthen guidance on bonus domestic content and energy communities tax credits in the landmark Inflation Reduction Act (IRA) “so that the offshore wind industry and workers can enjoy the full benefits of these incentives, as Congress intended”.
“Without a clear understanding of whether, and to what extent, offshore wind projects would qualify for the domestic content and energy community bonus tax credits, developers may be forced to bid at unnecessarily high prices or may be unable to secure needed project financing due to an inflationary market and congested supply chain,” the senators, including Ed Markey and Elizabeth Warren of Massachusetts, wrote.
Governors of the three states signed a memorandum of understanding (MoU) to synchronise their sector procurement to maximise efficiencies and raise economies of scale.
Led by Massachusetts with a tender for 3.6GW, the total could be as high as 6GW, with decisions expected this month.
The IRA offers investment tax credits (ITC) of 30% for offshore wind projects that meet minimal apprenticeship and prevailing wage requirements.
The ITC can be increased to up to 50% if domestic content and energy community provisions are met.
The application of energy communities adder has been particularly contentious.
Energy communities are described as census districts that have been afflicted with poverty and pollution related to fossil fuel extraction and use in power generation.
Under tentative guidance released by Treasury and its tax arm, the Internal Revenue Service (IRS), “an offshore wind project developer can claim the energy community bonus tax credit for offshore projects only where the onshore substation is located in a designated” area, the senators note.
They urged expanding this to include marshalling and operations and maintenance ports, “infrastructure that is integral to offshore wind generation and would allow for significant investment in portside energy communities”.
Lack of clarity over the energy communities is among several factors leading Orsted to cancel 2.25GW of capacity for New Jersey and the senators noted that “inaction or delay could threaten offshore wind projects in their states”.
Along with Markey and Warren, the signatories include Richard Blumenthal and Chris Murphy of Connecticut and Jack Reed and Sheldon Whitehouse of Rhode Island.
