The first round of applications for the Dept. of the Treasury’s Low-Income Communities Bonus Credit Program garnered interest from over 8 GW of renewable energy projects, almost four-times higher than the program’s available capacity. But thanks to a generous carveout, projects that meet certain criteria are still encouraged to apply.
The 2022 Inflation Reduction Act (IRA) updated and expanded the investment tax credit (ITC) so that most customer-sited projects can receive back at least 30% and up to 70% of eligible solar, solar + storage and wind project costs with the help of six stackable bonus credits.
The Internal Revenue Service (IRS) and Dept. of Energy (DOE) opened applications in mid-October for renewable energy projects under development (but not yet ‘placed in service’) to seek a capacity allocation from one of the four bonus credits serving low-income communities, listed in the table below. DOE published a Program Capacity Dashboard, which tracks the remaining capacity for program year 2023 and is updated to reflect when new applications are submitted and approved by the IRS.
|Low-Income Communities Bonus Credit Program
|2023 Capacity Allocation
|Applications Received (As of Dec. 8, 2023)
|Category 1: Located in a Low-Income Community (residential behind-the-meter facilities)
|Category 1: Located in a Low-Income Community (other eligible behind-the-meter and front-of-the-meter facilities)
|Category 2: Located on Tribal Land
|Category 3: Qualified Low-Income Residential Building Project
|Category 4: Qualified Low-Income Economic Benefit Project
At least half of all capacity across the program and within each of the four bonus credits is being reserved for projects that meet at least one of two additional selection criteria (ASC). Treasury established the ASC carveout to prioritize applications from the communities most impacted by energy insecurity. Because of these carveouts, at least 364 MW of capacity is still available, whereas without the carveouts, three categories might already be fully subscribed, or close to it.
The Ownership ASC can be met if the applicant is a tax-exempt entity (including nonprofits and governments), a Tribal enterprise, an Alaska Native Corporation, a renewable energy cooperative or a qualified renewable energy company. To meet the Geographic ASC, the project must be in a persistent poverty county (PPC) or a disadvantaged census tract as defined by the climate and economic justice screening tool (CEJST). Projects can assess their eligibility for the Geographic ASC by opening this online mapping tool produced by DOE and NREL.
Energy tax credits have historically benefited households with higher incomes, and nonprofits, prior to the IRA becoming law, could not access tax credits at all without engaging a third-party. This has led to the communities most impacted by the climate crisis – including communities of color, low-income communities and seniors – having the least access to locally sited renewable energy. The carveouts within the bonus credits can begin to change this dynamic and enable more locally led, community-benefitting renewable energy projects to be developed.
The ASC carveouts are already having an impact. In fact, Category 4 may fulfill its total 700-MW capacity only from ASC applications, which represent 838 MW, and not from any of the 3,113 MW from non-ASC applicants. Because of the 50%, there is still ASC capacity within the other three categories. Projects – especially ASC eligible projects and projects located on Tribal Land – can still apply on a rolling basis through early 2024. Interested projects can apply here.