American-made solar wafers given more weight in latest domestic content bonus guidance

The U.S. Dept. of the Treasury and Internal Revenue Service (IRS) have released additional guidance on the Inflation Reduction Act’s domestic content bonus (45X) for the PTC and ITC. The groups released their final rules last year.

The latest guidance updates and builds upon the domestic content safe harbor that provides clean energy developers the option to rely on default cost percentages provided by Dept. of Energy (in lieu of obtaining direct cost information from suppliers) to determine eligibility for the domestic content bonus. Today’s guidance reflects improved default values that more closely align with the characteristics and costs of applicable project components and manufactured product components in the marketplace, as analyzed by the DOE.

Now there are optional alternative cost percentages for developers of solar projects that use solar cells manufactured with domestically-produced wafers to appropriately recognize cost differentials for manufacturers who use cells made with domestic wafers, thereby enhancing incentives for onshoring wafer manufacturing.

The guidance also provides a variety of updates to clarify use of the safe harbor tables, including:

• Solar: The updated tables update cost percentages, make certain adjustments to the characterizations of applicable project components and manufactured product components, and offer clarifying definitions.
• Domestic Solar Wafers: For each solar table, there are new optional alternative cost percentages for projects using domestic solar cells manufactured with domestic wafers.
• Land-Based Wind: The updated table for Land-Based Wind includes minor adjustments to the characterizations of applicable project components and manufactured product components.
• Battery Electric Storage System (BESS): The updated table updates cost percentages, makes certain adjustments to the characterizations of applicable project components and manufactured product components, and offers clarifying definitions.

In addition, today’s guidance provides additional clarity on the use of the tables for retrofits, projects utilizing elective pay (also known as direct pay), as well as carport and floating solar projects. Taxpayers may utilize the safe harbor tables included in this guidance for projects beginning construction up to 90 days after the release of further guidance. See the safe harbor tables here.