Treasury ruling on subsea cables set to boost US offshore wind plans

The ruling applies to the eligibility of grid connection equipment such as subsea cables that bring power from offshore windfarms to shore to benefit from Investment Tax Credit (ITC) provisions in the Inflation Reduction Act (IRA).

Section 48 of the ITC was expanded under the IRA to apply to renewable energy projects such as offshore wind, but until the NPRM issue by the Treasury on 17 November 2023, it was unclear whether subsea cables could also benefit from tax credits.

The NPRM issued by the Department of the Treasury and Internal Revenue Service (IRS) provides guidance on the ITC under Section 48 of Internal Revenue Code, with the aim of spurring the investment boom ushered in by the IRA.

“Today’s guidance provides the private sector with additional clarity and certainty in making investment decisions for clean energy projects,” said the Treasury. 

“Given the new and expanded incentives created by the Inflation Reduction Act, this clarity is critical as companies secure financing for clean energy projects, create good-paying jobs in communities across the US and strengthen our energy security.

“To continue the investment and jobs boom created by the IRA, Treasury has focused on providing companies with the clarity and certainty needed to secure financing and advance clean energy projects nationwide.

“Today’s guidance provides clarity for offshore wind projects. Ensuring these projects can move forward efficiently is key to creating good-paying clean energy jobs and reducing utility bills.” 

Senior advisor to the President for clean energy, John Podesta said, “The IRA has already fuelled a clean energy investment boom in America. This guidance from Treasury on the ITC gives clean energy developers even more clarity and confidence to continue their momentum.”

Responding, the American Council on Renewable Energy said, “Thanks to the IRA, clean energy businesses now have access to a stable tax platform like the one enjoyed by the fossil fuel sector for more than a century, but to fully take advantage of these benefits, they need to understand how the provisions work. 

“This guidance provides important clarity to developers and investors looking to further America’s energy transition. We remain impressed by the administration’s commitment to fully maximising the economic and environmental benefits of this transformative legislation and plan to continue working closely with Treasury in support of fair, timely and practicable final rules across all facets of the clean energy tax package.”