Investment Tax Credits
Investment tax credits were awarded to two advanced coal projects in October.
The credits are 30% of the eligible project cost. They are special credits under section 48A of the US tax code that require one apply for an allocation.
The projects are the Texas Clean Coal project near Odessa, Texas, a 400-megawatt integrated-gas combined-cycle facility, being developed by Summit Power, that will use coal as fuel and capture and store a large share of the carbon emissions, and the Hydrogen Energy California project, a fossil-fuel gasification project with carbon capture and sequestration in Kern County, California.
The IRS allocated $324 million in tax credits to the Texas project and $334.5 million to the project in California.
Hydrogen Energy California was awarded another $103.6 million in tax credits in January. The IRS announced the latest awards in Announcement 2013-43.
The challenge now will be to raise enough tax equity to cover the credits. The developers will probably have to do sale-leasebacks of the projects to get value for the credits. The alternative is to find strategic investors who can use the credits and claim them on progress payments to contractors during construction.
By Keith Martin