2022 PTC inflation adjustment

2022 PTC inflation adjustment

June 23, 2022 | By Keith Martin in Washington, DC

Production tax credits for producing renewable electricity will be slightly lower this year than thought earlier after the Internal Revenue Service corrected an error.

Production tax credits for generating electricity from wind, geothermal steam or fluid or closed-loop biomass (plants grown to be used as fuel in power plants) will be 2.6¢ a kilowatt hour in 2022, 1¢ higher than the year before but not the 2¢ increase the IRS announced in April. The IRS corrected the error in May.

The tax credits will remain at 1.3¢ a kilowatt hour for generating electricity from open-loop biomass, landfill gas, incremental hydropower and ocean energy.

The credits are adjusted each year for inflation as measured by the GDP price deflator. They run for 10 years after a project is originally placed in service.

The credits phase out if contracted electricity prices from a particular resource reach a certain level. That level for wind in 2022 is 14.1¢ a KWh. The IRS said there will not be any phase out in 2022 because contracted wind electricity prices were 4.09¢ a KWh going into 2022. It said it lacks data on contracted prices for electricity from the other energy sources.

The tax credit amounts were published in the Federal Register on April 14, but then corrected in Internal Revenue Bulletin 2022-21 on May 23.