PTC Inflation Adjustment

PTC Inflation Adjustment

July 11, 2024 | By Keith Martin in Washington, DC

Production tax credits for producing renewable electricity are higher this year than in 2023.

The IRS announced the annual inflation adjustments in Notice 2024-69 in early July. 

Production tax credits for generating electricity from projects that use wind, geothermal steam or fluid or closed-loop biomass (plants grown to be used as fuel in power plants) and were placed in 2021 or earlier are 2.9¢ a kilowatt hour in 2024, 0.1¢ higher than in 2023.

PTCs for the same projects, plus solar, put in service in 2022 or later will be 3.0¢ a kilowatt hour because of a change the Inflation Reduction Act made in how the inflation adjustment works for newer projects.

The tax credits will be 1.5¢ a kilowatt hour in 2024 for generating electricity from open-loop biomass, landfill gas, trash, incremental hydropower and ocean energy. Such projects qualify for PTCs at only half the full rate. However, incremental hydropower and ocean energy projects qualify for PTCs at the full rate if placed in service in 2023 or later.

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.

Projects that commenced construction for tax purposes on or after January 29, 2023 and that have maximum net outputs of 1 MWac or greater must comply with wage and apprentice requirements to claim credits at the full rates. (For more details on these requirements, see, "Final Wage and Apprentice Requirements.")

The credits phase out if contracted electricity prices from a particular resource reach a certain level. That level for wind in 2024 is 15.6¢ a KWh. The IRS said there will not be any phase out in 2024 because contracted wind electricity prices were 3.15¢ a KWh going into 2024. It said it lacks data on contracted prices for electricity from the other energy sources.