US Renewable Energy Tax Credits: Domestic Content Bonuses

Understanding Domestic Content Bonuses in US Renewable Energy Tax Credits

Canadian Solar has unveiled its plans to construct a 5 GW solar cell production facility in Indiana, signaling a significant commitment to expanding its presence in the United States.

The Jeffersonville plant will be responsible for manufacturing solar cells to support Canadian Solar’s forthcoming 5 GW solar module assembly plant in Mesquite, Texas.

This cell plant represents a substantial investment, with a projected budget exceeding $800 million, and it is expected to generate approximately 1,200 jobs once it reaches full capacity.

Production at the Jeffersonville facility is slated to commence by the end of 2025, while the Mesquite module assembly facility is on track to commence production by the end of 2023.

Thomas Koerner, senior vice president of Canadian Solar, emphasized that these investments, amounting to over $1.2 billion, underline the company’s commitment to nurturing a local, sustainable, and eco-friendly energy supply chain. These endeavors also align with the long-term requirements of the local-content regulations outlined in the Inflation Reduction Act.

The Production Tax Credit (PTC) grants a 10% bonus to projects that fulfill the domestic content criteria. Meanwhile, under the Investment Tax Credit (ITC), projects complying with the domestic content requirement can receive a bonus of up to 10 percentage points.

To qualify for the full bonus value, projects must meet the domestic content requirement and meet one of the following conditions: 1) the project generates a maximum net output of less than 1 MW of energy; 2) construction on the project commenced before January 29, 2023; or 3) the project satisfies the prevailing wage and apprenticeship requirements outlined in the Inflation Reduction Act (IRA).

As per guidance from the Treasury Department, the domestic content bonus is applicable to projects constructed using specified quantities of domestically produced steel, iron, and manufactured products. To be eligible for the bonus, all manufacturing processes for steel and iron must occur within the United States.

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Image by Yangphoto from Getty Images

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