Resource logo with tagline

Treasury issues final tax credit transferability rules

The U.S. Treasury has issued final rules for the transferability of 11 different clean energy credits, including 45V, 45Q, and 45X.

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) this week released final rules on tax credit transferability.

The Inflation Reduction Act created two new credit delivery mechanisms—elective pay (otherwise known as “direct pay”) and transferability—that are enabling state, local, and Tribal governments; non-profit organizations; Puerto Rico and other U.S. territories; and many more businesses to take advantage of clean energy tax credits.

Until the Inflation Reduction Act introduced these new credit delivery mechanisms, governments, many types of tax-exempt organizations, and many businesses could not fully benefit from tax credits like those that incentivize clean energy construction, the agencies said in a news release.

“The Inflation Reduction Act’s new tools to access clean energy tax credits are a catalyst for meeting President Biden’s historic economic and climate goals. They are acting as a force multiplier, enabling companies to realize far greater value from incentives to deploy new clean power and manufacture clean energy components,” said Secretary of the Treasury Janet L. Yellen. “More clean energy projects are being built quickly and affordably, and more communities are benefitting from the growth of the clean energy economy.”

The Inflation Reduction Act’s transferability provisions allow businesses to transfer all or a portion of any of 11 clean energy credits to a third-party in exchange for tax-free immediate funds, so that businesses can take advantage of tax incentives if they do not have sufficient tax liability to fully utilize the credits themselves. Entities without sufficient tax liability were previously unable to realize the full value of credits, which raised costs and created challenges for financing projects.

The Inflation Reduction Act also allows tax-exempt and governmental entities to receive elective payments for 12 clean energy tax credits, including the major Investment and Production Tax Credits, as well as tax credits for electric vehicles and charging stations. Businesses can also choose elective pay for a five-year period for three of those credits: the credits for Advanced Manufacturing (45X), Carbon Oxide Sequestration (45Q), and Clean Hydrogen (45V).  Final rules on elective pay were issued in March.

To facilitate taxpayers transferring a clean energy credit or receiving a direct payment of an energy credit or CHIPS credit, the IRS built IRS Energy Credits Online (ECO) for taxpayers to complete the pre-file registration process and receive a registration number. The registration number must be included on the taxpayer’s annual return when making a transfer election or elective payment election for a clean energy credit. The registration process helps prevent improper payments to fraudulent actors and provides the IRS with basic information to ensure that any taxpayer that qualifies for these credit monetization mechanisms can readily access these benefits upon filing a return and making an election.

As of April 19, more than 900 entities have requested approximately 59,000 registration numbers for projects or facilities located across all 50 states plus territories. Approximately 97% of these projects are pursuing transferability.  A wide variety of credits are being used, but the bulk transferability-related registrations are related to solar and wind projects using the investment or production tax credit.  In addition, more than 1,300 projects or facilities submitted are pursuing elective pay, including submissions from more than 75 state and local governments to register approximately 650 clean buses and vehicles through elective pay.

Unlock this article

The content you are trying to view is exclusive to our subscribers.
To unlock this article:

You might also like...

Japan’s ENEOS makes investment in Gulf Coast hydrogen project

Established by Azimuth Capital Management, MVCE is developing a large plant for the manufacture of hydrogen, MCH, and ammonia to supply Japan.

ENEOS Corporation has made an equity investment in MVCE Gulf Coast, LLC, according to a news release.

MVCE seeks to produce clean hydrogen in the Gulf of Mexico and build a clean hydrogen supply chain between Japan and the US.

“ENEOS is working to build low-cost, stable clean hydrogen supply chains in Japan and overseas,” the release states. “As one aspect of the
initiative, ENEOS is investigating the joint production of hydrogen with business partners in Asia, the Middle East, and Australia as well as the production and transportation of methylcyclohexane (MCH),  an effective medium for the efficient form of hydrogen storage and transportation.”

Established by Azimuth Capital Management, MVCE is developing one of the world’s largest plants for the manufacture of hydrogen, MCH, and ammonia in
the Gulf of Mexico. Through its equity participation, ENEOS will verify the commercial feasibility of manufacturing cost-competitive and clean hydrogen in the Gulf of Mexico and exporting MCH to Japan.

Read More »

From Lisbon: Could the European clean fuels mandates fall?

A number of panelists speaking at the Lisbon Energy Summit & Exhibition expressed the possibility that European clean fuels consumption mandates could be revised downward – or even eliminated altogether.

The European Union’s array of mandates and quotas for clean fuels imports and consumption are, in many ways, holding up the floor of the boom in projects around the world, with many developers seeking to take advantage of the expected demand from European industry.

The mandates, however, might be too ambitious to be fulfilled and could in some cases be revised or eliminated, according to multiple speakers this week at the Lisbon Energy Summit & Exhibition.

“You still have a lot of companies that by now should be doing something to fullfill the mandates by 2030, and they’re not,” said Sergio Machado, head of hydrogen and renewable fuels at Galp, a Portuguese multinational energy company. “I think you have some companies that are not completely convinced that the mandates are fulfillable, and if not, something may have to change” such as a revised mandate or another timeline, he said.

Machado noted that anticipated penalties under RED III from Member States could end up being a “bailout” for industry. The deadline for EU Member States to implement RED III into national laws is September, 2025, where penalties for non-compliance will be set.

“Being a pioneer in [green hydrogen], I want a level playing field,” he added.

Galp took a final investment decision in December on two projects at its Sines refinery – a 100 MW electrolysis plant, and an advanced biofuels unit – for a total of EUR 650m of investment.

Nuno Rodriguez, head of energy and decarbonization projects for The Navigator Company, said the EU should start considering mechanisms to put in place for early mover projects that take FID only to later have the mandates revised or eliminated in some way.

Philip Christiani, of Copenhagen Infrastructure Partners, lauded the European Hydrogen Bank for its principles but noted that it has just EUR 3bn in funding and is “grossly underfunded.” He compared it to over $30bn in funding that is being allocated at the federal level to hydrogen in the United States under the IRA.

Furthermore, he said, citing an unnamed study, the ReFuel EU targets for consuming a total of 20 million tons of green hydrogen on the continent by 2030 was out of reach. He noted that the projects that recently won financing from the European Hydrogen Bank amounted to just 150,000 tons of production. 

“There’s a missing proportion between the ambitions on one side, and the possibilities on the other side,” he said.

A more realistic goal, he added, again citing research, was in the 2.5 million tons area by 2030. “[That’s] now not on the ridiculous scale, but it’s on a scale where you can see eye to eye with it.”

Executives from Madocqua Renewables, which has a 500 MW green ammonia project in southern Portugal, and ETFuels, an e-methanol developer, both noted they were relying on EU mandates to spur demand when their projects are expected to come online in 2028 or 2029.

“We believe that at the moment, without comprehensive legislative action, it’s difficult to get this industry off the ground,” said Oliver Seelis, of CIP, which is an investor into the Madocqua project in Portugal.

“We’ve seen this happen very successfully with renewables, where in the beginning feed-in tariffs and contracts for difference helped to start this industry,” he added. “If you look at hard-to-decarbonize sectors such as steel and shipping, that is not the case yet.”

Read More »

Verde Clean Fuels to develop lower carbon gas refinery in West Texas

The project would consume natural gas in the pipeline-constrained Permian Basin as feedstock, potentially mitigating the flaring of up to 34 million cubic feet of natural gas per day.

Verde Clean Fuels, Inc. and Cottonmouth Ventures LLC, a subsidiary of Diamondback Energy, have executed a Joint Development Agreement for the proposed development, construction, and operation of a facility to produce commodity-grade gasoline utilizing associated natural gas feedstock supplied from Diamondback’s operations in the Permian Basin.

The JDA provides a pathway forward for the parties to reach final definitive documents and Final Investment Decision for the proposed project, according to a news release. The JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement, construction agreement, license agreement and financing agreements as well as conditions precedent to close, such as FID.

The expectation for the project is to produce approximately 3,000 barrels per day of fully-refined gasoline utilizing Verde’s patented STG+® process. By consuming natural gas in the pipeline-constrained Permian Basin as feedstock, the proposed project could demonstrate the ability to mitigate the flaring of up to 34 million cubic feet of natural gas per day, while also producing a high-value, salable product.

“The Verde Clean Fuels team is incredibly excited to finalize this JDA with Diamondback Energy with the goal to produce gasoline from natural gas in the Permian Basin,” said Ernie Miller, CEO of Verde. “This arrangement brings compounding economic and environmental benefits to West Texas. We believe that the ability to de-bottleneck midstream constraints along with the potential to reduce flaring of natural gas, while creating less carbon intensive gasoline, is of paramount interest to natural gas producers.”

“This agreement, with the first planned project in Martin County, fits perfectly with Diamondback’s strategy to decarbonize the oil field while ensuring a return for our investors,” said Kaes Van’t Hof, President of Diamondback. “Additionally, the scalability of the project is incredibly exciting, with similar natural gas-to-gasoline facilities possible across Diamondback’s locations in West Texas. We are proud to partner with Verde to bring this technology to the market.”

The proposed facility, which is to be located in Martin County, Texas in the heart of the Permian Basin, could serve as a template for additional natural gas-to-gasoline projects throughout the Permian Basin and other pipeline-constrained basins in the U.S., as well as address flared or stranded natural gas opportunities internationally.

Read More »
exclusive

Siemens Energy NA executive priming for scale in hydrogen

The North American wing of the global technology company is in the earliest stages of engaging EPC providers and economic development officials for its next US electrolyzer manufacturing site, Richard Voorberg, president of Siemens Energy North America, said in an interview.

To say the demand for electrolyzer capacity has grown exponentially in 2022 comes across as an understatement, as customers in industry and energy have increased their orders multiple times over.

Siemens Energy North America’s electrolyzer – which is 18 MW and among the largest in the market – was too large for many customers just a year ago, Richard Voorberg, president of Siemens Energy North America, said in an interview. But following passage of the IRA, the question became how many the customer could get – and how fast.

“How quickly can I get 100 of your electrolyzers?” Voorberg said he hears now, whereas before that same customer might have asked for half an electrolyzer.

The decision to make an electrolyzer as large as 18 MW was part of the company’s strategy to have bigger capacity as the market for hydrogen expanded, Voorberg said.

HIF Global recently said it has tapped Siemens Energy to engineer and design their proprietary “Silyzer 300” electrolyzers to produce approximately 300,000 tons per year of green hydrogen at an eFuels facility in Texas.

Siemens Energy NA is now in the earliest stages of developing a new electrolyzer manufacturing plant in the United States, as previously reported by ReSource.

The US plant will be similar to the plant Siemens Energy is building in Berlin, and won’t be built until after Berlin is completed, Voorberg said.

The company is actively engaging with state economic development committees to scout locations, incentives and labor supplies. It is also in the early stages of engaging engineers, EPC providers and other development partners, Voorberg said.

“We also need to decide in the next few months what we want to do in-house, with our own shops, versus what we want to outsource,” Voorberg said.

North Carolina, Houston, Alabama and upstate New York are all in Siemens Energy’s existing footprint and are as such strong contenders for the new facility, Voorberg said, though nothing is set in stone as far as location. The company would finance the facility within its normal capex expenses within a year.

In electrolyzer manufacturing there is some “test hydrogen” that is produced, so there will be a need to find some small offtaker for that, Voorberg said. The company could also use it to supply its own fork-trucks in the future.

Open to acquisitions

Diving into an acquisition of another electrolyzer manufacturer probably would not make sense for Siemens Energy, Voorberg said. But the company is open to M&A.

He cited the acquisition of Airfoil Components in Florida as the type of deal that the company could move on again. In that case, the target company had expertise in casting that was easier to acquire than build from scratch.

“Does that make more sense that we buy it, that we outsource it, or should we be doing something like that ourselves?” Voorberg said are questions he often asks.

“When it comes to less complicated things, like a commodity market, that’s not something we play well in or need to play well in,” Voorberg said. “When it comes to a specialty design-type product, that’s where we at Siemens Energy shine.”

Right now, the Siemens Energy parent company has a bid out to acquire the third of Siemens Gamesa, the Spanish-listed wind engineering company, that it does not own, Voorberg noted.

Start-up opportunity

Siemens Energy, through its in-house venture capital group and partnerships with US universities, is interested in helping technology startups scale, Voorberg said.

“We can play in between them and the customers and do the introductions and potentially even partner in with some of our technology,” he said.

The company keeps close relationships with incubators at Georgia Tech and the University of Central Florida, among others, Voorberg said.

Equity investments will be made through the VC group, Voorberg said, noting that effort as one that is strategic in growing the energy transition, rather than financial.

Additional non-equity partnerships, similar to the fellowship with the Bill Gates-founded Breakthrough Energy, are on the table as well.

Read More »
exclusive

NOx mitigation firm looking to scale

A publicly listed company with a hydrogen burner project backed by one of the largest US utilities could accelerate growth with a capital infusion in pursuit of first-adopter clients. It offers technology that aims to mitigate an underappreciated aspect of the embryonic clean hydrogen ecosystem: blending hydrogen with natural gas can greatly increase NOx emissions when combusted.

ClearSign Technologies, the publicly listed burner solutions provider, is at an inflection point in the development of its products to serve players in the emerging hydrogen landscape, CEO Jim Deller said in an interview.

“We’re new,” Deller said of the company’s emergence on the hydrogen scene. The company is aggressively seeking a place in the hydrogen mainstream as it pursues first-adopter clients. “We need to get our install base up.”

ClearSign recently received a collaboration commitment and pledged funding for its 100% Hydrogen Ultra Low NOx burner project from Southern California Gas Co. This comes on top of the SBIR program Phase 2 Award for $1.6m from the DOE. The company has one year’s cash on hand, according to Deller.

Hydrogen blending increases the output of NOx emissions, which are heavily regulated, Deller explained. A 20% hydrogen blend with fuel gas, for example, causes a 40% increase in NOx emissions.

The goal of the project with SoCalGas is to develop NOx hydrogen burner technology, which the company believes will enable the adoption of hydrogen fuel for industrial heating.

“Your NOx permit is not going to change,” he said. “In order to use even a small amount of hydrogen in your fuel gas, you need a technology that’s going to allow you to maintain NOx emissions for an efficient price.”

Deller said he sees ClearSign as an enabler of the hydrogen transition, pointing to SoCalGas’ need to keep their clients compliant with their operating permits.

“They’re going to have to modify their technology to enable the combustion of hydrogen without exceeding their NOx permits, and that’s where we come in.”

A ‘pivotal point’

ClearSign is open to discussing partnerships and financial options to scale deployment of its technology, Deller said, pointing to potential markets in Texas and the Pacific Northwest.

“We’re certainly open to any company that has a compatible technology,” Deller said.

ClearSign is not engaged for M&A now, but it does have discussions with prospective financial advisors, company spokesperson Matthew Selinger said. “Like any small company, if we had more money we could potentially accelerate faster.”

The company is not considering a spin off now, Deller said, focusing instead on getting traction commercially. ClearSign has not historically taken on debt. Those types of business opportunities are not off the table, but technical synergy and strategic partnerships are first pursued for value creation.

“We’re at a pivotal point, I believe, in the development of our technology,” Deller said. “I’m open to talk about any ideas.”

A technology in development

The burner technology is also applicable to systems that use only hydrogen, Deller said. The Phase 2 DOE grant funding is meant to develop a full range of commercial burners that will operate through a range of fuel gasses up to and including 100% hydrogen.

ClearSign does not have additional partnerships pending announcement, Deller said. But what’s applicable in Southern California is relevant to discussions happening in proposed hydrogen hubs around the country.

The company is headquartered in Tulsa, Oklahoma, along with process burner manufacturing partner Zeeco. It uses third-party manufacturing and will continue to do so, Deller said.

ClearSign also has offices in Seattle and Beijing. The company’s US and Chinese businesses to not have a materials shipping relationship, Deller said. The model followed has manufacturing separated between countries.

Read More »
exclusive

Advisor Profile: Cameron Lynch of Energy & Industrial Advisory Partners

The veteran engineer and financial advisor sees widespread opportunity for capital deployment into early-stage renewable fuel companies.

Cameron Lynch, co-founder and managing partner at Energy & Industrial Advisory Partners, sees prodigious opportunity to pick up mandates in the hydrogen sector as young companies and early movers attract well-capitalized investors looking for auspicious valuations.

The firm, a three-year-old boutique investment banking outfit with offices in New York and Houston, is broadly committed to the energy transition, but is recruiting for new personnel with hydrogen expertise, Lynch said, adding that he is preparing for a new level of dealmaking in the new year.

“I think we can all expect 2023 will be even more of a record year, just given the appetite for hydrogen,” Lynch said. “Hydrogen is one of our core focuses for next year.”

Cameron Lynch

Lynch started his career as a civil & structural engineer and moved into capital equipment manufacturing and leasing for oil & gas, and also industrial gasses –things like cryoge

nic handling equipment for liquid nitrogen. He started the London office of an Aberdeen, U.K.-based M&A firm, before repeating that effort in New York.

Founding EIAP, Lynch and his business partner Sean Shafer have turned toward the energy transition and away from conventional energy. The firm works on the whole of decarbonization but has found the most success in the hydrogen space.

Earlier lifecycle, better valuations

Hydrogen intersects with oil& gas, nuclear, chemicals, midstream companies, and major manufacturing.

Large private equity funds that want to get into the space are realizing that if they don’t want to pay “ridiculous valuations for hydrogen companies” they must take on earlier-stage risk, Lynch said.

Interest from big private equity is therefore comparatively high for early-stage capital raising in the hydrogen sector, Lynch said, particularly where funds have the option to deploy more capital in the future, Lynch said.

“They’re willing to take that step down to what would normally be below their investment threshold.”

Lynch, who expects to launch several transactions in the coming months with EIAP, has a strong background in oil & gas, and views hydrogen valuations as a compelling opportunity now.

“It’s very refreshing to be working on stuff that’s attracting these superb valuations,” Lynch said.

There’s a lot of non-dilutive money in the market and the Inflation Reduction Act has been a major boon to investors, Lynch said. For small companies, getting a slice of the pie is potentially life changing.

Sean Shafer

The hydrogen space is not immune to the macroeconomic challenges that renewables have faced in recent months and years, Lynch said. But as those same challenges have accelerated the move toward energy security, hydrogen stands to benefit.

Supply chain issues post-COVID pose a potential long-term concern in the industry, and equity and debt providers question the availability of compressors and lead times.

“I would say that’s one of the key issues out there,” Lynch said. There’s also the question of available infrastructure and the extent to which new infrastructure will be built out for hydrogen.

EIAP sees the most convincing uses for hydrogen near term in light-weight mobility and aerospace, Lynch said. The molecule also has a strong use case in back-up generation.

Hydrogen additionally presents companies in traditional fossil fuel verticals the opportunity to modernize, Lynch said, citing a secondary trade EIAP completed earlier this year

California’s Suburban Propane Partners acquired a roughly 25% equity stake in Ashburn, Virginia-based Independence Hydrogen, Inc. The deal involved the creation of a new subsidiary, Suburban Renewable Energy, as part of its long-term strategic goal of building out a renewable energy platform.

Read More »

Welcome Back

Get Started

Sign up for a free 15-day trial and get the latest clean fuels news in your inbox.