Treasury Department Announces Process and Timetable to Allocate $6 Billion in Qualifying Advanced Energy Project Credits

Applications for Round 1 were submitted last year, and on March 29, 2024, the U.S. Department of Energy (DOE), which helps select awardees and administer the program, announced that $4 billion in Credits were awarded to over 100 projects across 35 states, with awards ranging from under $1 million to over $100 million. This year’s Round 2 will allocate approximately $6 billion in Credits to selected applicants, $2.5 billion of which must be awarded to projects located in IRC section 48C(e) Energy Communities Census Tracts (Energy Communities).

In general, Round 2 will be conducted in the same manner, under the same procedures and subject to similar criteria as Round 1. Pillsbury previously provided detailed guidance on 48C Credits and Round 1.

Round 2 applications will follow the same two-step application and review process, with a concept paper due in June as the initial step. (The specific concept paper due date will be 30 days from opening of the submission portal, which could be any point in May, but no later than May 28, 2024.) The DOE will then issue encouragement/discouragement notices to applicants based on the agency’s review of the concept papers, and full applications will then be due after a fixed period. All Round 2 allocation decisions will be made no later than January 15, 2025.

As with Round 1, Round 2’s qualifying project categories include Clean Energy Manufacturing and Recycling, Industrial Decarbonization/Greenhouse Gas Emission Reduction and Critical Materials. There exist some slight changes and clarifications, particularly around carbon capture, removal, use or sequestration equipment, and around the categories applicable to facilities that manufacture or recycle equipment used to produce certain low GHG chemicals, versus facilities directly producing those chemicals. Nonetheless, besides these few changes, the categories remain generally the same.

Further, as with Round 1, Round 2 applications will be evaluated in part on whether the project addresses certain energy supply chain and manufacturing priority areas. These priority areas are unchanged from Round 1 and include clean hydrogen, nuclear energy, electric grid, electric heat pumps, electric vehicles, solar energy, sustainable aviation fuels and wind energy. As a result of the priority areas and requirement that $2.5 billion go to Energy Communities, projects that are both focused on the above priority areas and located within Energy Communities are likely to possess a more substantial chance of receiving Credits.

Regarding the overall timeline, the following table provides the key dates concerning Round 2 of the program.

Given that the deadline to submit concept papers to the DOE is, at the latest, June 27, 2024, potential applicants should consider beginning the process of developing their submission. Pillsbury has continued to provide legal support on IRA tax credits and has deep familiarity with various funding opportunities provided by the IRA and other recent legislation. Our team stands ready to support parties interested in applying for the Advanced Energy Project Credits.