Renewable electricity production tax credits (PTC) provide a per-kilowatt-hour (kWh) tax credit for electricity generated from certain renewable sources for the first 10 years of a project under Section 45 of the tax code. Open-loop biomass refers to facilities that produce electricity by burning organic waste that is a byproduct of agriculture, construction or timber-related activities, such as livestock waste and tree trimmings. Closed-loop biomass refers to facilities that produce electricity from plants grown specifically as a feedstock for electricity production, such as switchgrass or fast-growing trees. For 2021, the closed-loop biomass PTC is 2.5 cents per kWh with the open-loop biomass PTC at 1.3 cents per kWh.
The Inflation Reduction Act of 2022 extended the renewable electricity PTC through the end of 2024, after which the PTC will be replaced with a new clean electricity production tax credit that only qualifies ‘zero emission’ sources. Open and closed-loop biomass are not expected to qualify for this new credit.
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