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US Updates Tax Credit Regulations To Support Offshore Wind Farms

New regulations, unveiled by the Biden administration on Friday, will facilitate offshore wind developers’ eligibility for subsidies for projects envisioned in regions where jobs have traditionally been derived from the fossil fuel industry.

The reversal comes after offshore wind developers for almost a year warned that their projects could not proceed without access to specific subsidies included in President Joe Biden’s historic climate change measure, the Inflation Reduction Act.

Biden’s strategy to address climate change and decarbonize the US power grid heavily relies on offshore wind, but projects have faced challenges from supply chain snags, rising costs linked to inflation, and increased financing rates.

The Treasury Department said in a statement that if supervisory control and data acquisition (SCADA) equipment is situated in a low-income community, it will now let an offshore wind project to claim a tax credit for sitting in that community. Critical infrastructure is controlled via SCADA systems.

In addition to the IRA’s normal 30% credit for renewable energy projects, the energy communities tax credit is worth 10% of the project’s cost.

Where a project links to an onshore substation determines the credit for locating it in “energy communities,” which are defined as locations with substantial unemployment, major employment or tax revenues from the fossil fuel sectors.

“This change reflects the fact that onshore SCADA equipment at ports is critical to offshore wind projects and that offshore wind projects make significant investments and create jobs at these ports over the duration of projects, which is the goal of the energy communities bonus,” the Treasury Department said in a statement.

The regulations also make it clear that in order to qualify for the incentive, projects with several points of interconnection may use any land-based power conditioning equipment.

A trade association commended the adjustment.

Oceantic Network CEO Liz Burdock said in a statement, “In a move to bolster the transition from fossil fuel to clean energy, the eligibility expansion for the 10% Energy Communities credit creates an easier path to market for many offshore wind projects.”

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