Renewable Energy Update: Key Trends and Developments

Here are six recent and notable developments in the renewable energy industry in Virginia, the mid-Atlantic, and across the country.

Federal Rule to Enhance Renewable Energy Transmission

On May 13, federal energy regulators approved a significant rule aimed at facilitating the transmission of renewable energy, such as wind and solar power, to the electric grid. This decision, which passed with a 2-1 vote, is intended to further the administration’s ambitious goal of achieving economy-wide carbon neutrality by 2050. The new rule, developed over two years, is designed to modernize the aging power grid to accommodate surging demand driven by large data centers, the electrification of vehicles and buildings, artificial intelligence, and other burgeoning uses. This increased demand is compounded by the ongoing retirement of coal-fired power plants and stricter federal pollution regulations for other energy sources, potentially affecting electric reliability.

New Round of Clean Energy Tax Credits

The U.S. Treasury Department and Internal Revenue Service will soon launch a second round of funding for the Internal Revenue Code section 48C tax credits, totaling up to $6 billion. Approximately $2.5 billion of this funding is earmarked for projects in communities impacted by the closure of coal mines or coal-fired power plants. This initiative builds on last month’s $4 billion allocation under the Qualifying Advanced Energy Project Credit program, which aims to incentivize clean energy manufacturing and recycling, industrial decarbonization, and critical materials processing, refining, and recycling. This move is part of a broader strategy to support the transition to a clean energy economy and bolster communities affected by the decline of coal industries.

Impact of Data Centers on Power Consumption

A recent Goldman Sachs report highlights the significant impact of data centers on power consumption in Virginia, the world’s largest data center market. According to the report, from 2016 to 2023, commercial power consumption in Virginia increased by 37%, driven by the growth of data centers. In 2023, data centers in Virginia alone added 2.2 gigawatts to the state’s power consumption, equivalent to the output of two nuclear reactors and enough to power approximately 1.5 million homes. Despite this, data centers account for only 0.5% of total U.S. power demand. However, nationwide power needs are expected to grow from 470 GW in 2023 to 567 GW by 2030, with data center demand projected to triple. Currently, only about 20% of U.S. electricity generation comes from renewables, with 60% still derived from fossil fuels, underscoring the need for continued investment in renewable energy infrastructure. To learn more about these issues and ways Virginia can address its energy challenges, check out GreeneHurlocker Member Jared Burden’s recent commentary piece for the Virginia Mercury: “Balancing Virginia’s energy future: A holistic approach to powering data centers.”

Domestic Content Bonus for Solar Projects

On May 16, the Department of the Treasury issued additional guidance on the domestic content bonus within the Inflation Reduction Act. Solar developers and installers sourcing iron, steel, and certain manufactured products from domestic producers can now receive up to a 10% bonus to the investment tax credit (ITC) or production tax credit (PTC) for their projects. Eligible projects must be under 1 MWAC, have begun construction before January 29, 2023, or be greater than 1 MWAC and meet prevailing wage and apprenticeship requirements. The Treasury also introduced a new elective safe harbor, allowing developers to rely on default cost percentages provided by the Department of Energy to determine eligibility for the bonus credit.

New Guidance on Clean Electricity Tax Credits

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued proposed guidance on May 29 regarding the qualification of eligible facilities for “technology-neutral” clean electricity tax credits under the Inflation Reduction Act. The new Clean Electricity Production Credit (Section 45Y) and Clean Electricity Investment Credit (Section 48E) will replace the existing Production Tax Credit (Section 45) and Investment Tax Credit (Section 48) for projects placed in service after December 31, 2024. The guidance identifies specific technologies that categorically qualify as zero greenhouse gas emissions, including wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal, and certain types of waste energy recovery property, while also clarifying how energy storage technologies would qualify for the Clean Electricity Investment Credit.

Maryland’s New Solar Incentive Program

Maryland has launched a new program to incentivize solar panel installation for income-eligible households. As part of the Brighter Tomorrow Act of 2024, the Maryland Solar Access program aims to enhance solar development in the state. The program offers up to $7,500 per eligible household,with an incentive of $750 per installed kilowatt-hour of DC solar capacity.

These recent developments underscore the dynamic nature of the renewable energy sector and the multifaceted efforts required to transition to a sustainable energy future. From regulatory changes and financial incentives to state-level programs and market trends, the landscape is evolving rapidly, offering both challenges and opportunities for stakeholders in the renewable energy space. If you have any questions or require assistance, please contact GreeneHurlocker.