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US revises tax credit rule to help offshore wind projects

The US government has released new rules that will make it easier for offshore wind developers to claim a subsidy for facilities planned in areas that have historically relied on fossil fuel industries for employment.

The revision, announced by the Biden administration on Friday March 22nd, follows nearly a year of warnings by offshore wind companies that their projects might become economically unviable without access to certain subsidies in the Inflation Reduction Act.

The Treasury Department said on Friday that it would now allow an offshore wind project to claim a tax credit for siting in low-income communities, provided its supervisory control and data acquisition (SCADA) equipment was located in such an area.

The energy communities tax credit is worth 10% of a project’s cost and can be claimed on top of the IRA’s base 30% credit for renewable energy projects.

‘Energy communities’ are defined as areas that have significant employment or tax revenues from fossil fuel industries, and high unemployment. They had been dictated by where a project connected to an onshore substation.

The Treasury said that ‘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 rules also clarified that projects with multiple points of interconnection may include any land-based power conditioning equipment to determine their eligibility for the energy communities bonus.