April 5, 2023

Feds announce new tax incentives for clean energy projects in fossil fuel communities


Federal officials announced new tax incentives for clean energy projects located within traditional fossil fuel producing communities, such as the Four Corners region.

During a White House energy communities briefing on Tuesday, officials announced an additional 10 percent bonus on Inflation Reduction Act incentives for clean energy projects if they are built in fossil fuel communities. 

“Many energy communities have the knowledge, infrastructure and the resources to take advantage of the clean energy transition but in many cases these communities would benefit significantly from an initial public investment to jumpstart this process,” U.S. Treasury Secretary Janet Yellen said.

Yellen said that means a solar farm operator can get an extra dime on the dollar of their investment if they site a new facility in a coal community on top of the existing tax credits.

A new map available at energycommunities.gov shows which communities are eligible for these tax incentives.

These communities include census tracts that directly adjoin tracts that have seen coal mines close since 1999 or have had units at coal-fired power plants retire since 2009. It also includes some metropolitan statistical areas and non-metropolitan statistical areas where at least 0.17 percent of direct employment has come from extraction, processing and transportation of fossil fuels including coal, oil and gas. 

Communities in southeast New Mexico’s Permian Basin are featured in blue on the map, meaning they meet the 0.17 percent employment threshold, however, the federal agencies have not determined if places like Eddy County will qualify for the additional tax incentives. The map states that the unemployment rate and the energy community status for Eddy County has not yet been determined.

Many communities in western New Mexico are qualified because of the past coal mining history. These include portions of San Juan, McKinley, Grant, Cibola, Catron and Sierra counties.

Hy Martin, the chief development officer for D.E. Shaw, expressed excitement about the new tax incentives.

Martin said federal incentives and policies have catalyzed D.E. Shaw’s investments in projects in coal communities, including in New Mexico.

“Projects are people. When you just really boil it down, we are in a project community,” he said. “That is county commissioners. That is folks that are coming out of a job at a coal mine looking for a transition. That is land owners who are trying to figure out how best to use their land.”

He said the company’s investments include solar, wind and battery storage projects.

“One of the best ways to signal investment to these communities is clear guidance,” Martin said.

D.E. Shaw Renewable Investments, or DESRI, acquired the San Juan Solar Project as well as the Arroyo Solar Project, both of which include battery storage as well and are intended to replace the electricity the state’s largest utility received from the San Juan Generating Station.

John Podesta, the senior advisor to the president for clean energy, innovation and implementation, said the tax incentives will be a powerful driver for clean energy projects in energy communities.

Additionally, he said 11 federal agencies have signed a memorandum of understanding that will enable them to work together to get energy communities the assistance they need to take advantage of grants and funding opportunities and to attract projects.

“There’s enormous untapped potential in these communities from fossil fuel workers whose skills we need to build the industries of the future to existing facilities that could be retooled and repurposed to local entrepreneurs and universities who are working to attract talent and investment,” he said.

Tuesday’s announcement came alongside a report on two years of efforts by the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization. This group was created through an executive order President Joe Biden signed shortly after taking office that focused on tackling the climate crisis.

Brian Anderson, the executive director of the interagency working group, highlighted some of the efforts.

“As the nation is transitioning to a clean energy economy to urgently address our climate crisis, many traditional fossil energy workers and the communities in which they live and work and play are at risk of being left behind despite their critical role in powering our nation for the last century or more,” Anderson said.

He said more than $480 million of American Rescue Plan Act funds have been invested in economic development in coal communities and $877 million of federal funding has been invested in abandoned mine land reclamation projects.

The efforts also include setting up rapid response teams to help communities faced with the closure of coal-fired power plants.

There were three initial rapid response teams, including one in the Four Corners region that is led by Los Alamos National Laboratory.

“Each rapid response team does its work differently, as it should,” Janet McCabe, deputy administrator of the U.S. Environmental Protection Agency, said. “From a project-based approach in the Illinois basin to a relationship-building approach in the Four Corners to a combination of the two, which is what is happening in Wyoming.”

McCabe said five more rapid response teams will be set up this year including in Pennsylvania,  eastern Kentucky, Ohio, West Virginia and southeastern Montana.

“This is a model that has worked and it’s so gratifying,” she said.

Deputy Assistant to the President and Deputy National Climate Advisor Ali Zadi was in San Juan County when the rapid response team for the Four Corners region was announced.

He said it was exciting to see Navajo Nation officials discussing how they planned to use Inflation Reduction Act money for solar projects. 

Zadi later said that it is important to focus on projects.

“It’s really easy to come up with pie-in-the-sky plans, the big banner press release. What’s hard is to build the projects,” he said. “And, if anything, this moment will be judged by our success in building those projects. That’s how our progress will be measured. And by that metric, I think by that metric we are being successful finally and being responsive to the responsibility we have to the folks who have powered our economic progress, our economic competitiveness for decades, for centuries.”