The Biden administration released new rules on Friday to help make it easier for offshore wind developers to claim a tax credit if they place their facilities in areas that have historically relied upon fossil fuel industries for employment.
The move could help boost the burgeoning industry in the US, which has seen projects in Connecticut and other nearby states cancelled due to soaring costs tied to inflation, higher interest rates, and supply chain issues.
Connecticut’s senior senator in Washington, Richard Blumenthal, applauded the Biden administration’s move.
“This tax credit has been a long time in coming,” he said. “It’s overdue. We pushed for it as a delegation. It’s in federal law and the regulation enables it to go forward. And we need to make sure that ports like New London are fully eligible for it.”
Under the rules that are part of the landmark climate change laws in the Inflation Reduction Act, wind developers can claim an IRA base 30% credit for renewable energy projects and an additional 10% tax credit if their project is in an ‘”energy community.”
These communities are defined as areas that have significant employment or tax revenues from fossil fuel industries and high unemployment.
The US Treasury Department makes the determination as to whether an area is deemed an “energy community” and said the rules also clarify that projects with multiple points of interconnection, like any land-based power conditioning equipment, could also help determine the developer’s eligibility for the additional 10% bonus.
In New London, the State Pier has been developed over the last few years into a hub for the new offshore wind industry in the state at a cost of about $310 million, and is being used by Danish energy company Orsted and it’s partner, Eversource, for their offshore wind projects.
The pier has already been used to assemble parts for New York’s South Fork Wind farm, comprising 12 giant wind turbines that are now powering around 70,000 homes on Long Island.
Later in April workers will begin assembling parts for a much larger wind farm called Revolution Wind that will draw renewable power from 65 turbines off the coast of Rhode Island and power homes in that state as well as Connecticut.
Blumenthal said it’s vital that New London is designated an “energy community” by the Treasury Department along with New Haven and Bridgeport.
In October, Connecticut signed an agreement with Rhode Island and Massachusetts, the first in the nation, to coordinate offshore wind procurement because of the economic challenges being faced by the offshore wind industry and individual state projects.
Katie Dykes, Commissioner of the state Department of Energy and Environmental Protection, said the new credits come at a critical time for the state as they are about to go out for bids with the other two states on Wednesday.
“Bids are due in a historic RFP that Connecticut is undertaking together with our sister states in Rhode Island and Massachusetts,” Dykes said. “We’re out shopping for up to 6800 megawatts across the three states of offshore wind. Those bids will be coming in on Wednesday and now we can be assured that the bidders offers will be able to have the clarity that their projects can qualify for this energy communities tax credit.”
Offshore wind is seen as a critical part of Biden’s plan to decarbonize the US power grid and combat climate change.
