On the evening of December 21, 2020, Congress provided a last-minute boost for clean energy projects and technology by passing a $1.4 trillion federal spending bill together with a $900 billion COVID-19 relief package. According to Senator Lisa Murkowski, Chair of the Senate Energy and Natural Resources Committee, “[the bill] represents the first modernization of our nation’s energy policies in well over a decade.” In particular, the bill’s clean energy provisions include:

  • A two-year extension of the investment tax credit (ITC) for certain renewable energy projects;
  • A one-year extension of the production tax credit (PTC) for onshore wind projects;
  • An extension for offshore wind tax credits through 2025; and
  • $35 billion of funding in federal energy research and development programs.

For solar developers, the two-year ITC extension pushes back the looming 2020 year-end deadline to the end of 2022. If solar developers begin construction by the end of 2022, this two-year extension will fix the ITC rate at 26% before the rate declines to 22% in 2023. The two-year ITC extension also applies to carbon capture and sequestration projects. Thus, the deadline for the carbon capture tax credit program, which was set to expire on December 31, 2023, is extended to the end of 2025.

For wind developers, the bill includes two major components. First, the bill provides a one-year PTC extension for onshore wind developers who currently receive a production credit of 1.5 cents per kWh. With the one-year extension, onshore developers that begin construction by the end of 2021 and start commercial operation by 2024 will receive the current rate. For offshore wind developers, the bill provides a similar PTC extension for five years, requiring construction to start by the end of 2025.

The spending bill also includes a massive R&D component for the clean energy sector, authorizing $35.2 billion in spending primarily through the U.S. Department of Energy (DOE). With the bill’s enactment, the DOE will be tasked with creating programs related to research, development and commercialization of renewable energy technologies. For instance, the bill requires the DOE to establish a carbon capture technology program, which would “significantly improve the efficiency, effectiveness, costs, emissions reductions, and environmental performance of coal and natural gas use.”