Hoping to give a kick to greater solar generation, electric storage, and electric transmission, the Biden administration’s Department of Energy last Thursday (Nov. 16) proposed new and streamlined “categorical exclusions” to required environmental reviews mandated by the National Environmental Policy Act.
On Friday (Nov. 17) the Treasury Department and its Internal Revenue Service announced liberalized rules on using the investment tax credit for solar heat and power, hydrogen fuel cells, and microturbines. The proposal is scheduled for Federal Register publication next Wednesday, Nov. 22, the day before Thanksgiving.
The IRS description of its ITC rule appears purposely anodyne, but reporting by Politico and its energy and environment publication Greenwire says a key is extending the tax credit to undersea power cables from struggling offshore wind projects. IRS said the new Section 48 ITC rules have not been changed since 1987 and the proposal reflects “changes in the energy industry, technological advances, and updates from the Inflation Reduction Act of 2022 (IRA).”
In the Nov. 16 Federal Register notice, DOE’s general counsel said it wants to “add a categorical exclusion for certain energy storage systems and revise categorical exclusions for upgrading and rebuilding transmission lines and for solar photovoltaic systems, as well as make conforming changes to related sections of DOE’s NEPA regulations.”
The notice claims the new policies “are based on the experience of DOE and other Federal agencies, current technologies, regulatory requirements, and accepted industry practice.” In other words, things are not moving fast enough and large enough on the administration’s climate change policy agenda.
DOE explains that NEPA generally establishes three provisions for review of “major federal actions”: full-scale environmental impact statements, somewhat less rigorous environmental assessments, and “categorical exclusions.” DOE explains that a “categorical exclusion is a category of actions that the agency has determined, in its agency NEPA procedures, normally does not have a significant effect on the human environment and therefore does not require preparation of an environmental assessment or environmental impact statement.”
DOE is proposing to add a new exclusion “for certain energy storage systems and revise categorical exclusions for upgrading and rebuilding transmission lines and for solar photovoltaic (PV) systems.” The agency said it “last made changes to its categorical exclusions in these areas in 2011. Since then, DOE has developed a better understanding of the potential environmental impacts of these types of actions through research, conducting environmental reviews, and engaging with industry, local communities, and other government agencies.”
The new DOE NEPA rules would:
- Remove a 20-mile limit on upgrading or rebuilding electric power lines without triggering NEPA review. “DOE proposes to remove the mileage limitation, add options for relocating within an existing right of way or within otherwise previously disturbed or developed lands, and add new conditions.” DOE says that “experience with powerline upgrades and rebuilds do not indicate a particular mileage limit that would mark a threshold for significant impacts.”
- Implement a new exclusion for electrical energy storage systems. DOE’s notice says the exclusion will be for “the construction, operation, upgrade, or decommissioning of an electrochemical battery or flywheel energy storage system within a previously disturbed or developed area or within a small area contiguous to a previously disturbed or developed area.” DOE says it “has not identified sufficient information to conclude that compressed air energy storage, thermal energy storage (e.g., molten salt storage), or other technologies normally do not present the potential for significant environmental impacts.”
- Eliminate a 10-acre exclusion limit for solar photovoltaic projects on “a previously disturbed or developed area.” The notice says, “Based on DOE’s experience, acreage is not a reliable indicator of potential environmental impacts.”
Elise Caplan, vice president of regulatory affairs with the American Council on Renewable Energy, told The Hill, “This step alone may not be a huge difference, but it is a very positive step, and it’s part of that pathway to exploring these kind of helpful opportunities that regulatory agencies can take in the absence of any legislation.”
The IRS said its unpublished proposal updates “the types of energy properties eligible for the section 48 ITC, reflecting changes in the energy industry, technological advances, and updates from the Inflation Reduction Act of 2022 (IRA).
“Energy industry participants will appreciate that the proposed regulations provide definitions of energy properties for which the ITC was available before the IRA. These include, but are not limited to, solar process heat, fiber-optic solar property, combined heat and power system property, qualified fuel cell property, and qualified microturbine property.
“These proposed regulations also address technologies that were added to the ITC as energy property by the IRA, including electrochromic glass, energy storage technology, microgrid controllers, and biogas property. Importantly, the IRA added new provisions to the ITC to allow smaller projects to include the cost of certain types of interconnection property in their credit amount.
“Additionally, the proposed regulations provide general rules for the ITC including the application of the “80/20” Rule to retrofitted energy property, dual use property, and issues related to multiple owners of an energy property.”
Abigail Ross Hopper, CEO of the Solar Energy Industries Association (SEIA), commented, “Today’s proposal provides more clarity and will help to drive clean energy deployment in the United States.
“One of the best parts of the IRA is its provisions to incentivize energy storage. SEIA secured a crucial win in this proposal that expands eligibility for the Investment Tax Credit to customers that install storage with their solar system.
“Today’s announcement is good news for America’s clean energy economy. However, given the economic headwinds that many solar and storage companies are facing, we are continuing to fully evaluate the details in this guidance to guard against any potential unintended consequences that might undermine our ability to rapidly deploy clean energy projects of all sizes.”
–Kennedy Maize