Applications: Battery Energy Storage Systems (BESS)

IRA Domestic Content Bonus vs. Requirements The IRA has provisions to provide additional tax credits for projects that can prove that a certain portion of the hardware used on the project were manufactured in the U.S. The purpose of this is to incentivize US manufacturing of Li-ion batteries, in order to combat China’s dominance in this field. This section summarizes the terms of these incentives, including recent IRS guidance.

DOMESTIC CONTENT BONUS (ADDS 2%, 10% ABSOLUTE TO ITC, ADDS 10% RELATIVE TO PTC)

Applies to project placed in service 2023 or later The values 40% of the total cost of the manufactured product used at the site must be from products mined, produced or manufactured in the US for projects that start construction through 2024

For projects that start construction in 2025, 45%,in 2026 50%, 2027 and thereafter 55% * To qualify, all iron and steel used in the project must be sourced from the US There is no exceptions waiver available to private BESS installations pursuing the domestic content bonus

Source: Federal Solar Tax, HR5376

DOMESTIC CONTENT REQUIREMENT FOR DIRECT PAY

Applies to projects that begin construction in 2024 or later Eligibility is similar to Domestic Content Bonus If the Domestic Content requirements are not met, the portion of the credit available is reduced per the following schedule

90% if project construction starts in 2024

85% if projects starts in 2025

0% if projects starts after 2025 Treasury is required to provide exceptions under the following circumstances:

If the inclusion of steel, iron or manufactured products which are produced in the US increases the overall cost of construction by more than 25%

If relevant steel, iron or manufactured products are not produced in the US in sufficient and reasonably available quantities of satisfactory quality

Extracted from the PDF; charts and images may read imperfectly.