Solar tax credits are a boon for blockchain technology solutions – pv magazine International

Solar tax credits are a boon for blockchain technology solutions – pv magazine International

The Inflation Reduction Act (IRA), signed into law by US President Joe Biden, represents the largest single investment in clean energy, greenhouse gas emissions reduction and climate resilience in the nation’s history by providing approximately $370 billion in green energy tax credits and other incentives to stimulate to large-scale development of solar energy technologies to electrify America’s digitalization.

Production Tax Credit (PTC) has been reintroduced for solar energy projects under the IRA. This allows solar projects to choose between the PTC and the Investment Tax Credit (ITC) to maximize the economics. The IRA also introduces a new “technology-neutral” PTC and ITC for solar projects that generate electricity and produce zero greenhouse emissions by types of facilities defined as causing zero greenhouse emissions. The tax credit is expected to accelerate solar production over the next decade with facilities commissioned after December 31, 2024, and phase out by 2032, or when US electricity sector emissions are 75% below 2022 levels.

IRAs generally allow the transfer of solar tax credits between taxpayers, provided, for example, that the tax credits are paid in cash and provided that the amount paid is neither counted as income by the seller nor deducted by the buyer. There are limited exceptions to this ability to carry forward tax credits, including in the case of, for example, certain tax-exempt transferors and government entities that may benefit from direct pay – reimbursement from the Treasury for the amount of tax credits claimed.

The IRA is expected to increase solar capacity installation by 67% over 10 years, accounting for about 2.5% of US electricity generation in 2021, according to Wood Mackenzie. The longevity of these tax credits is expected to improve cash flow visibility for solar energy projects and the development of new technologies as described in a series of federal reports commissioned by the Biden administration on March 9, 2022 executive order 14067: “Ensuring Responsible Development of Digital Assets” supporting responsible development of digital assets, in line with the country’s climate goals.

See also  Fresh Del Monte and Tech Start-Up Decapolis Team Up to Offer Industry-Wide Blockchain Traceability Solutions

The report from Technology Policy (OSTP) examines the connections between distributed ledger technologies (DLT) and energy transitions, the potential for these technologies to prevent or advance efforts to tackle climate change at home and abroad, and the impacts these technologies have on the environment. Blockchain technology has the potential to transform the solar energy sector, which has consistently been catalyzed by innovations including rooftop solar, solar electric vehicles and smart grid metering, and the US government has a responsibility to “protect” people from pollution and climate change caused by energy-intensive blockchain technologies .

The OSTP report and a study on layout blockchain technology applications in electricity smart microgrids look at promoting techno-socio-economic innovations for restructuring the sustainable energy supply chain by enabling distributed energy resource coordination, as well as broader supply chain management. For example, the OSTP report points out that “DLT-supported innovation can help digitize, automate and decentralize the operation of the power grid.”

“The new use of blockchain technologies for energy management includes enabling California’s Flex Alert system. This system enables the grid operator to push out energy conservation requests during a grid emergency, securely interact with customers and understand participation rates while maintaining customer anonymity,” wrote the authors.

They continue, “They can also enable community-created microgrids where resources are shared peer-to-peer (P2P) within the community. DLT can be useful for managing the P2P relationships on these microgrids. These microgrids are typically virtual grids, where electricity is traded across of the network operator-owned grid. In addition to satisfying customers’ preferences for producing and consuming in their community, localizing the production and consumption of electricity can reduce grid congestion, benefiting users inside and outside the community. P2P energy trading requires some of the same enabling technologies as cryptoassets, namely cryptography-based user authentication, a market-making mechanism and payment system via smart contracts, a tamper-proof ledger of transactions, and full auditability P2P energy trading on networks can use low-energy consensus mechanisms such as Proof-of-Stake (PoS ).

See also  GreaterHeat signs cooperation letter with Incheon City to create Blockchain Hub and promote Incheon's digital economy

Ethereum, the world’s most popular crypto platform, recently switched to a more environmentally friendly processing technique called PoS, which is being welcomed by US lawmakers. “The Merge” made fundamental changes to the Ethereum network such as improving sustainability and security, setting it up for scalability and offering an attractive real return on investment.

A new report by the Crypto Carbon Ratings Institute, commissioned by ConsenSys, a New York and Ethereum-based blockchain company, revealed that Ethereum’s transition from Proof of Work to PoS has reduced the power consumption and carbon footprint of the network by over 99.988% and 99.992%, respectively. This is expected to “help the United States achieve its climate goals of a 50% to 52% reduction in greenhouse gas emissions by 2030, a carbon pollution-free electricity system by 2035, and a net-zero emissions economy by 2050 at the latest.”

Another low-energy blockchain platform “Rubix, backed by a $100 million investment from US venture capital firm LDA Capital, is a global blockchain platform powered by a cutting-edge green technology” that founder and chief architect KC Reddy said he developed. “Rubix establishes a low-carbon, high-efficiency architecture based on a Proof-of-Pledge protocol that has zero transaction fees and one of the lowest energy consumption rates among all computer networks at less than 1 kWh per transaction,” he said.

There is undoubted potential for blockchain and DLT to facilitate the development of solar energy markets, distributed energy resource coordination, and general supply chain management. With the IRA, the US government supports and facilitates innovation in blockchain technology solutions that align with environmental and equity goals.

See also  Workshop encourages participants to monetize their talent with blockchain technology

About the author

Selva Ozelli, Esq., CPA, is an international tax attorney and certified public accountant who frequently writes on tax, legal and accounting issues for Tax Notes, Bloomberg BNA, other publications and the OECD. She is the author of Sustainably Investing in Digital Assets Globally (Wiley, 2022).

The views and opinions expressed in this article are the author’s own and do not necessarily reflect those held by pv magazine.

This content is protected by copyright and may not be reused. If you would like to collaborate with us and wish to reuse some of our content, please contact: [email protected].

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *