O'Melveny Insights 2023

11 And beyond adding new tax credits and enhancing existing ones, the IRA creates greater flexibility and new opportunities for clients to capture the value of tax credits using structures tailored to their investment goals. For instance, the IRA permits taxpayers to transfer many of these tax credits to third parties and, in more limited instances, to claim refundable credits and receive cash payments from the Treasury. By allowing investors to realize value from tax credits in these new ways, the IRA will make renewable projects attractive to a broader array of investors and ultimately encourage additional investment in the industry. Along with supporting investment in wind, solar, and other energy projects that traditionally have been and will continue to be supported by tax incentives, the IRA also creates significant tax credits for nuclear energy projects, which will likely encourage additional development of those projects. Combined, these credits and incentives are a game changer for utilities. One leading, integrated utility, for example, has projected that its nuclear plants in North and South Carolina will qualify for nuclear production tax credits of several hundred million dollars a year beginning in 2024. The utility could also have up to 17 gigawatts of connected solar power over the next 10 years, with each gigawatt of solar equal to about US$60 million in annual production tax credits. And the utility estimates that it could also make up to US$4.5 billion of storage investments over the next 10 years to qualify for investment tax credits. While private industry and investors lead the way, governments are pitching in, too. The newly enacted Inflation Reduction Act (IRA) amounts to one of the most consequential clean-energy bills in recent memory, breathing new life into existing tax credits for proven renewable energy sources, such as wind, solar, and energy-storage solutions; creating new opportunities for investment in novel technologies; and boosting incentives for producing electric vehicles. O’Melveny’s energy group shines with ‘the expertise, firepower and bench to handle any situation.’ —Chambers USA