As the Inflation Reduction Act approaches its first anniversary, Pillsbury’s energy development attorneys reported to Law360 that the law has enhanced project development and financings in the United States. However, questions surrounding IRA tax credit implementation still linger.

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“A year is actually not that long in the timeline of project execution,” said Finance partner Alicia McKnight, who focuses on domestic and international energy and infrastructure projects. “We'll see the impacts of the IRA more in the next twelve months compared to the last twelve months.”

Elina Teplinsky, the leader of Pillsbury’s global Energy Industry practice, told Law360 that hydrogen has seen hundreds of millions of dollars in new investment since the IRA’s enactment. While previous legislation earmarked billions for hydrogen infrastructure development, tax credit eligibility through the IRA is critical to driving down the price of hydrogen.

“The hydrogen [production tax credit] closes the delta on the price of hydrogen,” Teplinsky said. “That fundamentally changed the interest of some companies interested in participating.”

According to energy industry attorneys, the IRA’s most transformative factor is the ability for developers to transfer federal tax credits to others in exchange for cash. “The ability to do that gives much more flexibility on the structuring side and makes distributed generation a lot easier to get financiers interested,” McKnight said.

Even while the U.S. Department of Treasury is finalizing its tax credit guidance, questions remains whether the IRA will survive a major shift in the national political landscape.

“That's the big question I'm hearing from clients,” McKnight said.

While the IRA has supercharged the development of clean energy projects, other challenges persist such as expediting the interconnection process, upgrading our transmission system and streamlining the permitting and siting process for new clean energy generation projects.