Adjustments, Reference Prices for Renewable Energy Production Credit Released


The IRS has published the inflation adjustment factors and reference prices to be used in computing the renewable electricity production credit and the refined coal production credit under Code Sec. 45 for calendar year 2018. The inflation adjustment factors and reference prices apply to sales in calendar year 2018 of kilowatt hours of electricity produced in the United States or a U.S. possession from qualified energy resources and to 2018 sales of refined coal.

The inflation adjustment factor for calendar year 2018 is 1.6072 for qualified energy resources and refined coal. The reference price for calendar year 2018 is 4.85 cents per kilowatt hour for facilities producing electricity from wind. The reference price for fuel used as feedstock for refined coal production within the meaning of Code Sec. 45(c)(7)(A) is $31.90 per ton for calendar year 2002 and $49.69 per ton for calendar year 2018. The reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, qualified hydropower production and marine and hydrokinetic energy have not been determined for calendar year 2018.

Because the 2018 reference price for electricity produced from wind does not exceed 8 cents multiplied by the inflation adjustment factor, the phaseout of the credit provided in Code Sec. 45(b)(1) does not apply to such electricity sold during calendar year 2018. Note, however, that Code Sec. 45(b)(5) provides an additional phaseout of the credit for wind facilities the construction of which begins after December 31, 2016.

Because the 2018 reference price of fuel used as feedstock for refined coal does not exceed $87.16 (which is the $31.90 reference price of such fuel in 2002 multiplied by the inflation adjustment factor (1.6072) and 1.7), the phaseout of the credit provided in Code Sec. 45(e)(8)(B) does not apply to refined coal sold during calendar year 2018.

Further, for electricity produced from closed-loop biomass, open-loop biomass, geothermal energy, small irrigation power, municipal solid waste, qualified hydropower production, and marine and hydrokinetic energy, the phaseout of the credit provided in Code Sec. 45(b)(1)does not apply to such electricity sold during calendar year 2018.

The credit for renewable electricity production for calendar year 2018 is 2.4 cents per kilowatt hour on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass, and geothermal energy. The credit for calendar year 2018 is 1.2 cents per kilowatt hour on sales of electricity produced from open-loop biomass, small irrigation power facilities, landfill gas facilities, trash combustion facilities, qualified hydropower facilities, and marine and hydrokinetic energy facilities. The credit for refined coal production is $7.03 per ton of qualified refined coal sold in 2018.

For calendar year 2018, the credit period for Indian coal production has expired.