Small businesses investing in energy technologies eligible for new federal grant program

The Infrastructure Investment and Jobs Act (H.R. 3684) (IIJA), signed into law by President Biden on November 15, 2021, establishes the Advanced Energy Manufacturing and Recycling Grant Program for small businesses investing in certain advanced energy technologies that will reduce greenhouse gas emissions (Advanced Energy Grant Program). This new grant program, described in Section 40209 of the IIJA, is modeled after the advanced energy manufacturing tax credit (IRC Section 48C), which was first authorized in the American Reinvestment and Recovery Act of 2009 (ARRA) and could be extended under the Build Back Better Act (H.R. 5376) pending before Congress.

Beginning in 2022, the Advanced Energy Grant Program will allocate $750 million over five years on a competitive basis to small businesses that undertake eligible projects in communities that have been impacted by closures of coal mines or coal-fired power plants.

 

Eligibility

To be eligible for this grant program, manufacturers must meet the following requirements:

  • Have gross annual sales of $100 million or less
  • Have less than 500 employees at the plant/site where the eligible project is being implemented
  • Have energy bills of at least $100,000 and no more than $2.5 million
  • Undertake a Qualifying Advanced Energy Project

 

Qualifying Advanced Energy Projects are defined as projects that: (1) re-equip, expand or establish a manufacturing or recycling facility to produce certain types of advanced energy property; or (2) re-equip a facility with equipment designed to substantially reduce greenhouse gas emissions.

To be eligible under the first type of qualifying project, the manufacturer must produce “advanced energy property,” which includes:

  • Property that produces solar, wind, hydrothermal, geothermal or hydroelectric energy
  • Fuel cells and microturbines
  • Energy storage systems and components
  • Electric grid modernization equipment and components
  • Carbon capture and sequestration property
  • Equipment designed to process any low-carbon and low-emissions fuels or chemicals
  • Property to produce energy conservation technologies
  • Electric or fuel cell vehicles and equipment and related components, materials and technologies
  • Hybrid vehicles with a gross vehicle rating of more than 14,000 pounds and related technology or components

 

The qualifications for the second type of eligible project are more broadly targeted at manufacturing and industrial facilities that are implementing energy efficiency and waste reduction technologies or any other technology that substantially reduces greenhouse gas emissions.

Both types of eligible projects must be in a census tract in which a coal mine closed after January 1, 2000, or a coal-fired power plant closed after January 1, 2010. Entities with a project in an adjacent census tract may also apply under this program.

 

Application and selection criteria

Eligible entities must timely submit an application to the Department of Energy. Grant awards will be made on a competitive basis. Preference will be given to projects based on the following criteria:

  • Greenhouse gas reductions related to the project
  • Job creation
  • Potential for technological innovation and commercial deployment
  • Cost of energy creation or storage
  • Project time, with a preference for a shorter timeline
  • Whether the eligible entity is minority-owned

Selected projects must be completed within three years of the award date.

The Department of Energy is expected to release guidance and application materials for this program within 180 days of the IIJA’s enactment (i.e., approximately May 16, 2022).


Implications

The Advanced Energy Grant Program creates a unique opportunity for small business that are creating innovative, emissions-reduction technologies in coal communities that have felt the greatest economic impacts of plant closures. This program is expected to apply broadly, from electric vehicle component manufacturers to industrial facilities that are installing state-of-the-art emissions-reduction technologies.

Based on EY’s previous experience assisting businesses applying for tax credits under the IRC Section 48C advanced energy manufacturing tax credit, the program is likely to be highly competitive. Thus, eligible entities should immediately begin to review their prospective capital expenditure programs to identify projects that may be eligible for the advanced energy manufacturing grants under this new federal Advanced Energy Grant Program. As other discretionary and non-discretionary incentive programs from state and local agencies are anticipated to be made available for prospective investments, eligible entities should also review other federal, state and local incentives that may be available to aid in the development of these projects.

 

CONTACTING CAROPRESE & COMPANY
This publication is provided by Caroprese & Company as a service to its clients and colleagues.  The information and content included in this publication should not be construed as technical advice.  Questions regarding any matters discussed in this publication should be directed to Brandon Caroprese whose contact information is listed below:

Brandon Caroprese, CPA, MST
Tel. (973)-475-8090
Email. bcaroprese@caroprese.com

Share this article:

The Information contained in the Caroprese & Company (“Caroprese”) website is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in Information contained in the Caroprese website. Accordingly, the Information on the Caroprese website is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisors. Before making any decision or taking any action, you should consult a Caroprese professional.