November 17, 2021
Small businesses investing in certain energy technologies eligible for new federal grant program under Infrastructure Investment and Jobs Act
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.
To be eligible for this grant program, manufacturers must meet the following requirements:
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:
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:
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).
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.