The IRS has released the 2025 inflation adjustment factor and reference prices for calculating the IRC Section 45 production tax credit (PTC) for qualified energy resources.

The PTC originally allowed taxpayers to claim a credit equal to 1.5 cents (adjusted annually for inflation) per kilowatt hour of renewable electricity produced at a qualified facility. The inflation adjustment factor for calendar-year 2025 is 1.9971. The 2025 reference price for facilities producing electricity from wind is 3.1 cents per kilowatt hour; because this price does not exceed the 8 cents multiplied by the inflation adjustment factor in IRC Section 45(b)(1), the phaseout of the credit under IRC Section 45(b)(1) does not apply for calendar 2025. Reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy have not been determined for 2025.

For facilities placed in service before January 1, 2022, the PTC is:

• 3 cents per kilowatt hour on the sale of electricity produced from wind, closed-loop biomass, and geothermal energy
• 1.5 cents per kilowatt hour on the sale of electricity produced in open-loop biomass, landfill gas, trash, qualified hydropower, and marine and hydrokinetic facilities

For facilities placed in service on or after January 1, 2022, the PTC for electricity is 0.6 cents per kilowatt hour on the sale of electricity from all eligible technologies (3 cents if prevailing wage and apprenticeship requirements are met).

Implications

Unlike the previous year, the 2025 PTC rate is the same (3 cents) for projects placed in service before and after January 1, 2022 (assuming prevailing wage and apprenticeship requirements are met).