Four Lessons Learned for Round 2 of Section 48C Tax Credit Applications

Prepare with these key takeaways from round one of concept paper feedback 

The second round of funding applications for the qualifying advanced energy project credit program under Internal Revenue Code Section 48C will open in spring 2024. Are you prepared to apply?

The initial round of 48C applications was highly competitive – nearly $42 billion of allocation was requested for an available funding pool of $4 billion. The second round of funding may be even more competitive, as organizations that missed out on the first round are joined by new enterprises eager to make the most of this opportunity. 

Assembling a concept paper can take significant time and resources, but round two applicants have the advantage of being able to refer to the Department of Energy’s (DOE) feedback on round one concept papers to inform their strategy. 

Are you planning to apply? Based on our work helping companies with 48C concept papers and applications, we’ve summarized four major takeaways from the DOE’s feedback on round one concept paper to help you prepare. 

1. Select the Correct Project Category
   The DOE noted that some applicants did not select the appropriate project category or submitted projects that do not qualify for 48C awards, including those involving uranium or research and development (R&D). Some projects also included unqualifying costs relating to operations, property, or other activities in the qualified investment. For example, applicants that submitted critical mineral extraction projects were discouraged because extraction is an unqualifying activity. If those applicants had proposed projects on the subsequent steps to produce the critical materials, such as physical refining and chemical or thermal treatment, rather than focusing on extraction, those projects likely would have qualified. 
2. Communicate Commercial Viability
   Some submissions did not properly demonstrate commercial viability for their proposed projects. The criteria for articulating commercial viability require details regarding the project timeline, rationale for site selection, sources of financing, and a business plan for bringing the product to market. The timeline must also show that the proposed project will be placed in service within the required two years following receipt of the credit. 
3. Prioritize Specialization
   The DOE penalized projects that were insufficiently specialized. For example, some applicants submitted proposals for projects supporting facilities that also make products outside the criteria for 48C. These other products do not meet the policy goal of supporting the development of clean energy, and therefore, associated concept papers may have received a discouragement letter. 
4. Emphasize Community Impact
   In addition to supporting the domestic renewables industry, a major underlying policy goal of 48C is to support investment in workforce and community development. Many applicants received feedback on the lack of workforce and community impact details in their concept papers. Emphasizing the benefits a project will bring to the local community — including job creation, job training programs, and overall economic impact — is a priority for the DOE. 

Are You Ready for Round Two? 

Although the funding pool for round two will be larger than it was for round one, the application process will likely be just as competitive. Prospective applicants who prepare now will likely be better positioned to submit a comprehensive concept paper when the process officially opens this spring. 

Planning to apply for 48C funding? Contact us to start preparing a persuasive concept paper.