Project Labor Agreements are key to our clean energy transition

Posted by National Alliance for Fair Contracting on

Project Labor Agreements, or PLAs, enable contractors to know, definitively, what their costs will be, and typically include language that eliminates the risk of strikes, lockouts, or other labor disruptions.

By Marc Poulos Jun 8, 2023, 2:15pm EDT

A large-scale American energy transition is upon us. The Inflation Reduction Act, signed into law in 2022 by President Joe Biden, allocates nearly $400 billion for new energy projects, including solar, wind, carbon capture and sequestration, hydrogen, nuclear and more.

It represents what politicians in both parties have long suggested was the key to American energy independence: an “all of the above” strategy.

That is, if we can deploy the sufficiently skilled workforce to build, maintain and operate these facilities.

So how do we do it?

First, we need to acknowledge that for all of their environmental risks, America’s legacy fossil fuel sector has produced a largely sustainable workforce model. The industry long ago recognized the importance of partnership with skilled trade unions to attract, train and retain the skilled workforce it needed. Not surprisingly, U.S. government data has found that legacy energy projects typically feature two to three times the level of union density as renewable projects.

Another study, analyzing the energy industry in Minnesota, North Dakota and South Dakota, found that clean energy projects were simply not competitive in the labor market relative to their legacy industry peers, and increasingly reliant on lower-skilled workers from out-of-state to build projects.

To its credit, the Inflation Reduction Act has recognized the importance of job quality and local workforce development as central tenets of America’s clean energy transition. Most of the tax incentives linked to new project development require minimum labor standards, including prevailing wages and apprenticeship utilization.

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Prevailing Wage and the Inflation Reduction Act

Posted by National Alliance for Fair Contracting on

November 29, 2022 – USDOL

On August 16, 2022, President Biden signed Public Law 117-369, 136 Stat. 1818, also known as the Inflation Reduction Act of 2022, into law. The Inflation Reduction Act is by far our nation’s largest investment in clean energy to date. By pairing climate investment with the creation of good-paying jobs, the Inflation Reduction Act’s unparalleled investments to fight the climate crisis will help improve job quality in clean energy industries and incentivize the expansion of workforce training pathways into these jobs.

Critical to providing good paying jobs, the Inflation Reduction Act offers enhanced tax benefits for a range of clean energy projects when taxpayers pay Davis-Bacon Act prevailing wages and utilize registered apprentices, in accordance with the Inflation Reduction Act.

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On November 30, 2022, the U.S. Department of Treasury and the Internal Revenue Service will publish guidance on the Inflation Reduction Act’s prevailing wage and apprenticeship requirements. The publication of this guidance means that in order to receive increased incentives, taxpayers must meet the prevailing wage and apprenticeship requirements for facilities where construction begins on or after January 29, 2023.

The U.S. Department of Labor invites you to register for one of two educational webinars on the labor standards provisions contained in the Inflation Reduction Act and Treasury Guidance. The webinars are being offered at the following times:

Register Now: Wednesday, Dec. 14 from 1–2:30 p.m. EST
Register Now: Thursday, Dec. 15 from 1–2:30 p.m. EST

If you require an accommodation or language interpretation to attend this listening session, please email whd-events@dol.gov at least five (5) business days prior to the event so we can make arrangements.

Please direct any questions to WHD-Events@dol.gov.

Inflation Reduction Act Brings Big Changes to Clean Energy Tax Incentives

Posted by National Alliance for Fair Contracting on

JD Supra
August 22, 2022

Over the next decade, the United States, through enactment of the Inflation Reduction Act of 2022 (IRA), is primed to make a $369 billion investment in clean energy and climate change programs. The lion’s share of this investment comes in the form of tax credits (extending or expanding existing tax credits, reinstating expired tax credits, and establishing new tax credits) to incentivize behavior that makes significant progress in reducing greenhouse gas (GHG) emissions (with projections showing a nearly 40% decrease in GHG emissions compared to a 2005 baseline) while at the same time encouraging domestic manufacture of key climate change technologies.

Companies looking to execute projects to take advantage of these tax credits should note two significant differences from how these types of tax credits have been provided in the past.

First, with limited exceptions, most credits are set up with a low “base” credit that can be increased by satisfying certain requirements. For example, the investment tax credit has a “base” credit amount of 6%, which can be increased to 30% if the project meets both a prevailing wages requirement for its laborers, mechanics, contractors, and subcontractors and an apprenticeship labor requirement that a certain percentage of the total labor hours for construction, alteration, or repair work on a project are performed by qualified apprentices. The credit can be increased even further by satisfying a domestic content requirement, locating the facility in an “energy community” (which includes brownfields, areas with a history of significant fossil fuel employment, and properties on which a coal mine or coal-fired electricity generation has been recently located), or locating smaller scale projects in low-income communities or on Indian land. Similarly, some credits contain an enhanced credit for using certain technologies in project execution (e.g., the carbon oxide sequestration tax credit is enhanced for projects using direct air capture).

Second, and a change that is poised to shake up how certain projects are financed and developed, new methods of monetizing tax credits have been added. For developers, the ability to transfer all or a portion of eligible credits to an unrelated third party provided in exchange for cash consideration (which consideration is not included in the transferee’s gross income nor deductible by the transferor) will be fairly significant in how a project is structured (even if projects may still need a tax equity component to monetize accelerated depreciation). The IRA will also help incentivize certain tax-exempt and government entities to execute projects by offering direct payment in lieu of certain tax credits. For-profit entities pursuing clean hydrogen production, carbon capture and sequestration, and domestic advanced manufacturing projects can also elect direct pay in lieu of tax credits for those types of projects. We expect direct payment to drive significant activity towards those types of projects. Ultimately, new ways of monetizing credits will give rise to several new transaction structures.

This update is intended to provide a high level overview of some of the IRA’s tax credit incentives targeting clean energy and climate change. We have also published separate updates regarding the Act’s energy storage incentives and a general overview of IRA incentives.

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