IRS issues guidance on energy credit.

• Author: Sasaki, Carl

The Energy Policy Act of 2005, P.L. 109-58, amended Sec. 48 to include qualified fuel cell property and qualified microturbine property on the list of property that can qualify for the energy credit. Pending the issuance of regulations, the IRS issued Notice 2008-68 to provide taxpayers with guidance on the computation and availability of the credits.

Although these technologies have been in development for years, the recent rise in oil prices and environmental concerns about "going green" have caused an increased focus on these types of alternative energy-generation technologies.

Qualified Fuel Cell Property

Sec. 48(c)(1) defines a qualified fuel cell property as a fuel cell power plant that satisfies the following conditions:

1. The plant must have a nameplate capacity of at least 0.5 kilowatt of electricity using an electrochemical process. Nameplate capacity is the maximum electrical output of a generator as rated by the manufacturer. Nameplate capacity is determined at the normal operating conditions designated by the manufacturer (Notice 2008-68, [section] 3.01(7)).

2. The plant must have an electricity-only generation efficiency greater than 30%.

   A fuel cell plant is an integrated system comprising a fuel cell stack assembly and an associated balance of plant components that convert a fuel into electricity using a chemical reaction rather than combustion (burning of a fuel) (Sec. 48(c)(1)(C)).

   According to the U.S. Fuel Cell Council, an industry trade association, some of the advantages of fuel cell power plants over traditional grid power systems are:

1. They are a more reliable and consistent power source.

2. Power output is scalable because stationary fuel cell plants can be strung together as power needs change.

3. A fuel cell's waste heat can be used in cogeneration.

4. Fuel cells are environmentally preferable. Some fuel cells may create only 20 grams of pollutants per megawatt hour (MWh) as compared with 11,000 grams per MWh for an average fossil fuel plant (U.S. Fuel Cell Council, www.usfcc.com/about/Fuel_Cells_for_ Industrial_Applications.pdf).

   Qualified Microturbine Property

   Sec. 48(c)(2) defines a qualified microturbine property as a stationary microturbine power plant that satisfies the following conditions:

1. The plant has a nameplate capacity of less than 2,000 kilowatts. Nameplate capacity is determined at ISO conditions, which are 59[degrees]F, 60% relative humidity, and an atmospheric pressure of 14.696 pounds per square...