Learn about the energy communities in Transect for potential IRA tax credits.
An energy community is a designated area that qualifies for tax credits and incentives by boosting economic growth and creating jobs through clean energy projects. These areas include brownfield sites, coal, oil, natural gas-dependent areas, and coal mine closure areas. Transect helps developers identify potential sites within these communities, accelerating the clean energy transition and revitalizing local economies.
In this article, we’ll review the:
Energy Community Map Layers
Brownfields
Brownfields are typically former industrial or commercial sites that become eligible for funding to support cleanup and redevelopment once they are designated by the US Environmental Protection Agency. This designation opens up opportunities for the site to receive tax credits and incentives to redevelop into clean energy projects.
The following layer provides Brownfield locations:
Coal Communities
Coal communities are areas that heavily rely on the coal industry for its economy and identity. Renewable energy development in these areas offers coal communities new economic opportunities by creating jobs and stimulating local economies, while also improving public health and reducing reliance on fossil fuels.
There are the following layers for coal communities:
- Coal Mines: This layer, sourced from the Environmental Protection Agency, identifies operating surface and underground coal mines in the United States in 2020.
- Energy Community: Census Tracts with Planned Coal Plant Retirement: This layer shows the census tracts that contain or are adjacent to a coal plant that will retire before 2030.
- Energy Community: Coal Closure Census Tracts: This layer identifies U.S. census tracts and adjoining tracts that have had coal mine closures since 1999 or in which a coal-fired electric generating unit has been retired after 2009. A mine is considered “closed” if it has been listed as “Abandoned” or “Abandoned and Sealed” in the MSHA’s mine dataset.
- Energy Community: Coal Plants Planned Retirement: This layer shows the coal plant locations that are due to retire before 2030. This information is sourced from the Coal Plant Redevelopment Tool.
MSA and Non-MSA Energy Communities
MSA stands for Metropolitan Statistical Area, which typically refers to a large city and its surrounding suburbs. Non-MSA areas are rural or suburban regions that don't meet the criteria for a metropolitan area. In the context of energy communities, these terms categorize regions based on population density and economic characteristics.
Both MSA and non-MSA areas can qualify as energy communities if they meet specific criteria related to fossil fuel employment and unemployment rates. The IRA’s qualifications include “0.17 percent or greater direct employment or at least 25 percent of local tax revenues [are] related to the extraction, processing, transport, or storage of coal, oil, or natural gas,” and unemployment is at or above the national average in the previous year. An energy community might rely heavily on fossil fuels for its economy, potentially generating at least 25% of local tax revenue from this industry. However, the exact amount of fossil fuel revenue for local governments is unknown.
The following layer provides MSA and Mon-MSA Energy Communities locations:
Financial Incentives Worksheet
After running a report, Transect provides a powerful Financial Incentives Calculator to help developers maximize returns on their energy projects within energy communities. By inputting project details, developers can accurately estimate the total value of Investment Tax Credits (ITC) and Production Tax Credits (PTC) available. This tool streamlines the financial analysis process and aids in making informed decisions about project feasibility and profitability.
To calculate the potential Financial Incentives:
- Open a Transect Report and scroll to the lower-right corner.
- Alternatively, select Financial Incentives from the left-side menu.
- Select Calculate next to the applicable incentive:
- Provide responses to the required context questions. You can also provide responses to the optional questions for additional information. When finished, click Calculate.
- The potential savings will be calculated based on the inputted information. You'll also receive a breakdown of the credits/bonuses, a description of the credit, and reference links.
Important Considerations
- Unemployment rates change frequently, it is not clear whether an energy community will stay an energy community - and continue to be eligible for the bonus tax credit.
- A baseline 2021 US average unemployment rate of 5.3% was used
- For retired coal-fired power plants, exact coordinates don’t exist from 2010 to 2012. Instead, their ZIP codes are matched to the census tract with which they share the most land-area overlap.
- To calculate the percentage of the workforce directly employed in the energy sector, we sum the employment in North American Industrial Classification (NAICS) codes listed in Table 1, then divide by total employment. However, the IRA does not define which NAICS codes to use, nor whether to divide their sum by total employment or total labor force (which includes unemployed workers). The specific language in the IRA is, “extraction, processing, transport, or storage of coal, oil, or natural gas (as determined by the Secretary).” Two of these codes (213 and 486) include some non–fossil fuel activities but overwhelmingly consist of jobs in the coal, oil, and natural gas sectors.
- Counties don’t map perfectly to statistical areas in New England. We show county-level data for New England.