How the PTC Works
Establish Eligibility
Confirm the technology qualifies. Projects must begin construction before 2025 for §45. From 2025 onward, §45Y applies to facilities with zero greenhouse gas emissions. Wind and solar must have begun construction by July 4, 2026, or be placed in service by December 31, 2027. Prevailing wage required for the full rate.
Calculate Annual Credit
Credit = the year's inflation-adjusted per-kWh rate × net electricity produced (kWh/year). The IRS publishes the adjusted rate each year.
Claim or Transfer
Claim each year for 10 years (Form 8835 for §45, Form 7211 for §45Y). Alternatively, sell credits under IRA transferability at a discount to face value, or elect direct pay if tax-exempt.
Qualifying Technologies
| Technology | Notes |
|---|---|
| Wind (onshore) | Most common PTC technology; OBBBA wind and solar deadlines apply |
| Offshore Wind | High capacity factor; OBBBA wind and solar deadlines apply |
| Solar PV | IRA made solar PTC-eligible for first time; OBBBA wind and solar deadlines apply |
| Geothermal | High capacity factor; PTC-favorable |
| Run-of-River Hydro | Incremental hydropower production |
| Marine/Tidal | Wave and tidal energy systems |
| Landfill Gas | Electricity from gas recovery |
| Municipal Solid Waste | Qualifying waste-to-energy facilities |
§45 covers only facilities that began construction before 2025; newer facilities claim §45Y. Rates: 0.3 cents per kWh base and 1.5 cents for facilities under 1 MW or meeting prevailing wage and registered apprenticeship requirements, both adjusted for inflation. Sources: 26 U.S.C. §45Y, as amended by P.L. 119-21; IRS, Clean Electricity Production Credit.
ITC vs PTC — Comparison
The choice between ITC and PTC often depends on project type. Wind projects at high capacity factors typically favor PTC. Solar projects at lower capacity factors may favor the ITC.
| Factor | ITC | PTC |
|---|---|---|
| Credit Basis | % of capital cost | ¢/kWh produced |
| Credit Timing | Year 1 (upfront) | Years 1–10 (ongoing) |
| Best for wind (35%+ CF) | Lower value | Higher value typically |
| Best for solar (20–25% CF) | Often higher value | May be lower value |
| Risk | Lower (one-time, certain) | Higher (production-dependent) |
| Bonus adders | Energy community, domestic content | Same adders available |
Transferability & Direct Pay
Credit Transfer (Sale)
- Sell credits to unrelated buyers for cash
- For-profit taxpayers only
- Sale must occur in credit year
- Sold at a discount to face value
Direct Pay Election
- Cash payment from IRS in lieu of credit
- Available to nonprofits, gov, tribal entities
- Election made at tax filing
Stack PTC with Other Incentives
CFO Checklist
- 01Confirm technology qualifies under §45 (legacy) or §45Y (technology-neutral, 2025+)
- 02Establish the construction-start date: it decides §45 vs §45Y and, for wind and solar, whether the July 4, 2026 deadline was met
- 03Document prevailing wage and apprenticeship compliance for the full rate
- 04Model PTC vs ITC break-even given project capacity factor and 10-year production estimate
- 05Determine transferability or direct pay election before filing the first year
Frequently Asked Questions
What is the PTC rate?
The statutory base rate is 0.3 cents per kilowatt-hour. A higher 1.5-cent rate applies to facilities under 1 MW and to facilities that meet prevailing wage and registered apprenticeship requirements. Both are adjusted for inflation, and the IRS publishes the adjusted rate each year. The 10-year credit period begins when the facility is placed in service.
What is the difference between Section 45 and Section 45Y?
Section 45 is the legacy PTC that lists specific qualifying technologies (wind, solar, geothermal, etc.) and covers only projects that began construction before 2025. Section 45Y is the technology-neutral Clean Electricity Production Credit for newer facilities with zero or net-negative greenhouse gas emissions. Under the One Big Beautiful Bill Act, wind and solar facilities must have begun construction by July 4, 2026, or be placed in service by December 31, 2027.
Can you claim both PTC and ITC on the same project?
No. The ITC and PTC are mutually exclusive for the same energy property. Taxpayers must elect one or the other. The decision should be made based on which provides greater value given the project's cost, expected production, and capacity factor.
Is the PTC available for solar projects?
Yes, with a deadline. The IRA made solar eligible for the PTC for the first time, giving solar developers the option to choose the credit structure that maximizes their project value. Under the One Big Beautiful Bill Act, a solar facility must have begun construction by July 4, 2026, or be placed in service by December 31, 2027.
How long does the PTC last?
The PTC is earned for 10 years from the date the facility is placed in service. The per-kWh rate is adjusted for inflation each year of that period.