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. Prevailing wage required for the full 2.75¢/kWh rate.
Calculate Annual Credit
Credit = 2.75¢/kWh × total net electricity produced (kWh/year). Example: 100 MW wind at 35% capacity factor = 307M kWh/yr × 2.75¢ = ~$8.4M/year × 10 years = ~$84M total PTC value.
Claim or Transfer
Claim on Form 8835 each year for 10 years. Alternatively, sell credits under IRA transferability at ~90–95 cents per dollar, or elect direct pay if tax-exempt.
Qualifying Technologies
| Technology | PTC Rate | Notes |
|---|---|---|
| Wind (onshore) | 2.75¢/kWh | Most common PTC technology |
| Offshore Wind | 2.75¢/kWh | High capacity factor; often PTC-optimal |
| Solar PV | 2.75¢/kWh | IRA made solar PTC-eligible for first time |
| Geothermal | 2.75¢/kWh | High capacity factor; PTC-favorable |
| Run-of-River Hydro | 2.75¢/kWh | Incremental hydropower production |
| Marine/Tidal | 2.75¢/kWh | Wave and tidal energy systems |
| Landfill Gas | 2.75¢/kWh | Electricity from gas recovery |
| Municipal Solid Waste | 2.75¢/kWh | Qualifying waste-to-energy facilities |
Example Calculation
Rate adjusted annually for CPI inflation. Actual value depends on production actuals. Consult a tax advisor before filing.
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. IncentEdge models both automatically.
| 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
- Market rate: ~90–95 cents per dollar
Direct Pay Election
- Cash payment from IRS in lieu of credit
- Available to nonprofits, gov, tribal entities
- For-profit entities: limited direct pay available
- Election made at tax filing
Stack PTC with Other Incentives
CFO Checklist
- 01Confirm technology qualifies under §45 (legacy) or §45Y (technology-neutral, 2025+)
- 02Establish construction-start date for rate lock — rate is fixed at construction year
- 03Document prevailing wage and apprenticeship compliance for full 2.75¢/kWh 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 for wind in 2024?
The PTC rate for wind and other qualifying technologies is 2.75¢/kWh for 2024, adjusted for inflation annually. Projects without prevailing wage compliance receive only 0.3¢/kWh. 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.) for projects beginning construction through 2024. Section 45Y is the new technology-neutral Clean Electricity Production Credit that applies from 2025 forward for facilities with zero or net-negative greenhouse gas emissions.
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. The IRA made solar eligible for the PTC for the first time, beginning with projects that start construction after 2022. Previously, solar could only use the ITC. This change gives solar developers the option to choose the credit structure that maximizes their project value.
How long does the PTC last?
The PTC is earned for 10 years from the date the facility is placed in service. The credit rate is locked at the rate in effect during the year construction begins and is adjusted for inflation annually during the 10-year production period.