California seeks to secure federal tax credits for green energy projects

California's governor has ordered state agencies to facilitate the permitting of clean energy projects in an effort to help developers qualify for federal tax credits that are being phased out in the US tax and spending legislation that President Donald Trump signed into law in July.

In an Aug. 29 executive order, Gov. Gavin Newsom, a Democrat, directed the state's infrastructure strike team to identify clean generation and storage projects eligible for expiring credits in the federal Inflation Reduction Act and to accelerate permitting timelines for those projects so they meet deadlines to receive the incentives.

In a statement, Newsom said the order was meant to counteract Trump's actions to stymie the development of renewable energy.

"While Trump and Republicans want to bring back the days of dirty coal powering our homes, polluting our air, and increasing our electric bills, California will continue our decades of progress building our affordable, clean, reliable energy future," Newsom said.

The budget bill, which Trump signed into law July 4, drastically shortens the lifespan of the IRA's clean electricity production credit for wind and solar projects. To remain eligible under the new act, projects must either start construction by July 4, 2026, and meet safe harbor provisions set by the IRS or, if they begin construction after that date, go fully into service by the end of 2027.

Newsom's order calls on the strike team's energy working group to move immediately to identify projects eligible for the IRA credits that can meet one of the law's deadlines. The working group should help state agencies "prioritize all permitting, approval, and other agency actions" to help such projects meet the new requirements, Newsom's order said.

In addition, the order calls on the California Public Utilities Commission to request that utilities prioritize interconnection of "critical" generation and storage projects expected to enter service over the next three years. The document also tasks the PUC with working with the California Independent System Operator to develop new transmission to connect those resources to the grid.

Speeds up permitting

The order also directs the California Energy Commission, the California Natural Resources Agency, the California Environmental Protection Agency, and the California State Transportation Agency to identify ways to speed up their permitting and siting processes. It also calls on the Governor's Office of Business and Economic Development to cooperate with local permitting bodies to identify ways to accelerate the deployment of large-scale clean energy projects.

The agencies are required to submit a progress report with recommendations for further action to Newsom's office within 90 days.

Newsom's order is part of a years-long push to facilitate permitting of energy and other critical infrastructure, including housing, across California to address the state's high cost of living and meet decarbonization goals.

In July, Newsom signed two bills exempting numerous categories of projects, including solar and wind generation and manufacturing plants making components for renewable power and electric vehicles, from permitting requirements under the California Environmental Quality Act.

To support the permitting reform effort, the PUC adopted a general order in January streamlining its permitting process for new transmission and related grid upgrades. That order also called for the creation of a pilot program to track the time it takes to conduct a CEQA review and explore speeding up the CEQA process for some projects.

In 2023, Newsom signed a package of CEQA reform bills, including a measure limiting most litigation over environmental impact reports for renewable generation, transmission, and energy storage to 270 days. The bills, which the governor proposed, received bipartisan support in the state legislature.

That year, the governor also created the infrastructure strike team, comprising representatives of the PUC and other state agencies, through executive order.