The dairy industry is known for generating large volumes of high strength wastewater. The act of processing milk into our favorite dairy products such as cheese, butter, and yogurt, inherently produces significant amounts of wastewater that must be managed before discharging to the environment. Due to the high strength nature of this wastewater, anaerobic digestion is often the most economical and efficient means of treating it.
Anaerobic digestion creates significant amounts of biogas that is made up mostly of methane. This biogas can be captured and used as fuel to generate renewable electrical and thermal energy. With the latest act that was signed into law, not only can dairy producers be sustainable by generating renewable energy from their waste, they can now be eligible to collect up to a 50% tax credit of the capital cost of the project.
On August 16th 2022, the Inflation Reduction Act 0f 2022 (IRA) was signed into law. One of the main goals of the IRA is to lower energy costs and to fight global climate change. This law provides both new and expanded tax credits for companies that are converting waste streams into biogas and renewable energy.
Going forward, wastewater treatment projects that are using anaerobic digestion to create biogas and renewable energy are now eligible for the Investment Tax Credit (ITC). The ITC for eligible projects is 30% if the construction of the facility begins prior to January 1, 2025. The credit is increased by 10% if materials and components were manufactured in the United States. Additionally, there is an additional 10% that can be obtained if the facility is located in an energy community, which brings the total value of the ITC to a maximum of 50%.
The tax credit is a dollar-for-dollar reduction on the amount of taxes that are owed. This credit can be applied to prior years taxes or applied over a maximum of 20 years after the project is completed..
