(a) In general. If any qualified facility or EST satisfies the requirements in paragraph (b) of this section, the applicable percentage used for calculating the amount of the credit for a qualified investment determined under section 48E(a) for the taxable year equals 30 percent.

(b) Qualified facility or EST requirements. A qualified facility or EST satisfies the requirements of this paragraph (b) if it is a facility described in one of paragraphs (b)(1) through (6) of this section:

(1) A qualified facility with a maximum net output of less than one megawatt of electrical energy (as measured in alternating current) based on the nameplate capacity as provided in paragraph (c) of this section (One Megawatt Exception);

(2) A qualified facility the construction of which began prior to January 29, 2023;

(3) A qualified facility that meets the prevailing wage requirements of section 48E(d)(3) and §§ 1.45-7(a)(2) and (3) and (b) through (d) and 1.48-13(c), the apprenticeship requirements of section 45(b)(8) and § 1.45-8, and the recordkeeping and reporting requirements of § 1.45-12;

(4) An EST with a capacity of less than one megawatt based on the nameplate capacity as provided in paragraph (c) of this section (EST One Megawatt Exception);

(5) An EST the construction of which began prior to January 29, 2023; or

(6) An EST that satisfies the prevailing wage requirements of section 48E(d)(3) and §§ 1.45-7(a)(2) and (3) and (b) through (d) and 1.48-13(c), the apprenticeship requirements of section 45(b)(8) and § 1.45-8, and the recordkeeping and reporting requirements of § 1.45-12.

(c) Nameplate capacity for purposes of the One Megawatt Exception—(1) Qualified facilities. For purposes of paragraph (b)(1) of this section, whether a qualified facility has a maximum net output of less than 1 megawatt (MW) of electrical energy (as measured in alternating current) is determined based on the nameplate capacity of the facility. If a qualified facility has integrated operations (as defined in paragraph (c)(4)(i) of this section) with one or more other qualified facilities, then the aggregate nameplate capacity of the qualified facilities is used for the purposes of determining if the qualified facilities satisfy the One Megawatt Exception. If applicable, taxpayers should use the International Standard Organization (ISO) conditions to measure the maximum electrical generating output of a facility.

(2) Nameplate capacity for qualified facilities that generate in direct current for purposes of the One Megawatt Exception. For qualified facilities that generate electricity in direct current, the taxpayer determines the maximum net output (in alternating current) of each unit of qualified facility by using the lesser of:

(i) The sum of the nameplate generating capacities within the unit of qualified facility in direct current, which is deemed the nameplate generating capacity of the unit of qualified facility in alternating current; or

(ii) The nameplate capacity of the first component of property that inverts the direct current electricity into alternating current.

(3) EST—(i) In general. Paragraphs (c)(3)(ii) through (iv) of this section provide rules for applying the EST One Megawatt Exception described in paragraph (b)(4) of this section to different types of energy storage properties. If the EST has integrated operations (as defined in paragraph (c)(4)(ii) of this section) with one or more other ESTs, then the aggregate nameplate capacity of the ESTs is used for the purposes of the EST One Megawatt Exception. If applicable, taxpayers should use the ISO conditions to measure the maximum net output of an EST.

(ii) Electrical energy storage property. In the case of electrical energy storage property (as defined in § 1.48E-2(g)(6)(i)), the EST One Megawatt Exception is determined by using the storage device's maximum net output. If the output of electrical energy storage property is in direct current, taxpayer should apply the rules of paragraph (c)(2) of this section.

(iii) Thermal energy storage property. In the case of thermal energy storage property (as defined in § 1.48E-2(g)(6)(ii)), the EST One Megawatt Exception is determined by using the property's maximum net output. The maximum net output in MW is calculated by using a conversion whereby one MW is equal to 3.4 million British Thermal Units per hour (mmBtu/hour) for heating and 284 tons for cooling (Btu per hour/3,412,140 = MW). The maximum net output is the maximum instantaneous rate of discharge and is determined based on the nameplate capacity of the equipment that generates or distributes thermal energy for productive use (including distributing the thermal energy from the storage medium). For purposes of determining the maximum net output of thermal energy storage property, if the nameplate capacity of the thermal energy storage is not available, the nameplate capacity of the equipment delivering thermal energy to the thermal energy storage may be used. For thermal energy storage property distributing thermal energy to a building or buildings, the nameplate capacity can be assessed as either the aggregate maximum thermal capacity of all individual heating or cooling elements within the building or buildings, or as the maximum thermal output that the thermal energy storage property is capable of delivering to a building or buildings at any given moment. The maximum thermal capacity of an entire thermal energy storage property is capable of delivering at any given moment does not take into account the capacity of redundant equipment if such equipment is not operated when the system is at maximum output during normal operation. For thermal energy storage property and other energy property that generates or distributes thermal energy for a productive use, the maximum thermal capacity that the entire system is capable of delivering is considered to be the greater of the rate of cooling or the rate of heating of the aggregate of the nameplate capacity of the equipment distributing energy for productive use, including distributing the thermal energy from the thermal energy storage medium to the building or buildings. If such nameplate capacity is unavailable, in the case of thermal energy storage property only, the maximum thermal capacity may instead be considered to be the greater of the rate of cooling or the rate of heating of the aggregate of the nameplate capacity of all the equipment delivering energy to the thermal energy storage property in the project.

(iv) Hydrogen energy storage property. In the case of a hydrogen energy storage property (as defined in § 1.48E-2(g)(6)(iii)), the EST One Megawatt Exception is determined by using the property's maximum net output. The maximum net output in MW is calculated by using a conversion whereby one MW is equal to 3.4 mmBtu/hour of hydrogen or equivalently 10,500 standard cubic feet (scf) per hour of hydrogen.

(4) Integrated operations—(i) One Megawatt Exception. Solely for the purposes of the One Megawatt Exception described in paragraph (b)(1) of this section, a qualified facility is treated as having integrated operations with any other qualified facility of the same technology type if the facilities are:

(A) Owned by the same or related taxpayers;

(B) Placed in service in the same taxable year; and

(C) Transmit electricity generated by the facilities through the same point of interconnection or, if the facilities are not grid-connected or are delivering electricity directly to an end user behind a utility meter, are able to support the same end user.

(ii) EST One Megawatt Exception. Solely for the purposes of the EST One Megawatt Exception described in paragraph (b)(4) of this section, an EST is treated as having integrated operations with any other EST of the same technology type if the ESTs are:

(A) Owned by the same or related taxpayers;

(B) Placed in service in the same taxable year; and

(C) Transmit energy through the same point of interconnection or, if the ESTs are not grid-connected or are providing storage directly to an end user behind a utility meter, are able to support the same end user. In the case of EST described in paragraphs (c)(3)(iii) and (iv) of this section, which use the same piping and distribution systems for the respective type of EST.

(d) Transition waiver of penalty for prevailing wage requirements. For purposes of the transition waiver described in § 1.48-13(c)(2) (by reference to § 1.45-7(c)(6)(iii)), the penalty payment required by § 1.45-7(c)(1)(ii) to cure a failure to satisfy the prevailing wage requirements in paragraph (b)(3) or (6) of this section is waived with respect to a laborer or mechanic who performed work in the construction, alteration, or repair of an energy project on or after January 29, 2023, and prior to January 15, 2025, if the taxpayer relied upon Notice 2022-61, 2022-52 I.R.B. 560, or the PWA proposed regulations (REG-100908-23) (88 FR 60018), corrected in 88 FR 73807 (Oct. 27, 2023), corrected in 89 FR 25550 (April 11, 2024), to determine when the activities of any laborer or mechanic became subject to the prevailing wage requirements, and the taxpayer makes the correction payments required by § 1.45-7(c)(1)(i) with respect to such laborer and mechanics within 180 days of January 15, 2025.

(e) No alteration or repair during recapture period described in § 1.48-13(c)(3). If no alteration or repair work occurs during the five-year recapture period, the taxpayer is deemed to satisfy the prevailing wage requirements described in paragraph (b)(3) or (6) of this section with respect to such taxable year.

(f) Applicability date. This section applies to qualified facilities and qualified ESTs placed in service in taxable years ending after January 15, 2025, and the construction of which begins after March 17, 2025. Taxpayers may apply this section to qualified facilities and qualified ESTs placed in service in taxable years ending on or after January 15, 2025, the construction of which begins before January 15, 2025, provided that taxpayers follow this section in its entirety and in a consistent manner.