Production Tax Credit: 2026 Valuation & Phaseout Timeline

TL/DR –

The Internal Revenue Service has released the 2026 values for the Production Tax Credit (PTC), a tax incentive for renewable electricity production, which is being phased out and replaced by the Clean Electricity Production Tax Credit (CEPTC). The PTC’s 2026 value is set at 0.6 cents per kilowatt-hour, adjusted based on factors like compliance with prevailing wage and apprenticeship requirements and the degree of investment from tax-exempt bonds. The CEPTC, in contrast, aims to be technology-neutral and cover all zero-emission energy sources, but regulations from 2024 and 2025 excluded certain technologies subsidized by the PTC from CEPTC eligibility.

Production Tax Credit 2026 Values Released by IRS

In June 2026, the Internal Revenue Service (IRS) issued a notice outlining the 2026 Production Tax Credit (PTC) values. The PTC, a tax credit provided for the production of renewable electricity such as wind and solar, is one of the two most significant clean energy tax credits in terms of budgetary impact. The other credit is the Investment Tax Credit (ITC), equivalent to 30% of the capital investment costs for renewable energy facilities. This notice provides insights into the calculation of the PTC and details the 2026 PTC values for various types of facilities.

Historical Overview of the PTC

The Energy Policy Act of 1992 introduced the PTC, with the last substantial updates coming from the Inflation Reduction Act of 2022 (IRA; P.L. 117-169). The IRA brought several changes: it included solar electricity as an eligible energy source for the PTC, gave full tax credits to hydropower and marine and hydrokinetic facilities, established prevailing wage and apprenticeship (PWA) requirements for most qualifying facilities, and modified the tax treatment of facilities partially financed by tax-exempt bonds. Furthermore, it enabled PTC eligibility for direct payments and credit transfers, and established two 10% bonus credits. Facilities could qualify for the PTC if they started construction before 2025, a three-year extension from the previous cut-off in 2022.

The PTC is currently being phased out and will be replaced by the Clean Electricity Production Tax Credit (CEPTC).

Understanding PTC Calculation and 2026 Values

For facilities that started operation in 2022 or later, the PTC begins with a base credit of 0.3 cents per kilowatt-hour (kWh) of electricity produced, which adjusts annually for inflation and gets rounded to the nearest 0.05 cents. Four factors then influence the base credit:

• Technology: Full tax credits go to wind, solar, geothermal, and closed-loop biomass facilities, while open-loop biomass and municipal solid waste facilities receive half-credits.
• Placed-in-service date: The date when a facility begins producing electricity. Hydropower facilities and marine and hydrokinetic facilities earn full credits if they start operation in 2023 or later, and half-credits if they started operation in 2022.
• PWA requirements: Base credit values increase by fivefold for facilities that adhere to PWA requirements during construction. Facilities can also qualify for this increase without meeting PWA requirements if they have a maximum net output of under 1 megawatt or if construction began before January 29, 2023.
• Financing from tax-exempt bonds: Credit amounts decrease proportionally based on the share of capital financing from tax-exempt bonds, up to a maximum reduction of 15%.

Once the base credit gets adjusted, taxpayers can add two bonus credits. They can earn a 10% domestic content bonus credit if a specific percentage of the materials used in facility construction originate from the U.S. They’re also eligible for a 10% energy communities bonus credit if the facility is located in a designated energy community.

The inflation adjustment factor for 2026 is 2.0570. The 2026 PTC, rounded down, is 0.6 cents per kWh after multiplying this factor by the 1992 credit of 0.3 cents. The 2026 PTC values, not considering any reductions for financing from tax-exempt bonds or any bonus credit amounts, can be seen in Table 1.