California accelerates permit process for federal tax credits
TL/DR –
California Governor Gavin Newsom has ordered state agencies to expedite clean energy projects to secure federal tax credits before the Inflation Reduction Act (IRA) incentives expire. The order calls for the state’s Infrastructure Strike Team to identify eligible energy projects and for state agencies to shorten approval processes for these projects to begin construction before July 4, 2026. Several state agencies, including the California Energy Commission and the California Environmental Protection Agency, have been tasked to simplify permitting and siting procedures, and a progress report must be delivered to the governor’s office within 90 days.
California Rushes Clean Energy Initiatives to Secure Federal Aid
The Governor of California, Gavin Newsom, has issued an executive order to expedite the permitting process for clean energy projects in the state. This move aims to secure tax credits offered by the federal government’s Inflation Reduction Act (IRA) before their expiration. The federal law, adopted in July, established a deadline for the expiration of these incentives.
Efforts to Leverage Federal Aid
Governor Newsom’s order, signed on August 29, mandates the Infrastructure Strike Team of the state to identify energy projects that qualify for the remaining IRA credits. According to the order, these projects should begin construction no later than July 4, 2026, and must follow the Internal Revenue Service safe harbour rules. Otherwise, the projects need to be fully operational before the close of 2027. The order also urges state agencies to reduce approval timelines to ensure these requirements are met.
In line with this, the California Public Utilities Commission (CPUC) has been directed to prioritize the interconnection of critical projects expected to be activated within the next three years. Additionally, the CPUC is called to collaborate with the California Independent System Operator (CAISO) to hasten the planning of new transmission infrastructure.
Streamlining Procedures Through Inter-Agency Cooperation
Newsom’s order also calls on various state agencies, including the California Energy Commission, the California Environmental Protection Agency, and the California State Transportation Agency, to devise ways to simplify and quicken permitting and siting processes. The Governor’s Office of Business and Economic Development is charged with collaborating with local permitting entities to expedite the realization of large-scale projects.
The governor’s office expects a progress report with specific recommendations within 90 days. This initiative is part of wider efforts by the California executive to streamline administrative processes, confront construction costs, and achieve the state’s energy targets.
Prior Reforms Setting the Stage for This Move
This executive order is not the first effort to advance clean energy initiatives in the state. Numerous reforms have been introduced in recent years. In July, two laws were enacted that exempted certain projects, including solar and wind plants and factories producing components for electric vehicles, from review under the California Environmental Quality Act (CEQA).
The CPUC introduced a general order in January to simplify its permitting process for new transmission lines. This measure also established a pilot program to monitor CEQA review timelines and experiment with expedited procedures.
In 2023, a legislative bundle shortened the maximum litigation period for environmental impact assessments on energy generation, transmission, and storage projects to 270 days. The governor proposed these bills, which received bipartisan support.
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