SECTION 13. DRAFTING

INFORMATION

The principal author of this notice is Philip Tiegerman of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further

March 4, 2013 548 2013–10 I.R.B.

APPENDIX A

AGREEMENT

[Insert taxpayer’s name, address, and identifying number] (“Taxpayer”) and the Commissioner of Internal Revenue (“Commissioner”) make the following agreement:

WHEREAS:

1. On or before [insert date and year], Taxpayer submitted to the Internal Revenue Service (“IRS”), an application for certification under the § 48C Phase II program described in Notice 2013–12 (“Application for § 48C Certification”);

2. Taxpayer’s Application for § 48C Certification is for the qualifying advanced energy project (the “Project”) described below— (1) The name of the Project is [insert name as provided in Taxpayer’s application]; (2) The Project will be located in or near [insert city and state]; (3) The Project [insert either: “re-equips”; “expands”; or “establishes”] a manufacturing facility for the production of [insert type of property as described in § 48C(c)(1)(A)(i)(I) — (VII)].

(4) On [insert date of acceptance letter issued under section 4.02(7) of Notice 2013–12], the IRS accepted Taxpayer’s Application for § 48C Certification for the Project and allocated a qualifying advanced energy project credit under § 48C in the amount of $[insert number] to the Project.

NOW IT IS HEREBY DETERMINED AND AGREED FOR FEDERAL INCOME TAX PURPOSES THAT:

1. The total amount of the § 48C Phase II credit to be claimed for the Project under § 48C(a) must not exceed the amount allocated to the Project as specified in WHEREAS clause 2(4).

2. If Taxpayer fails to satisfy the certification requirements under section 6.02 of Notice 2013–12 within the time specified in § 48C(d)(2)(B) (1 year from the date the IRS accepted the Taxpayer’s Application for § 48C Certification for the Project as specified in WHEREAS clause 2(4)), or if the IRS does not issue a certification for the Project under Notice 2013–12, the § 48C Phase II credit in the amount allocated to the Project as specified in WHEREAS clause 2(4) is fully forfeited.

3. Taxpayer will notify the IRS in writing at the address listed in section 6.02 of Notice 2013–12 when the Project is placed in service. This notification must be sent within 30 days of the date the Project is placed in service.

4. If the Project is not placed in service by Taxpayer within 3 years of the date of issuance of the certification as determined under section 6.03 of Notice 2013–12, the § 48C Phase II credit in the amount allocated to the Project as specified in WHEREAS clause 2(4) is fully forfeited.

5. If the plans for the Project change in any significant respect from the plans set forth in the application for DOE recommendation (as defined in section 4.01 of Notice 2013–12) and the Application for § 48C Certification and, under section 7.03 of Notice 2013–12, the acceptance of Taxpayer’s Application for § 48C Certification on the date the IRS accepted the Taxpayer’s Application for § 48C Certification for the Project as specified in WHEREAS clause 2(4) is void, then the § 48C Phase II credit in the amount allocated to the Project as specified in WHEREAS clause 2(4) is fully forfeited.

6. Taxpayer will not claim the qualifying advanced energy project credit under § 48C for any qualified investment for which a credit is allowed under §§ 48, 48A, or 48B or for which a payment is received under § 1603 of the American Recovery and Reinvestment Act of 2009, Division B of Pub. L. 111–5, 123 Stat 115.

7. If Taxpayer elects to claim the qualifying advanced energy project credit for the qualified progress expenditures paid or incurred by Taxpayer during the taxable year(s) during which the Project is under construction and the Project ceases to be a qualifying advanced energy project (whether before, at the time, or after the Project is placed in service), rules similar to the recapture rules in § 50(a)(2)(A) through (D) apply.

8. Taxpayer reasserts that the following information is trade secret or proprietary information: [Insert “All information identified as trade secret or proprietary in Taxpayer’s application for DOE recommendation” or list the specific information in Taxpayer’s application for DOE recommendation to which the reassertion applies.]

9. This agreement applies only to Taxpayer. Taxpayer must notify the IRS within 90 days of the acquisition of the Project by any other person (a successor in interest). A successor in interest that plans to claim the § 48C credit allocated to the Project must request permission to execute a new agreement with the IRS. If the request is granted, the new agreement must be executed no later than the due date (including extensions) of the successor in interest’s Federal income tax return for the taxable year in which the transfer occurs. If the interest is acquired at or before the time the Project is placed in service and the successor in interest fails to execute a new agreement, the qualifying advanced energy project credit in the amount allocated to the Project, as specified in the WHEREAS clause 2(4), is fully forfeited. If the interest is acquired after the time the Project is placed in service and the successor in interest fails to execute a new agreement, the Project ceases to be investment credit property, and the recapture rules of § 50(a) apply.

THIS AGREEMENT IS FINAL AND CONCLUSIVE EXCEPT:

1. The matter it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of a material fact;

2013–10 I.R.B. 549 March 4, 2013

2. It is subject to the Internal Revenue Code sections that expressly provide that effect be given to their provisions notwithstanding any law or rule of law; and

3. If it relates to a tax period ending after the date of this Agreement, it is subject to any law enacted after such date, which applies to the tax period.

By signing, the parties certify that they have read and agreed to the terms of this Agreement.

Taxpayer: [insert name and identifying number]

By: Date Signed:

[insert name]

Title: [insert title]

[insert taxpayer’s name]

Commissioner of Internal Revenue

By: Date Signed:

[insert name]

Title: Industry Director, Natural Resources & Construction

March 4, 2013 550 2013–10 I.R.B.

APPENDIX B: REQUEST FOR CONCEPT PAPERS AND FULL APPLICATIONS FOR DOE RECOMMENDATION

Table of Contents

I. Overview II. DOE Review Process III. Eligibility Information IV. Submission Information for DOE Recommendation Process

A. General B. Application Forms C. Content and Form of Concept Papers D. Content and Form of Full Applications E. Submission and Registration Requirements F. Application Review Information V. Instructions Regarding Quantitative Factors Information Submission VI. Supporting Documents VII. Technical References for Advanced Energy Technologies Supplied Figures VIII. Taxpayer Data Spreadsheet IX. Questions

I. OVERVIEW

The Internal Revenue Service (“Service”) with the assistance of the Department of Energy (“DOE”) seeks to select for certification applications of innovative technologies that demonstrate a reasonable expectation of commercial viability and are eligible for consideration based on the selection criteria in sections III and IV below. To be eligible, applications must be for qualifying advanced energy projects and projects must have a reasonable expectation of commercial viability.

This request for concept papers and full applications for DOE Recommendation:

1. Describes the information to be provided by the taxpayer to allow DOE to review and recommend projects,
2. Identifies the eligibility requirements, the merit review criteria for the concept papers, the merit review criteria for the full applications for DOE recommendation and Program Policy Factors to be used by DOE in the review of applications, and
3. Requests a tax credit that is 30% of the qualified investment not to exceed $30 million per project.

In conducting its review, DOE may utilize assistance and advice from qualified personnel from other Federal agencies and/or contractors. DOE will obtain conflict of interest/non-disclosure acknowledgements in advance from all reviewers to assure that application information shall be kept confidential and used only for reviewing purposes. Reviewers will be required to report all personal and organizational conflicts of interest.

DOE reserves the right to request clarifications and/or supplemental information from some or all taxpayers submitting applications through written submissions and/or oral presentations.

DOE may determine whether to recommend an application to the Service at any time after the full application has been received, without further exchanges or discussions with the Taxpayer.

Neither a procurement action (under Title 48 of the Code of Federal Regulations) nor a financial assistance award (under 10 CFR Part 600) is contemplated based on an application submitted under Notice 2013–12 (Notice).

DOE will be hosting an informational webinar on the § 48C Phase II program for potential applicants (taxpayers) on February 19, 2013 at 2:00 p.m. Eastern time. This initial webinar will provide information about how to prepare the Concept Paper. Participants will have the opportunity to submit written questions during the webinar. Answers will be posted on the IRS website at http://www.irs.gov/Businesses/Advanced-Energy-Credit-for-Manufacturers-(IRC–48C) and on DOE’s eXCHANGE system at https://eere-exchange.energy.gov/ under the § 48C Phase II opportunity announcement. The February 19, 2013 webinar will only address topics related to the concept paper phase of the process. Applicants who are subsequently invited to submit a full application will also be invited to a webinar addressing that stage of the process.

Webinar information is as follows:

1. Click this link to start or to join the Webinar:

https://www1.gotomeeting.com/register/838885833

2. Choose one of the following audio options:

2013–10 I.R.B. 551 March 4, 2013

TO USE YOUR COMPUTER’S AUDIO:

When the Webinar begins, you will be connected to audio using your computer’s microphone and speakers (VoIP). A headset is recommended.

TO USE YOUR TELEPHONE:

If you prefer to use your phone, you must select “Use Telephone” after joining the Webinar and call in using the numbers below.

Toll: +1 (415) 655–0055 Access Code: 674–939–455 Audio PIN: Shown after joining the meeting

II. DOE REVIEW PROCESS

A two-phase technical evaluation process will be used for applications submitted under the Notice: Phase 1 — concept paper and Phase 2 — full application. Based on the results of the concept paper review, a select number of taxpayers (up to approximately 50) will be invited to submit full applications. At its sole discretion, DOE may give all taxpayers who submit a full application the option of doing an in-person presentation, at their own expense, at DOE Headquarters at 1000 Independence Avenue SW, Washington, DC. 20585.

FULL APPLICATIONS WILL BE ACCEPTED ONLY FROM TAXPAYERS THAT RECEIVE AN INVITATION TO SUBMIT THE FULL APPLICATION. NO OTHER FULL APPLICATIONS SUBMITTED UNDER THIS NOTICE WILL BE REVIEWED.

The first phase requires a taxpayer to submit a concept paper. As a result of this preliminary review, taxpayers will either receive an invitation to submit a full application package or be removed from further consideration. DOE expects to invite selected taxpayers to submit full applications no later than June 4, 2013.

As part of the review of the concept papers, DOE will carry out an initial compliance review to determine that (1) the concept paper meets the eligibility requirements (see Section III), (2) all required information has been submitted, and (3) all mandatory requirements of this Notice are satisfied. If a concept paper clearly fails to meet the eligibility requirements or does not provide sufficient information for evaluation, the concept paper will be considered non-responsive and eliminated from further review.

The second evaluation phase will consist of a review of full application packages submitted by invitation as a result of the concept paper Phase. Applications submitted that were not invited, or do not expand on successful Phase I — concept paper proposals will not be reviewed. Successful Phase I — concept paper Taxpayers invited to submit full applications may not significantly change the scope or focus of the original concept paper proposals.

The review will be a thorough, consistent, and objective examination of applications based on merit review criteria outlined in Section IV (F).

Prior to the comprehensive review of the full applications, DOE will review compliance to determine that (1) the application meets the eligibility requirements, (2) the information required by this notice has been submitted, (3) the taxpayer filed a timely concept paper, and (4) all mandatory requirements of this Notice are satisfied.

III. ELIGIBILITY INFORMATION

To be eligible, (1) concept papers and applications must be for advanced energy projects, and (2) projects must have a reasonable expectation of commercial viability. Concept papers and full applications that do not clearly demonstrate how the proposed project meets the eligibility requirements will not be reviewed. Eligibility requirements are as follows:

A. Qualifies as an advanced energy project

As defined in 26 U.S.C. § 48C(c)(1), the term “qualifying advanced energy project” means a project—

(i) which re-equips, expands, or establishes a manufacturing facility for the production of:

March 4, 2013 552 2013–10 I.R.B.

1. property designed to be used to produce energy from the sun, wind, geothermal deposits (within the meaning of § 613(e)(2)), or other renewable resources,
2. fuel cells, microturbines, or an energy storage system for use with electric or hybridelectric motor vehicles,
3. electric grids to support the transmission of intermittent sources of renewable energy, including storage of such energy,
4. property designed to capture and sequester carbon dioxide emissions,
5. property designed to refine or blend renewable fuels or to produce energy conservation technologies (including energyconserving lighting technologies and smart grid technologies),
6. new qualified plug-in electric drive motor vehicles (as defined by § 30D), qualified plug-in electric vehicles (as defined by § 30(d)), or components which are designed specifically for use with such vehicles, including electric motors, generators, and power control units, or
7. other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Treasury Secretary, and

(ii) any portion of the qualified investment of which is certified as eligible for the § 48C credit.

B. Has a reasonable expectation of commercial viability

The application must demonstrate that the project has a reasonable expectation of commercial viability.

IV. SUBMISSION INFORMATION FOR DOE RECOMMENDATION PROCESS

A. General

An application for DOE recommendation and ranking must include a concept paper at Phase 1 and a full application at Phase 2 as described below. All applications shall be prepared in accordance with this request for applications for DOE recommendation in order to provide a standard basis for review and to ensure that each application will be uniform as to format and sequence.

Concept papers and full applications should clearly address each of the eligibility requirements and applicable merit review criteria to demonstrate the taxpayer’s capability, knowledge, and experience regarding the requirements described herein.

Taxpayers should fully address the requirements of the Notice and this request and not rely on the presumed background knowledge of reviewers. DOE may reject an application that does not follow the instructions regarding the organization and content of the application when the nature of the deviation and/or omission precludes meaningful review of the application.

ALL CONCEPT PAPERS AND FULL APPLICATIONS MUST BE SUBMITTED THROUGH EERE eXCHANGE TO BE CONSIDERED FOR DOE RECOMMENDATION UNDER THIS NOTICE.

CONCEPT PAPERS AND FULL APPLICATIONS RECEIVED AFTER THE STATED DEADLINES WILL NOT BE REVIEWED OR CONSIDERED FOR DOE RECOMMENDATION.

B. Application Forms

Required forms and information for downloading concept papers and full applications are available at https://eere-exchange.energy.gov . Taxpayers will need to register and create an account in EERE eXCHANGE at https://eere-exchange.energy.gov/ . This account will then allow the user to submit concept papers and full applications for the 48C tax credit re-allocation. The taxpayer will have the opportunity to re-submit revised application materials for any reason as long as the revision is submitted by the specified deadline.

The taxpayer will receive an automated response when the concept paper or full application is received. This will serve as a confirmation of receipt. Please do not reply to the automated response. The Users’ Guide for Applying to the Department of Energy EERE Funding Opportunity Announcements is found at https://eere-exchange.energy.gov/Manuals.aspx .

C. Content and Form of Concept Papers

See Section III for a description of the eligibility requirements for the 48C tax credit under this notice. See Section IV (F) for a description of the merit review criteria that will be used to evaluate the concept papers.

The purpose of the concept paper phase is to save taxpayers the considerable time and expense of preparing full applications for proposed projects that are unlikely to be selected for recommendation.

The concept paper must conform to the following requirements:

2013–10 I.R.B. 553 March 4, 2013

Roman typeface, a black font, and a font size of 11 points or larger (except in figures and tables). A symbol font may be used to insert Greek letters or special characters; the font size requirement still applies.

be included in the footer of every page.

Each concept paper should be limited to a single project .

Concept papers must be limited to 10 pages of narrative and five (5) pages of appendices. Pages in excess of the page limitation will not be considered for review. Merit review criteria are listed in Section IV (F).

Table 1. Content Requirements for Concept Papers

1 Upon login to EERE eXCHANGE ( https://eere-eXCHANGE.energy.gov/login.aspx ), the taxpayer may access its submissions to this notice by clicking the “My Submissions” link in the navigation bar on the left side of the page. Every application that it has submitted to EERE and the corresponding control number is displayed on this page. If the Taxpayer submits more than one application to this notice, a unique control number is assigned to each application.

March 4, 2013 554 2013–10 I.R.B.

D. Content and Form of Full Applications

Based on the results of the concept paper review, a select number of taxpayers will be invited to submit full applications. FULL APPLICATIONS WILL BE ACCEPTED ONLY FROM TAXPAYERS THAT HAVE RECEIVED AN INVITATION TO SUBMIT THE FULL APPLICATION. NO OTHER FULL APPLICATIONS WILL BE REVIEWED.

The Advanced Energy Project must be deemed eligible and a concept paper must have been submitted in order for a full application to be considered.

Full applications must conform to the following requirements:

Times New Roman typeface, a black font, and a font size of 11 points or larger (except in figures and tables). A symbol font may be used to insert Greek letters or special characters; the font size requirement still applies.

right corner of the header of every page. Page numbers must be included in the footer of every page.

assumptions.

Each full application should be limited to a single project .

2 Upon login to EERE eXCHANGE ( https://eere-eXCHANGE.energy.gov/login.aspx ), the Taxpayer may access its submissions to this notice by clicking the “My Submissions” link in the navigation on the left side of the page. Every application that it has submitted to EERE and the corresponding control number is displayed on this page. If the Taxpayer submits more than one application to this notice, a unique control number is assigned to each application.

2013–10 I.R.B. 555 March 4, 2013

The full application, excluding Appendices and Taxpayer Data Spreadsheet, shall not exceed thirty (30) pages. Pages in excess of the page limitation will not be considered for review. No material may be incorporated in any application by reference as a means to circumvent the page limitation.

This section outlines the format of the full application to be submitted by the taxpayer to the DOE for project recommendation. Guidelines and suggestions for specific content are included below. Full applications should be arranged in the following order. Strict adherence is required.

Table 2. Content Requirements for Full Application

March 4, 2013 556 2013–10 I.R.B.

2013–10 I.R.B. 557 March 4, 2013

3 A new or significantly improved technology means a technology that is concerned with the production, consumption or transportation of energy that is not a commercial technology currently in use in the U.S., and either (i) has only recently been developed, discovered or learned, or (ii) involves or constitutes one or more meaningful and important improvements in productivity or value in comparison to commercial technologies currently in use in the U.S.

4 A commercial technology currently in use in the U.S. means a technology currently in general use in the commercial marketplace in the U.S. A technology is in general use if it has been installed in and is being used in three or more commercial projects in the U.S. in the same general application as in the proposed project, and has been in operation in each such commercial project for a period of at least five years. The five-year period shall be measured, for each project, starting on the in-service date of the project or facility employing that particular technology and ending on the date that full applications are due.

5 Full-time equivalent (FTE) is a way to measure a worker’s involvement in a project. An FTE of 1.0 means that the person is equivalent to a full-time worker, while an FTE of 0.5 signals that the worker is only half-time. FTE is defined by the Government Accountability Office (GAO) as the number of total hours worked divided by the maximum number of compensable hours in a work year as defined by law. For example, if the work year is defined as 2,080 hours, then one worker occupying a paid full time job all year would consume one FTE. Two employees working for 1,040 hours each would consume one FTE between the two of them.

March 4, 2013 558 2013–10 I.R.B.

Please see Section VI for information on supporting documents.

E. Submission and Registration Requirements for Application to DOE

Please read carefully the notice and the statute to determine if your project is eligible for the § 48C credit. The tax credits are for certain types of property in manufacturing facilities; they are not for renewable deployment projects or energy efficiency installation projects.

DOE plans to review applications and recommend for tax credits through the following specific steps:

6 If the taxpayer believes that the total emissions reduction from the SAEP attributable to the project is not accurately represented by the values provided in the Taxpayer Data Spreadsheet, the taxpayer may also provide a transparent justification for a different calculation and should employ cited numbers wherever assumptions are made.

2013–10 I.R.B. 559 March 4, 2013

An application to DOE will not be considered in the 2013 allocation round unless the concept paper is received by April 9, 2013 and, if requested, the full application is received by July 23, 2013. Only applications submitted via the EERE eXCHANGE system ( https://eere-exchange.energy.gov ) will be accepted.

1. Where to Submit

Application material must be submitted under this announcement through EERE eXCHANGE at https://eere-exchange.energy.gov/ to be considered. You cannot submit an application through EERE eXCHANGE unless you are registered. Please read the registration requirements below carefully and start the process immediately. Applications submitted by any other means will not be accepted.

If you have problems completing the registration process or submitting your application, send an email to the EERE eXCHANGE helpdesk at eere-exchangesupport@hq.doe.gov .

It is the responsibility of the taxpayer to verify successful transmission prior to the Application due date and time.

2. Registration Process Requirements

Prior to submitting an application, the taxpayer must register and create an account on EERE eXCHANGE at: https://eere-exchange.energy.gov/ . This account will then allow the user to register for any open EERE Funding Opportunity Announcements (FOAs) that are currently in eXCHANGE. It is recommended that each business unit use only one account as the appropriate contact point for each submission.

The taxpayer will receive an automated response when the concept paper and full application have been submitted. This will serve as a confirmation of receipt. Please do not reply to the automated response. The taxpayer will have the opportunity to re-submit revised application materials for any reason until the specified deadline.

The taxpayer is responsible for the integrity and structure of the electronic files. DOE will not be responsible for reformatting, restructuring or converting any files submitted in response to this request.

3. Electronic Authorization of Applications

Submission of material under this announcement through electronic systems used by DOE, including EERE eXCHANGE, constitutes the authorized representative’s approval and electronic signature.

4. Markings of Confidential Information

If elements of an application contain information the taxpayer considers to be trade secret, confidential, privileged or otherwise exempt from disclosure under the Freedom of Information Act (FOIA, 5 U.S.C. 552), the taxpayer shall assert a claim of exemption at the time of application by placing the following text on the first page of the application, and specify the page or pages of the application to be restricted:

“The data contained in pages [__] of this document which hereby forms a part of the application have been submitted in confidence and contain trade secrets or proprietary information, and such data shall be used or disclosed only for review purposes. If this taxpayer is issued a tax credit under Section 1302 of the American Recovery and Reinvestment Act of 2009 as a result of or in connection with the submission of this application, DOE, except as prohibited or limited by law, shall have the right to use or disclose the data herein, other than such data that have been properly reasserted as containing trade secrets or proprietary information in the agreement described under section 4.02(9) of Notice 2013–12. This restriction does not otherwise limit the government’s right to use or disclose data that was obtained from any source, including the taxpayer.”

To further protect trade secret, confidential, privileged or otherwise exempt information, each line or paragraph on the page or pages containing such data must be specifically identified and marked with text that is similar to the following:

“The following contains proprietary information that [name of Taxpayer] requests not be released to persons outside the Government, except for purposes of review.”

F. Application Review Information

1. Compliance Review for Concept Papers and Full Applications

As explained in more detail in Sections II and III, as part of the review of the concept papers and full applications DOE will carry out an initial compliance review to determine that (1) the application meets the eligibility requirements, (2) the required information has been submitted, (3) as applicable to full applications, a timely concept paper was submitted, and (4) all mandatory requirements of this notice are satisfied. If an application clearly fails to meet the eligibility requirements or does not provide sufficient information for evaluation, the application will be considered non-responsive and eliminated from further review.

March 4, 2013 560 2013–10 I.R.B.

2. Merit Review Criteria

a. Merit Review Criteria for Concept Papers

Subsequent to determining that the taxpayer’s project is eligible, DOE will screen projects for Technical Applicability and Corporate Viability on a pass/fail basis; projects that pass the screen will then be assigned numeric scores based on Commercial Viability. Criteria for the Technical Applicability Review and Commercial Viability are shown below.

Technical Applicability and Corporate Viability Review criteria (pass/fail):

Only Advanced Energy Projects that pass the above screen will be scored for Commercial Viability. Commercial Viability merit review criteria are as follows:

1. Market and Product Viability (35 points)

others as appropriate to the product.)

2. Project Financial Viability (35 points)

ship agreements, existing financing arrangements, permits, and other indicators of progress

4. Exceptional Project Strengths (5 points)

The exceptional strength of the proposed project in any of the areas above (for example, the project is the first of its kind or has a very short payback period)

Concept papers will be rank ordered based on their numeric scores, and the following may be considered in determining the final group of concept papers invited to submit full applications:

2013–10 I.R.B. 561 March 4, 2013

to become, a key player in its local economic, business, and academic (if applicable) network

b. Merit Review Criteria for Full Applications

In an effort to make the application process suitable to a diverse set of projects and streamline the DOE review, taxpayers must input the data necessary to address the merit review criteria into the Taxpayer Data Spreadsheet, shown in Section VIII. ⁷

Each proposed project will be reviewed based on the SAEP produced at the manufacturing facility. In the case of a project producing property that, after further manufacture, will become SAEP, the DOE will review the project based on the SAEP for which the property produced at the facility will be used. For example, the review under the emissions criterion for a project that manufactures wind turbine blades will be in the context of the emissions profile of wind turbines, rather than the more narrow characteristics of blade production alone. In this example, the wind turbine blade will be assigned a portion of the overall emissions profile of a wind turbine based on the percentage of the wind turbine’s cost that is attributable to the wind turbine blade, as discussed in Section VII below.

The taxpayer must calculate the incremental energy produced, saved or stored due to the project. The taxpayer will be required to provide and show the work used to produce derived numeric values specific to its product. In addition, it is critical that the taxpayer show and support all necessary calculation steps in the project’s narrative.

The DOE review and recommendation process generally requires the use of the U.S. national averages ( e.g., national grid mix, national fleet fuel efficiency) as a baseline for certain comparisons. ⁸

Full applications will be evaluated based on the following criteria:

1) Has strong potential to expand American manufacturing (Weight: 25%):

become, a key player in its local economic, business, and academic (if applicable) network

2 ) Demonstrates significant potential for commercial viability (Weight 20%):

7 If a Taxpayer can justify that it has a value that better represents its project than the values referenced in the Taxpayer Data Spreadsheet, the taxpayer may 1) select a value reported in the open literature, justify the use of this value as opposed to one supplied by DOE, and perform any necessary unit conversions, or 2) develop an independent estimate analogous to ones supplied in the Section H of the spreadsheet. Any customized calculations should be done according to commonly accepted industry standards and be sufficiently transparent to be reproducible by the merit review panel.

8 A taxpayer may provide a different baseline for comparison if the taxpayer can justify that the SAEP attributable to the project will be put in service in a more narrowly-defined geographic region. Any customized calculations should be done according to commonly accepted industry standards and be sufficiently transparent to be reproducible by the merit review panel.

March 4, 2013 562 2013–10 I.R.B.

3) Has the potential for technological innovation and commercial deployment, as indicated by (Weight 20%):

4) Provides domestic job creation (Weight 15%):

5) Has shortest project time from certification to completion (Weight 10%)

process, written commitments from actual project partners

6) Contributes to avoiding or reducing airborne pollutants and/or greenhouse gases (Weight 10%):

(based upon AAMC assumptions in Taxpayer Data Spreadsheet)

The comments and the scores assigned during the merit review process will not be made available for review by the taxpayer.

3. Program Policy Factors

In addition to the above criteria, DOE may consider the following program policy factors in determining which taxpayers will be invited to submit full applications to select for recommendation to the Service.

Unlike the Merit Review Criteria, these factors are not weighted.

V. INSTRUCTIONS REGARDING QUANTITATIVE FACTORS INFORMATION SUBMISSION

Taxpayers should fill out the Taxpayer Data Spreadsheet with the relevant data and include it with the application. This is intended to capture information in a consistent manner to allow a quantitative comparison to be made across all eligible projects. It is essential that taxpayers conform to this process in order to ensure a competitive review of all proposals. Additionally, taxpayers should substantiate in their narrative any data which is inputted into the Taxpayer Data Spreadsheet. Specifically, taxpayers should cite or justify their stated assumptions and show any calculations which are not performed by the Taxpayer Data Spreadsheet. The information below provides instructions for inputting data, examples specific to each type of SAEP, and guidance on how to use the reference data listed in Section VII.

Attributable Annual Manufacturing Capacity (AAMC)

2013–10 I.R.B. 563 March 4, 2013

In order to assess the significance of a taxpayer’s proposed project, the following formulas (or their equivalent) must be used to quantify the AAMC. AAMC measures the total impact over the lifetime of deployed property which is attributable to one year of manufacturing. The AAMC will be divided by the qualified investment to determine the relative value, per dollar of tax credit, of different project proposals. Finally, the AAMC will be used to assess production significance and emissions abatement on a per-dollar-of-tax-credit basis.

General AAMC Instructions: The AAMC is calculated with four terms, annual production, fractional system contribution, annual performance of the SAEP, and expected lifetime of the deployed property. For annual production, taxpayers are required to justify the claimed production by providing yield loss (both manufacturing and downstream) and throughput data wherever possible. In particular, taxpayers should discuss previous manufacturing experience on similar or identical manufacturing equipment. If the taxpayer’s annual production is not measured in terms of kWh, gallons of gasoline, or Mtons CO e.g., solar water heating, 2 ( biodiesel, or methane gas recapture, respectively) then a conversion factor between the units of measurement and kWh, gallons of gasoline, or Mtons CO When calculating the fractional system contribution, taxpayers should 2 should be cited and applied. transparently state and justify (with citations wherever possible) current and future pricing assumptions for all significant value chain segments, including the property produced at the proposed facility. To calculate real-world annual performance, taxpayers should identify and employ the necessary de-rating factors, including degradation rates, such that the claimed annual performance is reflective of the average annual performance over the lifetime of the SAEP. Where appropriate, typical resource and use conditions should be chosen from the reference data provided in Section VII. If the necessary reference data is not available or representative of the taxpayer’s specific manufactured property, the taxpayer should provide and substantiate assumptions with market reports and/or field data where possible. A similar approach should be taken for the deployed property lifetime. Specifically, if reference data from Section VII is not used, the taxpayer should cite life-cycle performance data of previously deployed, comparable property. Provided below are equations and examples corresponding to each type of SAEP which can be used as high level guidance when calculating AAMC.

Electricity Generation : For SAEP used to produce energy from the sun, wind, geothermal, or other renewable resources, the following formulas shall be used to estimate the electricity generation attributable to property produced at the proposed facility. Specifically, the AAMC is the kWhs generated which can be attributed to one year’s worth of production from the proposed project:

Where:

And:

March 4, 2013 564 2013–10 I.R.B.

Example :

A photovoltaic company is building a “50 MW” crystalline silicon solar cell manufacturing line. 50 MW is input as the first term “W peak production per year”

which is the annual peak power output of property produced from the manufacturing line. This 50 MW number is multiplied by a series of terms to produce an

AAMC that represents the true lifetime electricity generation from this property after it is deployed.

The second term, “Fractional System Contribution” is used to discount the 50 MW by the solar cell’s fraction of a solar system’s total value. In this example,

the company purchases silicon wafers and other consumable materials and processes them into a functional cell. The Fractional System Contribution represents

the added value that the manufacturing process adds to the final system price. If the market value of a wafer and consumables is $0.25/W, the cells are sold p

for $0.40/W, and the total factory gate price of the entire PV system hardware (including the inverter and balance of system components) is $1.50/W, then the p p

Fractional System Contribution is (.40–0.25)/1.5=10%. Note: in this example, 100% of the product manufactured by the solar cell line is allocated for SAEP. If

instead, some fraction of the rated 50 MW capacity was allocated for an application other than SAEP, then the “Percentage SAEP” would be reduced from 100% to

account for this diverted product stream.

The third term, “Capacity Factor” is used to calculate the ratio of annual energy produced to the total energy implied by the peak power rating of the manufactured

property. In this example, the power output of the cells are reduced slightly when they are incorporated into a module and reduced further when the DC power

from the module is converted to useable AC power via an inverter. Additionally, the modules are projected to degrade over their deployed lifetime. The actual

average annual energy output of the system over its lifetime is determined by these reductions and the annual solar insulation or resource which is typical of current

installations.

The fourth term, “Deployed Property Lifetime,” is the anticipated hours of operation of the manufactured property over its lifetime (after being incorporated

into an end of supply chain component or system). In this example, the end of supply chain component is a photovoltaic module which may have a lifetime of 25

years. Thus the Deployed Property Lifetime would be 219,000 hours (25 years multiplied by 8,760 hours per year). Note: if the end of supply chain component

property was instead, a PV inverter, then the Deployed Property Lifetime would be the expected lifetime, as evidenced by warranty or field data, of the inverter,

not the PV system. If the potential lifetime of the end of supply chain component is longer than the expected lifetime of the generation system, then the Deployed

Property Lifetime should be equal to the expected system lifetime.

Energy Conservation : For SAEP designed to conserve energy, such as advanced building, smart grid, or industrial technologies, the following formulas shall be used to estimate the energy saved which is attributable to the incorporation of the property produced at the proposed facility. Specifically, the AAMC is the kWhs saved which can be attributed to one year’s worth of production from the proposed project:

Where:

And:

2013–10 I.R.B. 565 March 4, 2013

Example :

A heating, ventilating, and air conditioning (HVAC) equipment supplier is re-equipping a factory for the manufacture of advanced condensers. The re-equipping

will enable 10,000 advanced condensers to be manufactured annually. This number will be inputted as the first term “# Units per year.” For the equations used above,

the condenser could represent a sub-component of an advanced HVAC “component” (the complete collection of sub-components required to enable the conservation

of energy, e.g., an advanced air handler, controller, packaging unit, etc.). Alternatively, if the condenser alone provides the full energy conservation benefit and

can be integrated with traditional HVAC systems in a straightforward manner, then the condenser would be the “component.” In either case, the energy consuming

“system” is the entire energy load which is directly impacted by, and fully encompassing of the energy conservation benefit. For this example, the system is simply

a building.

The second term, “Fractional Component Contribution” is used to calculate the value fraction of an end of supply chain component that the manufactured con

denser comprises. In this example, the company purchases supplies (fans, tubing, etc.) and materials (sheet metal, solder, etc.) to assemble a functional condenser.

The “Fractional Component Contribution” represents the added value that the manufacturing process adds to the final component price. If the market value of

the supplies and materials is $100 per unit, the controller assembly is sold to downstream manufacturers for $200, and the total “factory gate” price to a HVAC

installer of the entire HVAC component is $2,000, then the “Fractional Component Contribution” is (200–100)/2000 = 5%. Note: if for example, 20% of the units

manufactured were used in a different system where there was no energy conservation benefit, then the “Percentage SAEP” term would be 80% and the “Fractional

Component Contribution” would be further reduced accordingly.

The third term, “Annual Energy Savings per Unit” is used to calculate the annual energy savings which is enabled by incorporating only the component into a

system and assuming typical climate and operation. In this example, the electricity consumption of the building may be decreased by 5,000kWh per year.

The fourth term, “Deployed Property Lifetime,” is the anticipated years of operation of the manufactured property over its lifetime. In this example, the an

ticipated years of operation should equal the warranty on the entire HVAC unit. Note: if the sub-component lifetime is shorter than the expected lifetime of the

component, then the sub-component lifetime should be used for the “Deployed Property Lifetime.” The lifetime of the sub-component cannot be longer than the

lifetime of the component or system in which it is installed.

Fuel Efficiency : For SAEP which increases fuel efficiency, such as a hybrid-electric or plug-in electric drive motor vehicle, the following formulas shall be used to estimate the annual energy saved which is attributable to the incorporation of the property produced at the proposed facility. Specifically, the AAMC is annual fuel savings which can be attributed to one year’s worth of production from the proposed project:

Where:

And:

March 4, 2013 566 2013–10 I.R.B.

Example 1 :

An automobile supplier is expanding a factory for the manufacture of hybrid-electric controller assemblies. The expansion will enable 10,000 additional con

trollers to be manufactured annually. This number will be inputted as the first term “# Units per year.” For the equations used above, the controller could represent

a sub-component of a hybrid drive train “component” (the complete collection of sub-components required to enable the efficiency improvement, e.g., a controller,

battery, and electric motors). Alternatively, if the controller alone provides the full fuel efficiency improvement and can be integrated with a traditional powertrain,

then the controller would be the “component.” In either case, the fuel consuming “system” is the entire load which is directly impacted by, and fully encompassing

of the fuel efficiency improvement. For this example, the system is simply the vehicle.

The second term, “Fractional Component Contribution” is used to calculate the value fraction of an end of supply chain component that the manufactured

controller assembly comprises. In this example, the company purchases supplies (PCBs, power controllers, etc.) and materials (adhesives, wiring, etc.) to assemble

a functional controller. The “Fractional Component Contribution” represents the added value that the manufacturing process adds to the final component price.

If the market value of the supplies and materials is $500 per unit, the controller assembly is sold to downstream manufacturers for $1000, and the total “factory

gate” price to an automobile manufacturer of the entire hybrid electric component is $4,000, then the “Fractional Component Contribution” is 12.5%. Note: if,

for example, 10% of the units manufactured were allocated instead for electric golf carts (non-SAEP) then the “Percentage SAEP” term would be 90% and the

“Fractional Component Contribution” would be further reduced accordingly.

The third term, “Annual Fuel Savings per Unit” is used to calculate the annual fuel savings which is enabled by incorporating only the component into a system

under typical use patterns. In this example, the fuel economy of the vehicle may be increased by 10 miles per gallon. The actual annual fuel savings would be

determined by this increase in fuel economy and the annual vehicle miles traveled, for which the taxpayer should provide cited data. For alternative fuels such as

diesel, savings should be converted to gallons of gasoline equivalent (GGE). For electric vehicle (EV) or plug-in hybrid electric vehicle (PHEV) systems, where

electricity is consumed to further reduce the fuel consumption, an additional calculation of MWh consumed per GGE saved is required in the calculation of CO 2 emissions. See further instructions under “Impact on Air Pollution and Anthropogenic Emissions of Greenhouse Gases.”

The fourth term, “Deployed Property Lifetime,” is the anticipated years of operation of the manufactured property over its lifetime. In this example, the antici

pated years of operation should be substantiated by citing fleet lifetime of previously deployed comparable systems. Note: if the sub-component lifetime is shorter

than the expected lifetime of the system, then the sub-component lifetime should be used for the “Deployed Property Lifetime.” For example, if the subcomponent

was a battery for an electric vehicle then the anticipated lifetime might be the warrantied lifetime of the battery rather than the anticipated lifetime of the vehicle.

The lifetime of the sub-component cannot be longer than the lifetime of the component or system in which it is installed.

Example 2 :

A manufacturer of reciprocating engines is building a new factory to manufacture a new, high-efficiency engine for use in Combined Heat and Power (CHP)

systems. CHP applications are included in “fuel efficiency” for purpose of this notice because they consume energy in the production of electricity and thermal

energy. ⁹

The new factory will enable 1,000 high-efficiency engines to be manufactured annually. This number will be inputted as the first term “# Units per year.” For the

equations used above, the reciprocating engines could represent a sub-component of a CHP “component” (the complete collection of sub-components required to

enable the efficiency improvement — e.g., fuel handling, thermal recovery unit, integrated controls, etc.). The energy consuming “system” is the entire energy load

which is directly impacted by, and fully encompassing of the efficiency improvement. For CHP, the system may be an industrial building, hospital or other building.

The second term, “Fractional Component Contribution” is used to calculate the value fraction of an end of supply chain component that the manufactured

engine comprises. In this example the company purchases supplies (fuel pumps, tubing, etc.) and materials (engine blocks, wire, etc.) to assemble a completed

engine. The “Fractional Component Contribution” represents the added value that the manufacturing process adds to the final component price. If the market

value of the supplies and materials is $40,000 per unit, the controller assembly is sold to downstream manufacturers for $100,000, and the total “factory gate” price

to an engineering firm of the complete CHP system $150,000, then the “Fractional Component Contribution” is (100,000–40,000)/150,000 = 40%. Note: if for

example, 25% of the units manufactured were used in a different system where there was no efficiency improvement or the system does not qualify as SAEP, then

the “Percentage SAEP” term would be 75% and the “Fractional Component Contribution” would be further reduced accordingly.

The third term, “Annual Energy Savings per Unit” is used to calculate the annual energy savings which is enabled by incorporating only the component into a

system and assuming typical climate and operation. In this example, the CHP system saves energy by displacing electricity from the grid and onsite thermal energy

generation that would be generated by a boiler or other device. The net annual energy savings is the energy that would be consumed by grid generated electricity

plus the energy that would be consumed by the onsite boiler minus the energy consumed by the CHP system. This net energy should be expressed in terms of gallons

of gasoline equivalent using the conversion factors provided in the Taxpayer Data Spreadsheet.

The fourth term, “Deployed Property Lifetime” is the anticipated years of operation of the manufactured property over its lifetime. In this example, the antici

pated years of operation should equal the warranty on the entire CHP system. Note: if the sub-component lifetime is shorter than the expected lifetime of the system,

then the sub-component lifetime should be used for the “Deployed Property Lifetime.” The lifetime of the sub-component cannot be longer than the lifetime of the

component or system in which it is installed.

9 Although the energy source for a CHP system may be renewable ( e.g., landfill gas), the CHP system displaces thermal energy production ( e.g., a boiler) that would typically use fossil fuel. Because fossil energy consumption is displaced by the CHP system, the “fuel efficiency” analysis is used.

2013–10 I.R.B. 567 March 4, 2013

GHG Emission Reduction : For SAEP with the primary purpose of reducing emissions or sequestering GHG, the following formulas shall be used to estimate the annual emission reduction in CO Specifically, the AAMC is the Mtons of 2 equivalent gases. avoided CO 2 equivalent gas emission which can be attributed to one year’s worth of production from the proposed project.

Where:

And:

Example :

A chemical supplier is building a factory for the manufacture of physical solvents for CO capture. The factory will produce 100,000 gallons of solvent. 2

This volume will be inputted as the first term “# Units per year.” For the equations used above, the physical solvent would represent a sub-component of a CCS

“component” (the collection of sub-components required for the full Carbon Capture and Sequestration (CCS) process). The “system” is the entire carbon emitting

facility which is directly impacted by, and fully encompassing of, the CCS process.

The second term, “Fractional Component Contribution” is used to calculate the value fraction of an end of supply chain component that the manufactured solvent

comprises. In this example the company purchases feedstock materials to process the solvent. The “Fractional Component Contribution” represents the added value

that the manufacturing process adds to the final component price. If the feedstock costs $50 per unit volume, this volume is sold to downstream manufacturers for

$500, and the total “factory gate” price of a functional CCS apparatus is $5,000 (per unit volume), then the “Fractional Component Contribution” is (500–50)/5000

= 9%. Note: if, for example, 30% of the annual manufactured volume was sold for non-CCS applications then the “Percentage SAEP” term would be 70% and the

“Fractional Component Contribution” would be further reduced accordingly.

The third term, “CO only the full CCS component 2eq Reduction per Unit” is used to calculate the annual CO2eq reduction which is enabled from incorporating

into a system under typical use patterns. In this example, the system emissions will be reduced by 1000 Mtons per year per unit.

The fourth term, “Deployed Property Lifetime,” is the anticipated years of operation of the manufactured property over its lifetime. In this example, the antici

pated years of operation should be substantiated by providing information on likely solvent replacement schedules. Note: if the sub-component lifetime is shorter

than the expected lifetime of the component, then the sub-component lifetime should be used for the “Deployed Property Lifetime.” The lifetime of the sub-com

ponent cannot be longer than the lifetime of the component or system in which it is installed.

Renewable Fuel Refining or Blending : For SAEP to be used exclusively in the refining or blending of renewable fuels, the following formulas shall be used to estimate the production of renewable fuel which is directly attributable to the annually manufactured property. Specifically, the AAMC is the renewable fuel generation which can be attributed to one year’s worth of production from the proposed project:

March 4, 2013 568 2013–10 I.R.B.

Where:

Example :

A pump manufacturer is building a factory for the manufacture of pumps specifically designed for renewable fuel refining or blending. The factory will produce

10,000 pumps per year. This volume will be inputted as the first term “# Units per year.”

The second term, “Capacity per Unit” is the estimated annual volume of fuel refined or blended annually, which is enabled by the pump under typical plant

operations. For example, if a single pump is installed per biofuel refinery, the enabled capacity is the annual refined or blended product from the biofuel refinery.

The third term, “Fractional System Contribution” is used to calculate the value fraction of an end of supply chain system that the manufactured pump comprises.

In this example the company purchases sub-components and materials to manufacture each pump. The “Fractional System Contribution” represents the added value

that the manufacturing process adds to the final component price. If the sub-component and materials cost $5000 per pump, this pump is sold to a construction com

pany for $10,000, and the total price of the constructed refinery, the “system,” is $1M, then the “Fractional Component Contribution” is (10,000–5000)/1,000,000

= 0.5%. Note: as per the requirement that no portion of such a project be used for the refining or blending of non-renewable fuels, the “Percentage SAEP” term

must be equal to 100% for such SAEP.

The fourth term, “Deployed Property Lifetime,” is the anticipated years of operation of the manufactured property over its lifetime. In this example, the antic

ipated years of operation should equal the anticipated lifetime based on the planned service schedule or warranty. The lifetime of the component cannot be longer

than the lifetime of the system in which it is installed.

Other Advanced Energy Technologies : For other technologies with the primary benefit of storing or transmitting renewable energy, taxpayers should quantify the annual renewable energy generated and/or saved which is directly attributable to the manufacture of their technology discounted by the likely fraction of their annual production which will be used for this purpose. Although no generic equations are provided for this technology area, taxpayers should review the equations and methodology above and transparently employ analogous calculations where possible and appropriate.

Impact on Air Pollution and Anthropogenic Emissions of Greenhouse Gases:

DOE anticipates a wide variety of manufacturing proposals and thus no standard, all-encompassing approach will be used to calculate pollutants and GHG emissions. Instead, the taxpayer is expected to quantify or discuss the pollutant and/or GHG emissions associated with the operation of the SAEP.

To quantify the primary effects on CO emissions (“AAMC CO Reduction” as listed in the Taxpayer Data Spreadsheet), the 2 2 following four technology-specific approaches are used.

For Electricity Generation and Energy Conservation SAEP, the following equation is used to calculate the reduction in emissions of CO from the AAMC: 2

This calculation ignores CO 2 emissions associated with the manufacture, installation, and end-of-life processes and assumes that the dominant impact with respect to CO 2 emissions is the offset consumption of average U.S. grid electricity reduction.

For most Fuel Efficiency SAEP, a similar equation is used:

2013–10 I.R.B. 569 March 4, 2013

For Fuel Efficiency SAEP, such as EVs and PHEVs, which require the consumption of electricity to enable the full fuel efficiency, the following equation is used:

The “MWh/GGE” term is calculated by the taxpayer.

For Renewable Fuel Refining or Blending SAEP, the calculation is modified to account for CO 2 emissions associated with the manufacture of renewable fuel:

The life cycle analysis (LCA) is determined by the taxpayer by selecting the most relevant fuel and corresponding process from the “LCA Fuel CO Taxpayers must select the LCA number which most closely corresponds to their SAEP. If 2 Assumptions” tab. the taxpayer believes that the actual LCA emissions associated with the operation of the SAEP differs significantly from data provided, then the taxpayer may substantiate an alternative LCA number in their narrative.

For GHG Emission Reduction SAEP, the AAMC is equivalent to the CO 2 emission reduction and thus no additional calculations are necessary.

The AAMC CO 2 Reduction represents the total CO2 impact over the lifetime of deployed property which is attributable to one year of manufacturing. This number is further adjusted in three ways to assess the magnitude of the CO 2 reduction of a given project. First, the normalized value of this reduction is assessed by dividing by the requested tax credit. Second, the normalized AAMC CO 2 Reduction is then divided by the deployed property lifetime to capture the CO2 impact after the first year of SAEP deployment. Third, the normalized AAMC CO This 2 Reduction is multiplied by the projected factory lifetime. number calculates the total carbon impact over the lifetime of all deployed property over the lifetime of the factory. Because this number will scale with the factory lifetime, the taxpayer should justify the claimed operational period of the factory in the project narrative. All of these three AAMC CO 2 Reduction figures will be used in the scoring of Evaluation Criteria 2 as shown in the Taxpayer Data Spreadsheet workbook.

Technological Innovation and Cost Reduction:

Taxpayers must provide quantitative information regarding their project’s innovation and value. This information is captured with the related metrics of technological or cost advantage over competitors, levelized cost, and the cost of CO The 2 abatement. preferred approach is for the taxpayer to discuss and quantify each of these three metrics. However, DOE recognizes the difficulty associated with calculating levelized costs (and thus $/CO ) for many types of eligible property. If the taxpayer is 2 unable to perform a levelized cost or CO 2 abatement cost calculation for the SAEP then the taxpayer should provide a quantitative or qualitative assessment of how their technological or cost advantage over competitors translates into system price savings, improved performance, or improved system life.

Technological or Cost Advantage over Competitors : The Taxpayer Data Spreadsheet requires taxpayers to identify their “Technological or Cost Advantage over Competitors” with respect to the most relevant figure of merit. Ideally this is an apples-to-apples comparison between similar property of similar function. For example, a wind blade manufacturer might compare the performance and cost of the proposed blade manufacturing to current commercially manufactured blades. Although high level metrics such as levelized costs can capture this cost advantage, taxpayers are encouraged to select a lower level metric ( i.e. $/W, $/Unit, efficiency, etc.) and later discuss the impact this granular cost advantage has upon the levelized cost. If the taxpayer’s manufactured property has multiple advantages over currently manufactured property, the taxpayer should select and quantify the most significant advantage in the Taxpayer Data Spreadsheet while discussing all technological and cost advantages in their narrative.

Levelized Cost: The levelized cost of energy (LCOE) calculation should assume that the manufactured property is part of the SAEP and where appropriate, be based on the financial and resource assumptions provided in Section VII. This “improved” LCOE value should be expressed in nominal terms and should not include any federal, state or other financial incentives. Further, plant and related cost values and prices of commodity fuels or feedstocks used in the calculation should reflect current national wholesale averages where possible. The following information should be provided as documentation:

March 4, 2013 570 2013–10 I.R.B.

and maintenance costs, and prices of commodity fuels or feedstocks.

potential directional effect on the resulting cost ( i.e., increase or decrease).

the competitive standard of the day), based on the same financial and resource assumptions used in the “improved” calculation.

Cost of Abatement: The form and units of the levelized cost vary across each energy type in the Taxpayer Data Spreadsheet. Thus, the cost of abatement equations are specific to each energy type to ensure consistent, accurate and comparable abatement costs are produced by the Taxpayer Data Spreadsheet. For all energy types the cost of abatement reflects the incremental cost and associated incremental reduction in carbon emissions from a baseline.

For Electricity Generation and Efficiency technologies the cost of abatement is calculated with the following equation:

The baseline ¢/kWh is defined by the retail electric rate of the electricity being generated or saved ( i.e. residential, commercial, or utility). The factor of 10 in the numerator provides dimensional consistency. For simplicity, all improved technologies are assumed to be non-carbon emitting.

For Fuel Efficiency technologies the cost of abatement is calculated with the following equation:

Incremental levelized cost / incremental emissions reduction:

In this calculation, an incremental LCOE term is used to simplify the taxpayer’s data entry into the Taxpayer Data Spreadsheet. This term represents the difference in LCOE ($/GGE) costs between the baseline system and the improved system. The specific calculation of this difference or increment will vary depending upon the fuel efficiency technology being considered. The denominator represents the emissions reduction associated putting the improved system in place, principally in terms of its displacement of the baseline technology.

For example, for a vehicle fuel efficiency technology, the incremental LCOE ($/GGE) may be calculated as:

In this case the $/Mile term represents the fully-burdened cost associated with each mile driven and includes factors such as depreciation. To calculate the incremental $/GGE, the taxpayer calculates the difference between baseline and improved $/GGE. The denominator of the cost of abatement term is based on the “well to wheels” emissions associated with burning a GGE of the consumed fuel. Taxpayers should show their work and reference Section VII when calculating these values.

For other fuel efficiency technologies, such as a CHP application, the incremental LCOE ($/GGE) may be calculated as:

2013–10 I.R.B. 571 March 4, 2013

In this case, the $/BTU term represents the fully-burdened cost associated with each BTU of heat that the CHP system generates as a by-product of the power generation. The cost of abatement denominator reflects the emissions avoided as a result of the reduced consumption of the fuel that would have to be burned to generate the heat now supplied by the CHP system.

For GHG Reduction technologies the cost of abatement is equivalent to the levelized cost ( i.e ., for these technologies, the levelized cost is already expressed as the cost abatement) and thus no additional calculations are necessary.

For Renewable Fuel Refining or Blending technologies the cost of abatement calculation is analogous to the Electricity equations provided above:

In this case the traditional fuel is the fossil fuel not consumed. The term “Mtons/GGE ” in the denominator is similar to the traditional denominator term in the fuel efficiency example provided previously. The second term in the denominator “Mtons/GGE ” refined accounts for the life-cycle (“seed to wheels”) carbon emissions associated with consumption of the renewable fuel. This value is referenced from the “LCA Fuel CO 2 Assumptions” tab based upon the taxpayer’s renewable fuel type selection.

If a taxpayer cannot reasonably calculate a LCOE for the SAEP associated with the proposed manufactured property, the taxpayer can instead provide an estimated cost of GHG emissions abatement. The taxpayer should provide and justify the use of a cost value from a published study for a comparable energy system.

If the taxpayer chooses to calculate a cost of abatement without a corresponding LCOE value for the SAEP, the basis of the calculation is similar to that required in the LCOE calculation. For example, a taxpayer could calculate an incremental LCOE by calculating the net present value of the incremental cost to the baseline system and dividing by the net present value of the incremental performance improvement. This calculation should also be based on the financial and resource assumptions provided and should be expressed in nominal terms and should not include federal, state or other financial incentives. Further, plant and related cost values and prices of commodity fuels or feedstocks used in the calculation should reflect current national wholesale averages where possible. The following information should be provided as documentation:

be a commonly accepted industry standard.

or first costs, operating and maintenance costs, prices of commodity fuels or feedstocks, and carbon emissions associated with the operation of the end use energy product.

the cost of generation and carbon emissions.

in the calculation, and their potential directional effect on the resulting cost ( i.e., increase or decrease).

ufactured property ( e.g., relies on the competitive standard of the day), based on the same financial and resource assumptions used in the “improved” calculation.

Finally, if the taxpayer chooses to provide a cost of abatement value for the closest comparable end use energy product from a published study, the following information should be provided as documentation:

March 4, 2013 572 2013–10 I.R.B.

reported (if the cost is reported in real terms; e.g., $2011), the year of costs and prices of fuel commodities, the year to which the end cost value is referenced ( e.g., could be a future year), the extent of technology improvement assumed for the comparable end use energy product, the regional extent of the baseline assumed ( e.g., global, U.S., region of U.S.), the carbon emissions associated with the baseline energy mix and the end use energy product, the key financial assumptions ( e.g., interest rates, taxes, incentives included), and the resource-related parameters ( e.g., capacity factors).

lation of the cost of abatement, and the potential directional effect of these differences on the study’s cost value ( i.e., if the aforementioned assumptions required for cost of abatement calculation had been used, would the study’s cost value likely have increased or decreased).

VI. SUPPORTING DOCUMENTS

The taxpayer should include such appendices as are applicable to the project. In addition to items specifically requested in Table 2 of IV (D) above, examples of appropriate appendices include:

would include a deed, or an executed contract to purchase or lease the site.

manufacturing facility and for its intended use.

VII. TECHNICAL REFERENCES FOR ADVANCED ENERGY TECHNOLOGIES SUPPLIED FIGURES

This section assists the taxpayer in calculating the quantitative factors required in the project proposal. Wherever appropriate, the taxpayer should use this information for baseline assumptions for estimating factors such as the annual performance of the SAEP, expected lifetime of the deployed property and LCOE property. Additionally, in the event that the taxpayer is unable to calculate the levelized cost or the cost of abatement, this information may be used as inputs to the Taxpayer Data Spreadsheet.

2013–10 I.R.B. 573 March 4, 2013

Table 1: Financial Assumptions for Levelized Cost of Energy Analysis

Common Financial Inputs for LCOE Analysis by Market Sector

March 4, 2013 574 2013–10 I.R.B.

Suggested LCOE Tools: All Electricity Generating Technologies (general tool): RET Finance: http://analysis.nrel.gov/retfinance/ The NREL Strategic Energy Analysis Center launched RET Finance in October 2001. It is an Internet-based cost of electricity model that simulates a 30-year nominal dollar cash flow for a variety of renewable energy power projects. As an online application, RET Finance is accessible from anywhere using an Internet connection and a browser. RET Finance calculates project earnings, detailed cash flows, and debt payments and also computes a project’s levelized cost-of-electricity, after-tax internal rate of return, and debt service coverage ratio.

Solar Technologies SAM 2012.5.11: https://sam.nrel.gov The National Renewable Energy Laboratory (NREL), in conjunction with Sandia National Laboratory and in partnership with DOE’s Solar Program developed the Solar Advisor Model (SAM). The Solar Advisor Model evaluates several types of financing (from residential to utility-scale) and a variety of technology-specific cost models for several (and eventually all) SETP technologies. The SETP technologies currently represented in SAM include concentrating solar power (CSP) parabolic trough and dish-stirling systems and photovoltaic (PV) flat plate and concentrating technologies. Other technologies will be added in future versions, including CSP central receivers and residential solar water heating.

Geothermal Technologies Geothermal Electricity Technology Evaluation Model (GETEM): http://www1.eere.energy.gov/geothermal/getem.html . The Geothermal Electricity Technology Evaluation Model (GETEM) was developed to aid the Geothermal Technologies Program (GTP) in understanding the performance and the cost of the technologies it is seeking to improve. It is a detailed model of the estimated performance and costs of currently available U.S. geothermal power systems. GETEM can be used to analyze and evaluate currently available technologies and it can also be used to estimate what certain technologies might cost five to twenty years in the future, given the direction of potential Research, Development and Demonstration (RD&D) projects. The model is intended to help GTP determine which proposed RD&D programs and projects might offer the most improvements for the taxpayer dollar.

Small Wind Technologies www.nrel.gov/wind/docs/spread_sheet_Final.xls

Table 2: Vehicle Assumptions

Metric Value Units

2013–10 I.R.B. 575 March 4, 2013

Table 3: Common Service Life Years

Technology Service Life Years

Assumption Tables to the EIA AEO, August 2012 and DOE Solar Energy Technology Program. http://www.eia.gov/forecasts/aeo/assumptions/index.cfm

Table 4: Other Common Technical Assumptions and Baseline for Levelized Cost of Energy Analysis

Electricity Generation and Storage

1 Generation — NREL Analysis estimates based on averages from multiple published sources; Storage — Input costs from EPRI 2009 Overview of Electric Energy Storage Options for the Electric Enterprise

2 A constant nominal price of $2.02/million Btu should be assumed to determine the fuel price contribution to the LCOE.

N/A - not applicable

If a natural gas price is needed to compute the LCOE of a technology, a constant nominal price of $4.66/ thousand cubic feet should be used (based on EIA AEO 2009).

March 4, 2013 576 2013–10 I.R.B.

VIII. SAMPLE TAXPAYER DATA SPREADSHEET

This section provides taxpayers a depiction of the Taxpayer Data Spreadsheet, captured in the images on the following pages.

2013–10 I.R.B. 577 March 4, 2013

IX. QUESTIONS/ AGENCY CONTACTS

All questions and answers related to this notice will be posted on EERE eXCHANGE at: https://eere-eXCHANGE.energy.gov/ . Please note that you must first select 48C from the list of options in order to view the questions and answers specific to this Notice . Service/DOE will attempt to respond to a question within 3 business days, unless a similar question and answer has already been posted on the website.

Please send questions in writing via fax to the Service point of contact Marc Bernabo at (713) 209–3964. He may also be reached by telephone at (713) 209–3669.

Questions related to the registration process and use of the EERE eXCHANGE website should be submitted to: eere-exchangesupport@hq.doe.gov

March 4, 2013 578 2013–10 I.R.B.