The clean energy tax credit market is booming
A new U.S. market for clean energy tax credits generated $9 billion in trading activity last year, per a report this week from clean energy financing site Crux.
Why it's the BFD: The robust market is providing new sources of capital for wind, solar and other projects that might have previously struggled to find financing.
Catch up fast: Tax credits have long been vital to the clean energy sector. But they could only be used by companies generating enough profit to absorb all the credits — making them relevant to only a handful of companies.
- The Inflation Reduction Act in 2022 enabled renewable energy companies to sell or "transfer" the credits, opening the sector to a far greater number of backers.
- A wider array of technologies were also made eligible.
The latest: Just one year after the IRA, tax credit trading volume reached $7 billion to $9 billion, per the Crux report.
The intrigue: About 80% of the transactions had a face value of $50 million or less, suggesting that transferring the credits "is leveling the playing field for smaller projects," Crux said in its report.
Of note: Recent deals in the space include solar manufacturer First Solar's agreement in December to sell $700 million in manufacturing credits to fintech Fiserv.
- Renewables developer Arevon told WSJ it's pursuing about $2 billion in projects that will qualify for about $500 million in tax credits.