The newly established tax credit transfer program allows companies to invest in renewable-energy developers while providing tax savings in return. This United States Department of the Treasury’s program is designed to encourage more companies to invest in clean energy projects.
With clean-energy tax breaks surging — a Crux study found deals now total as much as $9 billion — the transfer program hopes to quickly help fund renewable energy companies. The U.S. Congress created it for renewable-energy companies as part of the Inflation Reduction Act (IRA).
Photo Courtesy First Solar
“We’re creating a market where you can have more players around the table all participating in the clean-energy transition,” Karen Fang, Bank of America’s global head of sustainable finance, told The Wall Street Journal.
To date, more than 100 companies pursuing more than 1,000 clean-energy projects have indicated they plan to sell tax credits, according to a Treasury Department press release.
This effort is ideal for renewable energy companies, many of which don’t make enough profit to utilize and absorb the tax credits they generate.
The law allows these companies to sell the credits to other companies to monetize what they can’t use. The Wall Street Journal reported that buyers typically pay $90 to $96 for credits that let them reduce their tax bills by $100. In essence, transferring tax credits to larger corporate buyers is a simple and fast way for clean energy companies to fund new projects.
“Increased access to clean energy credits is acting as a force multiplier so that more clean energy projects are built quickly and affordably, and more communities benefit from the growth of the clean energy economy,” said Wally Adeyemo, deputy secretary of the treasury, said in a press release. “Making it easy to access these credits also underscores the connection between realizing the economic and climate goals of the Inflation Reduction Act and modernizing the IRS.”
Photo Courtesy U.S. Department of Treasury
Recently, clean-energy developer Arevon agreed to transfer $191 million in tax credits
to JP Morgan. That agreement helped Arevon build a new solar and battery storage facility in California. The company has more than $2 billion in current new projects, which will qualify for nearly a half-billion in additional tax credits.
Similarly, Fiserv bought $700 million in domestic manufacturing tax credits from the solar panel maker First Solar, enabling First Solar to continue to ramp up its clean energy efforts.
Photo Courtesy First Solar
“ITC and PTC tax credit transferability is a major step forward for the energy transition, post-IRA, and we are excited to be able to leverage it on the Vikings financing structure,” Daniel Murphy, Arevon’s director of project finance, said in a statement. “This solar peaking project concept is a key strategy for Arevon, and we are grateful to our financing parties for their support on this groundbreaking financing using tax credit transferability.”
The Treasury Department now offers an online registration tool — the IRS Energy Credits Online (ECO) portal — for companies to sign up for the tax credit program.
“The IRS has quickly delivered modern technology with IRS Energy Credits Online, making it easier for eligible companies who do business in the United States and state and local governments to take advantage of clean energy incentives,” Adeyemo said.
