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They’re still agreeing to swap subsidies into 2025 and beyond.
The Inflation Reduction Act will direct billions of dollars to subsidize clean energy in the form of tax credits. But those tax credits need to be bought and sold, requiring a whole industry to stand up between developers and corporate taxpayers looking to reduce their tax liabilities.
A key pillar of this emerging industry is Crux, which functions as a marketplace for these deals, which said Monday in its mid-year market intelligence report that it expects to see $20 billion to $25 billion worth of these transactions by the end of this year, with $9 billion to $11 billion having already occurred in the first half of the year, surpassing the $7 billion to $9 billion in total transactions Crux estimated for last year. Crux has been working to put itself quite literally at the center of this quickly growing industry, raising tens of millions of dollars from both technology venture capital investors as well as the renewables industry.
Clean energy tax credits that subsidize both investment and production of renewables are nothing new. What is new is that the Inflation Reduction Act made them “transferable,” meaning that the taxpayer who was able to reduce their tax liability didn’t have to be directly involved with the project in order to get the tax benefits, they could simply buy them.
This has drawn a wider range of participants into the market, Alfred Johnson, Crux’s co-founder and chief executive officer, told me. Transferability was written into the tax credits “in part to make up for the low demand that is inherent to the tax equity market” when only certain taxpayers can participate, he said. “So far, we have seen family offices, companies of all shapes and sizes. We’ve seen food and ag companies and retailers and different kinds of financial institutions and manufacturers.” The Financial Times even reported that cash-rich (and therefore tax liability-rich) oil and gas companies were buying tax credits from renewable developers.
In the past, the tax credits accrued to the actual investors and developers in projects, who often didn’t have enough taxable income to fully benefit from the available credits, so banks would then often be brought in to own some of the project and reap the tax benefits. This was a complicated system that would seize up if, for some reason, the taxable corporate income of banks disappeared, like during a global financial crisis. “Clean energy investment has long been constrained by the scarcity of tax equity investors relative to the addressable market,” the law firm White and Case wrote in a note to clients.
Now, with transferability, tax credits can be essentially sold for cash. But it’s not quite a dollar-for-dollar transfer. According to Crux’s data, pricing for these deals has improved slightly in the first half of the year, going up from 94 cents for a dollar of production tax credits in 2023 to 95 cents in 2024, and from 92 cents for investment tax credits to 92.5 cents. Deals have also gotten larger on average, although some of this is due to more tried-and-true projects coming to market earlier in the year, namely wind, solar, and storage, whereas last year saw a more diverse range of often smaller deals, including advanced manufacturing credits, which were newly introduced by the Inflation Reduction Act.
The investment bank Evercore estimates that the total addressable market for tax credit trading could get to $100 billion annually by 2030. And make no mistake: Those tax equity investors are doing it for the money. While some deals are struck as part of a company’s sustainability or climate change mandates, when Crux surveyed buyers and their advisors, 78% said they made these deals to reduce their effective tax rates, compared to 58% who said they supported clean energy development and 40% for other sustainability goals.
While many of the questions around the next year are around whether or not the IRA and its tax credit regime will survive the outcome of the election in November — and dealmakers who work on this stuff every day seem confident that it will, for the most part — the shape of corporate liabilities could change in next year or beyond. Donald Trump has mused to Bloomberg about bringing down corporate tax rates to 15% from their current level of 21%. The Crux report notes that even debating such a bill can end up “stifling demand” for tax credits.
But looking forward, Johnson notes, the market appears to be confident that those who have tax liabilities in 2025 and even 2026 think tax equity will be there for them. “People are electing to commit on a production tax credit that goes well out into the future, or an investment tax credit that will be earned in 2025, or 2026,” Johnson said.
“I think that’s indicative of the market’s interpretation of risk, right? If the market thought that those 2026 credits would not be around, then you wouldn’t see as much as that,” Johnson said. He also noted that both the production and investment tax credits have typically been extended (although the uncertainty about extension can weigh on developers and tax equity investors) under just about every partisan configuration of Capitol Hill and the White House.
“You could certainly imagine scenarios, both from macroeconomic and a policy perspective, where the amount of taxes paid by companies went up or went down. But I think we are well covered right now in the market at the current volumes,” Johnson said.
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On the environmental reviews, Microsoft’s emissions, and solar on farmland
Current conditions: Enormous wildfires in Manitoba, Canada, will send smoke into the Midwestern U.S. and Great Plains this weekend • Northwest England is officially experiencing a drought after receiving its third lowest rainfall since 1871 • Thunderstorms are brewing in Washington, D.C., where the Federal Court of Appeals paused an earlier ruling throwing out much of Trump’s tariff agenda.
The Supreme Court ruled Thursday that courts should show more deference to agencies when hearing lawsuits over environmental reviews.
The case concerned a proposed 88-mile train line in Utah that would connect its Uinta Basin (and its oil resources) with the national rail network. Environmental groups and local governments claimed that the environmental impact statement submitted by the federal Surface Transportation Board did not pay enough attention to the effects of increased oil drilling and refining that the rail line could induce. The D.C. Circuit agreed, vacating the EIS; the Supreme Court did not, overturning the D.C. Circuit in an 8-0 decision.
The National Environmental Policy Act, or NEPA, requires the federal government to study the environmental impact of its actions. The D.C. Circuit “failed to afford the Board the substantial judicial deference required in NEPA cases and incorrectly interpreted NEPA to require the Board to consider the environmental effects of upstream and downstream projects that are separate in time or place,” Justice Brett Kavanaugh wrote for the court.
The court’s decision could sharply limit the ability of the judicial branch to question environmental reviews by agencies under NEPA, and could pave the way for more certain and faster approvals for infrastructure projects.
At least, that’s what Kavanaugh hopes. The current NEPA process, he writes, foists “delay upon delay” on developers and agencies, so “fewer projects make it to the finish line. Indeed, fewer projects make it to the starting line.”
Map of the approved railway route.Source: Uinta Basin Railway Final Environmental Impact Statement
The Department of Agriculture is planning to retool a popular financing program, Rural Energy for America, to discourage solar development on agricultural land, Heatmap’s Jael Holzman exclusively reported.
“Farmland should be for agricultural production, not solar production,” a USDA spokesperson told Heatmap. The comments echoed a USDA report released last week criticizing the use of solar on agricultural land. The report said that the USDA will “disincentivize the use of federal funding at USDA for solar panels to be installed on productive farmland through prioritization points and regulatory action.” The USDA will also “call on state and local governments to work alongside USDA on local solutions.”
The daughter of a woman who died during the Pacific Northwest “Heat Dome” in 2021 sued seven oil and companies for wrongful death in Washington state court, The New York Times reported Thursday.
“The suit alleges that they failed to warn the public of the dangers of the planet-warming emissions produced by their products and that they funded decades-long campaigns to obscure the scientific consensus on global warming,” according to Times reporter David Gelles.
Several cities and states have brought suits making similar claims that oil and gas companies misled the public about the threat of climate change. Earlier this week, a German court threw out a suit from a Peruvian farmer against a German utility, which claimed that the utility’s commissions helped put his town at risk from glacial flooding.
The seven companies named in the lawsuit are Exxon Mobil, Chevron, Shell, BP, ConocoPhillips, Phillips 66, and Olympic Pipeline Company, a subsidiary managed by BP. None of them commented on the suit.
Tech giant Microsoft disclosed in its annual sustainability report that its carbon emissions have grown by 23.4% since 2020, even as the company has a goal to become “carbon negative” by 2030. The upside to the figures is that the growth in emissions was due to a much larger increase in energy use and business activity, not from using dirtier energy. In that same time period, Microsoft’s revenue has grown 71%, and its energy use has grown 168%.
“It has become clear that our journey towards being carbon negative is a marathon,” the report read. The company said it had contracted 34 gigawatts of non-emitting power generation and had agreements to procure 30 million metric tons of carbon removal.
The company has set out to reduce its indirect Scope 3 emissions “by more than half” by 2030 from the 11.5 million metric tons it reported in 2020, as its Scope 1 and Scope 2 emissions fall to close to zero. It will become “carbon negative,” it hopes, by purchasing carbon removal.
Microsoft attempts to reduce emissions in its supply chain by procuring low- or no-carbon fuels and construction materials. Last week the tech giant signed a purchasing agreement with Sublime Systems for 600,000 tons of low-carbon cement.
The Nuclear Regulatory Commission announced it had approved a 77-megawatt small modular reactor design. This is the second SMR design approved by the NRC, following approval of a smaller design in 2020. Both are products of the SMR company NuScale, and neither has yet been deployed. A project to build the earlier design in Idaho was abandoned in 2023.
The NRC review was set to be completed in July of this year. Coming in ahead of scheduled demonstrates “the agency’s commitment to safely and efficiently enable new, advanced reactor technology,” the Commission said in a press release.
Congress and the Biden and Trump administrations have pushed the NRC to move faster and to encourage the development of small modular reactors. No SMR has been built in the United States, nor is there any current plan to do so that has been publicly disclosed. NuScale’s chief executive told Bloomberg that he hopes to have a deal signed by the end of the year and an operational plant by the end of the decade.
Tesla veteran Drew Baglino’s Heron Power raised a $38 million round of Series A funding for a new product designed to replace “legacy transformers and power converters by directly connecting rapidly growing megawatt-scale solar, batteries, and AI data centers to medium voltage transmission,” Baglino wrote on X.
A conversation with Mike Hall of Anza.
This week’s conversation is with Mike Hall, CEO of the solar and battery storage data company Anza. I rang him because, in my book, the more insights into the ways renewables companies are responding to the war on the Inflation Reduction Act, the better.
The following chat was lightly edited for clarity. Let’s jump in!
How much do we know about developers’ reactions to the anti-IRA bill that was passed out of the House last week?
So it’s only been a few days. What I can tell you is there’s a lot of surprise about what came out of the House. Industries mobilized in trying to improve the bill from here and I think a lot of the industry is hopeful because, for many reasons, the bill doesn’t seem to make sense for the country. Not just the renewable energy industry. There’s hope that the voices in Congress — House members and senators — who already understand the impact of this on the economy will in the coming weeks understand how bad this is.
I spoke to a tax attorney last week that her clients had been preparing for a worst case scenario like this and preparing contingency plans of some kind. Have you seen anything so far to indicate people have been preparing for a worst case scenario?
Yeah. There’s a subset of the market that has prepared and already executed plans.
In Q4 [of 2024] and Q1 [of this year] with a number of companies to procure material from projects in order to safe harbor those projects. What that means is, typically if you commence construction by a certain date, the date on which you commence construction is the date you lock in tax credit eligibility, and we worked with companies to help them meet that criteria. It hedged them on a number of fronts. I don’t think most of them thought we’d get what came out of the House but there were a lot of concerns about stepdowns for the credit.
After Trump was elected, there were also companies who wanted to hedge against tariffs so they bought equipment ahead of that, too. We were helping companies do deals the night before Liberation Day. There was a lot of activity.
We saw less after April 2nd because the trade landscape has been changing so quickly that it’s been hard for people to act but now we’re seeing people act again to try and hit that commencement milestone.
It’s not lost on me that there’s an irony here – the attempts to erode these credits might lead to a rush of projects moving faster, actually. Is that your sense?
There’s a slug of projects that would get accelerated and in fact just having this bill come out of the House is already going to accelerate a number of projects. But there’s limits to what you can do there. The bill also has a placed-in-service criteria and really problematic language with regard to the “foreign entity of concern” provisions.
Are you seeing any increase in opposition against solar projects? And is that the biggest hurdle you see to meeting that “placed-in-service” requirement?
What I have here is qualitative, not quantitative, but I was in the development business for 20 years, and what I have seen qualitatively is that it is increasingly harder to develop projects. Local opposition is one of the headwinds. Interconnection is another really big one and that’s the biggest concern I have with regards to the “placed-in-service” requirement. Most of these large projects, even if you overcome the NIMBY issues, and you get your permitting, and you do everything else you need to do, you get your permits and construction… In the end if you’re talking about projects at scale, there is a requirement that utilities do work. And there’s no requirement that utilities do that work on time [to meet that deadline]. This is a risk they need to manage.
And more of the week’s top news in renewable energy conflicts.
1. Columbia County, New York – A Hecate Energy solar project in upstate New York blessed by Governor Kathy Hochul is now getting local blowback.
2. Sussex County, Delaware – The battle between a Bethany Beach landowner and a major offshore wind project came to a head earlier this week after Delaware regulators decided to comply with a massive government records request.
3. Fayette County, Pennsylvania – A Bollinger Solar project in rural Pennsylvania that was approved last year now faces fresh local opposition.
4. Cleveland County, North Carolina – Brookcliff Solar has settled with a county that was legally challenging the developer over the validity of its permits, reaching what by all appearances is an amicable resolution.
5. Adams County, Illinois – The solar project in Quincy, Illinois, we told you about last week has been rejected by the city’s planning commission.
6. Pierce County, Wisconsin – AES’ Isabelle Creek solar project is facing new issues as the developer seeks to actually talk more to residents on the ground.
7. Austin County, Texas – We have a couple of fresh battery storage wars to report this week, including a danger alert in this rural Texas county west of Houston.
8. Esmeralda County, Nevada – The Trump administration this week approved the final proposed plan for NV Energy’s Greenlink North, a massive transmission line that will help the state expand its renewable energy capacity.
9. Merced County, California – The Moss Landing battery fire is having aftershocks in Merced County as residents seek to undo progress made on Longroad’s Zeta battery project south of Los Banos.