A multibillion-dollar market for clean energy tax credits has materialized in a matter of months, sparked by a provision of President Joe Biden’s marquee climate law that allows project developers and manufacturers to directly sell their credits for cash.
By enabling the “transferability” of tax breaks, the Inflation Reduction Act (IRA) greatly eased the process for clean energy businesses to monetize those incentives. These include 11 types of tax credits, the US Treasury Department and Internal Revenue Service confirmed April 25 in final guidance. Developers previously had to rely on more restrictive, complicated and expensive tax equity deals that attracted a relatively small number of investors, typically large financial institutions.
“The Inflation Reduction Act, with this component in particular, has really freed up a lot of capital to be deployed faster,” said Frank Burkhartsmeyer, CFO of battery storage developer GridStor LLC. That capital velocity is accelerating the energy storage industry’s ability to deliver cost-competitive zero-emission capacity, “which is desperately needed in many areas, as the renewables have been built out ahead of the capacity market,” he added.
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