Featured Analysis: Evercore ISI “energy tax financing market poised to scale as Treasury issues final rules for tax credit transfers”

May 15, 2024

Evercore’s research indicates that the market for clean energy tax credits is taking off. In their research note published April 28, Evercore projects that, in 2024, companies will generate $47 billion in tax credits that could potentially be transferred – rising to more than $100 billion per year in 2030.

Evercore’s analysis underwrites several important findings which are also consistent in Crux’s research.

  • A large share of projects that are eligible for either direct pay transferability, in particular the 45X advanced manufacturing tax credits, seem to often prefer the liquidity of the transferability market versus waiting for a check to come in through direct pay. This is particularly true for 45X advanced manufacturing tax credits, which are among the most popular with tax credit buyers.
  • Evercore forecasts that the supply of Production Tax Credits (PTCs) likely will exceed Investment Tax Credit (ITC) supply, including that PTCs could comprise 80% of credit supply in the market. In Crux’s most recent First Quarter Market Update, we found that PTCs tend to be associated with fewer larger projects while ITCs tend to be associated with many smaller projects. That trend is likely to continue as large hydrogen (45V) and carbon capture projects (45Q) are built and advanced manufacturing (45X) continues to scale.
  • In practice, market pricing for PTCs and ITCs typically differs. Our Market Update breaks out typical pricing for ITCs and PTCs separately. ITC pricing can vary significantly, from around 75 cents for the smallest projects to 95 cents for projects owned by larger investment grade developers. PTC pricing trades within a narrower band, from around 89 cents at the low end to 95-96 cents for the highest quality credits. PTC strips also tend to price differently, with future year credits discounted by as much as several cents depending on duration of the PTC.
  • The tax credit market is chiefly a spot market today. Evercore notes that there is abundant potential for this market to grow and support tens of billions in tax finance for clean energy projects and manufacturers.

Get in touch with us today to learn more about how to access this rapidly growing tax credit market.

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