Ridin’ the green wave… More businesses are cashing in on clean energy. Companies generate clean-energy tax credits by investing in renewable projects (think: solar panels, EVs). Credits can be used to lower a company’s tax bills, but eco-friendly cos that typically generate the most credits often aren’t usually profitable enough to fully benefit from the breaks. That’s why in 2022 the Inflation Reduction Act started letting companies transfer and sell their extra credits for a profit. Now a variety of companies, from big banks to energy powerhouses, are spending billions to snag the tax benefits.
First Solar, the largest US solar-panel maker, agreed to sell $700M (or 90% of its operating profit) worth of green credits to fintech giant Fiserv in December.
Green-energy developer Arevon agreed to transfer nearly $200M in credits to JPMorgan Chase. FYI: once a company buys a credit, it can’t be resold.
Clean-energy conundrum… ESG (environmental, social, and governance) investing has trended up, but so has the cost of green-energy projects (blame high interest rates and inflation). Wind and solar developers have faced a harder time securing financing because they require high upfront costs. But some estimates suggest the IRA credit-sharing law could open a trillion-dollar floodgate for clean-energy investments.
Sharing is caring… While clean-energy companies could save unused tax credits for years, they earn $$ upfront by selling them right away. Meanwhile, companies with massive tax bills (think: banks, big tech) can save while supporting eco-friendly projects. Clean-energy credit transfer deals have topped $7B since the IRA passed, and are expected to rise into the tens of billions this year.