As per insights from tax credit investment banking firm Foss & Company, the entire Fortune 500 is exploring opportunities in clean energy tax credit transferability transactions.
Tax credit incentives for advanced manufacturing in the clean energy sector in the United States have the potential to increase to billions of dollars annually.
Managing director Bryen Alperin expressed this viewpoint during an exclusive conversation with our associates at Energy-Storage.news Premium last week. Although the focus of the discussion was primarily on the battery sector, particularly in light of Foss & Co’s recent investment in Plus Power’s Anemoi battery energy storage system (BESS) in Texas, Alperin highlighted that the transfer of tax credits, including the 45X manufacturing credit, might play a substantial role in the future of the clean energy industry in the United States.
The 45X regulations are a crucial element of the Inflation Reduction Act (IRA), with the Department of the Treasury recently completing the finalization of its provisions. Notably, businesses will now have the opportunity to receive tax credits for their investments in clean energy manufacturing sectors, allowing them to factor in material and extraction expenses when determining tax credits. This development could greatly benefit the U.S. solar industry, which has experienced substantial investments as the country aims to decrease its dependence on solar products manufactured in China.
Alperin commented, “There appears to be a significant increase in activity within the 45X sector, with numerous manufacturing projects underway. The potential size of this market remains uncertain, but it could potentially reach billions annually. Essentially, this market will operate on a straightforward transferability basis.”
The transferability aspect has evolved into a burgeoning market of its own, marked by a surge in deal signings and a rapidly increasing number of companies keen on engaging in such transactions. Data from Crux reveals that in the third quarter of the current year, advanced manufacturing technologies dominated the landscape of tax credit transfers in the U.S., underscoring a rising interest in transferring clean energy manufacturing tax credits.
“Before the IRA, perhaps 50 or 60 companies were heavily engaged in tax credit activities,” Alperin shared with Energy-Storage.news Premium. “Currently, I would estimate that the entire Fortune 500 is either actively involved or beginning to explore participation. This shift is partly due to transferability and also stems from the IRA raising awareness about these tax credits as a whole.”
