Companies Are Snapping Up New Clean-Energy Tax Credits

The new government program is designed to funnel cash quickly to renewable-energy developers, potentially accelerating the transition from fossil fuels, while giving tax breaks to buyers such as JPMorgan Chase and Fiserv.

Congress created the tax credit transfer program for renewable-energy companies in the 2022 climate law. About 100 companies pursuing more than 1,000 clean-energy projects have indicated they plan to sell tax credits in the new market, according to preliminary Treasury Department figures reviewed by The Wall Street Journal ahead of their release.

Renewable-energy companies often don’t make enough profit to absorb all the tax credits they generate. The law lets them sell the credits to other companies to monetize what they can’t use. Buyers typically pay $90 to $96 for credits that let them reduce their tax bills by $100, turning a near-instant profit.

Total transactions from the market likely totaled between $7 billion and $9 billion last year and are expected to rise soon into the tens of billions, according to estimates by Crux, an online marketplace that connects tax-credit buyers and sellers.

“The market really started to coalesce in the fourth quarter faster than people expected," said Alfred Johnson, chief executive officer of Crux. “You’re now seeing people start to think ahead about what their strategy for 2024 is going to be."

Transferring tax credits directly to corporate buyers offers a faster, simpler way for clean-energy companies to fund projects than existing tax-credit marketplaces. These rely on an arcane market called tax equity that is generally limited to the largest renewable developers.

“It’s definitely a game changer," said Kevin Smith, CEO of the clean-energy developer Arevon, which recently agreed to transfer $191 million in tax credits to JPMorgan. That agreement helped Arevon raise $338 million in debt for a solar and battery storage project in California. “It will be a huge boon for the industry," he said.

Arevon has roughly $2 billion in projects it is pursuing that will qualify for about $500 million in tax credits, he said. The company expects to sell the vast majority directly to big companies, generating cash it can use for the projects.

The new deals typically take three to eight weeks to complete, down from four months, for tax equity, said Keith Martin, a lawyer at Norton Rose Fulbright, whose firm has already closed 14 deals and has 20 more in process.

Banks including JPMorgan and Bank of America dominate tax equity and are expected to be some of the biggest players in the transfer market.

By making it easier for any company to buy credits, government officials hope they can entice businesses beyond banking to reduce their taxes and fund climate investments in the process. 

Early buyers were the same companies that had done tax-equity deals in the past, but retailers and technology companies started entering the market later in 2023, Martin said. U.S. Bancorp facilitated $700 million in transfers in the fourth quarter, it said in a regulatory filing.

The financial-technology giant Fiserv recently agreed to buy $700 million in domestic manufacturing tax credits from the solar-panel maker First Solar, arguably the biggest winner from the climate law. It is one of the largest transfer deals announced to date.

The Treasury Department launched an online registration tool for companies to sign up for the program in December. Its preliminary figures are through Tuesday, and the numbers are expected to rise as companies become familiar with the new market.

“Increased access to clean energy credits is acting as a force multiplier so that more clean energy projects are built quickly and affordably," Deputy Treasury Secretary Wally Adeyemo said.

The Treasury Department initially proposed rules for selling credits in June and won’t have financial details on transfers until companies file their tax returns.