Evercore Partners’ research reveals a rapidly expanding market for clean energy tax credits. Their April 28th report projects a staggering $47 billion in transferable tax credits generated by companies in 2024, with potential growth exceeding $100 billion annually by 2030. These findings align with independent research and highlight significant trends within the renewable energy sector.
Key Findings from Evercore’s Analysis
Evercore’s analysis underscores several crucial observations regarding the dynamics of the clean energy tax credit market:
Preference for Transferability over Direct Pay
Many projects eligible for direct pay or transferability, especially those utilizing 45X advanced manufacturing tax credits, often favor the liquidity of the transfer market. This preference stems from the immediate financial benefits of selling credits compared to waiting for direct pay reimbursements. 45X credits, in particular, are highly sought after by tax credit buyers.
Production Tax Credits (PTCs) Outpacing Investment Tax Credits (ITCs)
Evercore forecasts that the supply of PTCs will likely surpass that of ITCs. Their projection suggests PTCs could constitute 80% of the total credit supply. This aligns with market trends indicating PTCs are often linked to fewer, larger-scale projects, such as hydrogen (45V) and carbon capture (45Q) initiatives, while ITCs are associated with numerous smaller projects.
Distinct Pricing Dynamics for PTCs and ITCs
Market pricing typically differentiates between PTCs and ITCs. ITC pricing exhibits greater variability, ranging from approximately 75 cents for smaller projects to 95 cents for those undertaken by larger, investment-grade developers. Conversely, PTC pricing remains within a tighter range, generally between 89 cents and 95-96 cents for high-quality credits. Future year PTC strips are often discounted by several cents, depending on the duration of the PTC.
A Predominantly Spot Market with Growth Potential
The current tax credit market primarily operates as a spot market. However, Evercore highlights the significant potential for expansion, capable of supporting tens of billions in tax finance for clean energy projects and manufacturers. This growth trajectory underscores the increasing importance of tax credits in driving the transition to a sustainable energy future.
Conclusion: A Market Ripe with Opportunity
Evercore Partners’ analysis paints a compelling picture of a burgeoning clean energy tax credit market. The projected growth in transferable tax credits, coupled with distinct market dynamics and a preference for liquidity, presents significant opportunities for both project developers and investors. This evolving landscape warrants close attention as it continues to shape the future of clean energy finance.
