May 21, 2024

Gary Durden Featured on Crossroads: Transferability and the Energy Economy

Gary Durden, Partner & Managing Director, joined Infralogic’s Chuck Stanley on the Crossroads podcast to discuss the evolving tax credit transferability market and its impact on the sustainable finance landscape. Listen here.

From Inframation News: “Crossroads: CRC-IB’s Gary Durden discusses tax credit transfers, energy economy”

This week, CRC-IB managing director Gary Durden joined Crossroads: The Infrastructure Podcast, to discuss how the emerging tax credit transfer market is re-shaping the investment climate for renewable energy in the United States.

The 2022 Inflation Reduction Act (IRA) for the first time allowed recipients of clean energy tax incentives to sell claims on their tax credits to third-party buyers. Tax credit transfers offer renewable energy project sponsors a more simplified mechanism to monetize tax credits from their projects than traditional tax equity deals, while the lower barrier to entry is bringing new investors into the space, Durden said.

Traditionally, renewable energy developers that did not generate enough tax liability to monetize their own tax credits had to bring on equity partners from a relatively small group of financial institutions with both predictable tax burdens to offset with renewable energy incentives, and the sector expertise to execute such transactions.

Now that tax credits can be transferred to buyers without an ownership stake in the related project portfolio, the pool of potential partners for renewable energy developers to monetize their tax credits has grown substantially. That’s a critical development, Durden says, because the IRA has dramatically increased the amount of tax credit dollars available to the market, while extending incentives to new technologies.

“There’s a handful of large banks that supply probably 60-80% of the total volume of tax equity deals that were done in every year prior to the Inflation Reduction Act being passed. So, the market was somewhat limited. And now, fast forwarding to today, where the Inflation Reduction Act has been passed, it has not only renewed the tax credits for wind and solar projects, but it has expanded the tax credit to cover new technologies that previously did not qualify for the tax credit, such as carbon capture, renewable natural gas, stand alone battery storage, and various green fuels that are now eligible for the tax credit,” Durden said.

The framework for the credit transfer market was first provided by the Treasury Department and the IRS last year, in the form of proposed rules governing the market. And those rules were only finalized last month. So the market is still evolving. But trade volume is growing fast, as is the number of buyers, Durden said.

“I would also say that the market is evolving. It’s very young right now but it’s rapidly evolving. Some of the things that we’re seeing is, the buyer universe is expanding,” Durden said.