Despite ongoing uncertainty over the fate of certain tax credits created by the Inflation Reduction Act, the transferable tax credit market is booming.
According to a market analysis out this week from Crux, the market more than tripled in size in 2024, ballooning to nearly $30 billion in total deal volume by the end of the year. At the end of 2023, the nascent market recorded just $9 billion in deals.
The report also illustrated a dramatic shift in which technologies are driving the market forward. By the second half of last year, credits generated by eligible emerging technologies including advanced manufacturing, nuclear, bioenergy, geothermal, and carbon capture accounted for 67% of tax credit supply.
Of those, advanced manufacturing production tax credits (known as 45X) grew particularly rapidly, becoming the single largest segment of the tax credit market, at more than 33% of total tax credit supply. That’s despite the fact that IRS guidance for 45X wasn’t finalized until November.
Transferability is a key financing tool for such projects, which often don‘t have access to traditional tax equity financing, due in part to their longer lead times.
The makeup of the market shifted over the course of the year, the report found. While wind, solar, and storage were dominant during the first six months, they dropped during the back half of the year. Tax credits from nuclear power plants, which only came into the market in the second half of 2024, accounted for 12% of the market during those months.
45X credits, which can include manufacturing components for solar, wind, and battery storage, as well as the production of inverters, 50 different critical minerals, and electrode active materials, reached more than $7 billion last year, thanks to a significant jump in the second half.
Traditional wind projects, meanwhile, saw their market share decline from 33% in the first half of last year, to just under 3% in the second half. Crux doesn’t currently have any offshore wind credits being offered in the market, but noted that the Trump administration’s move to freeze new permits and leases for onshore wind projects is likely to cause delays. One impact of that tight supply is that prices increased.
Another key consideration: wind PTC deals don’t usually include insurance, Crux said, because those credits have historically been relatively low risk. Only 2% of wind PTCs sold last year had third-party insurance coverage, the lowest of any tax credit category. That, of course, may begin to shift with the Trump administration’s ongoing attack on the wind market.
The transfer market so far hasn’t cooled in light of the new president’s antipathy toward clean energy and the IRA. The week of the election saw the most bidding activity of the fourth quarter; and during the lame duck session, the vast majority of bids submitted on the platform were for 2025 or 2026 tax credits. Crux said those behaviors indicate a high degree of confidence in the durability of the market.
That said, the dramatic political shifts underway are definitely causing alarm. Crux reported that its market participants — including project developers, manufacturers, and investment firms as well as buyers — are especially concerned about the impact of political and regulatory changes on the market. Less concerning to that group, though, are the possibility of increased audits by the IRS, lack of demand, or lack of supply.
