Schneider Electric has facilitated $1.7 billion in tax credit transfer transactions over 18 deals since late 2023, the company announced today.
The Inflation Reduction Act enabled transferability of clean energy tax credits. Since 2023, companies have been able to sell those credits for cash, allowing any corporate buyer with tax liability to buy them and participate indirectly in the financing of clean energy projects.
While the market started out small, it grew quickly over the course of 2024. According to numbers from the tax credit marketplace Crux, the market for transfers grew to nearly $30 billion in total deal volume by the end of 2024, up from just $9 billion at the end of 2023. Of that $30 billion, $24 billion were 2024 transfers and $6 billion were “forward-market” sales predicted to occur in 2025 or beyond; by the fourth quarter of 2024, more than a third of closed deals had commitments to purchase credits in the future.
This, said John Powers, vice president of strategic renewables for Schneider, is a sign of the market’s growing maturity and stability. “Terms are a little more standard, pricing is a little tighter, structures are falling into predictable patterns when it comes to risk profiles,” said Powers via email to Latitude Media. “So, from that perspective, it’s a great time to transact.”
However, the first months of the Trump administration have brought uncertainty — or “new market dynamics,” as Powers put it — over the future of both clean energy tax credits and their transferability. Congress is currently hashing out the budget, which will determine what will happen to each of the IRA clean energy tax credits, but clarity could still be months away.
This uncertainty could stem investors’ growing confidence in the new market. In most transfer deals, the buyer assumes the risk of the credit being disallowed or recaptured. So if corporate buyers don’t know whether the clean energy tax credits will be repealed or not, they might be more cautious about going shopping.
The resilience shown by the renewable energy industry in the past, however, is reason to be optimistic, according to Powers.
“While there may be some concerns about potential changes to tax credit policies and their transferability, it’s important to note that the renewable energy industry has shown remarkable resilience and adaptability in the face of potential policy shifts,” he said. “Potential changes in the policy landscape could lead to new opportunities for innovation and strategic adjustments within the industry.”
The evolution of Schneider’s approach
It was a little over one year ago that Schneider Electric announced its first major tax credit transfer deal: an $80-million deal with Engie North America. The novel structure included both Schneider’s purchase of clean energy tax credits from Engie, and the reinvestment of the tax savings obtained from the purchase into 110,000 megawatt-hours of renewable energy credits from some of Engie’s solar and battery projects.
This way, Schneider contributed to the projects’ development twice, first via the tax credit purchase and then via the REC investment, essentially becoming Engie’s development partner. And thanks to its REC investment, it was able to offset its own scope 2 carbon emissions.
At the time, Powers told Latitude Media that the idea was to go beyond using transferability for a “standalone tax play or as a standalone way to support solar and wind,” and to leverage it to further the company’s decarbonization.
With a year of hindsight, Powers said this week that the initial Engie deal showcased the potential embedded in the transferability provision to open new avenues for investment in clean energy projects.
And since then, “quite a few of our deals have included long-term REC procurement to meet Scope 2 goals in addition to the tax credits, and other clients are using the savings to fund broader decarbonization like energy efficiency,” Powers said.
For example, in September 2024, Schneider announced it had served as a strategic advisor to Kimberly-Clark, a hygiene products manufacturer, for over $200 million in tax credit transfer agreements connected to battery energy storage projects in Texas. The company has also completed deals with Silfab Solar and Crux, among others.
The company facilitated the transactions through its Sustainability Business arm, which advises companies on corporate renewable energy procurement, helping clients leverage the potential of transferability to invest in renewables and battery storage, among other clean energy technologies.
The $1.7-billion topline number includes both deals that Schneider directly participated in, such as the one with Engie, as well as those that the company advised.
