Every day, LevelTen gets asked tough questions about clean energy tax credits. Corporate sustainability teams want to know, “How should tax credits fit into my sustainability strategy?” and “Should I wait until there’s more policy certainty before transacting?”
It’s not surprising that clean energy tax credits are top-of-mind for sustainability managers. When our team attended the GreenBiz Sustainability Conference recently, they heard one resounding message: It’s imperative to demonstrate the business case for sustainability initiatives. More than ever before, c-suite executives, board members, and investors want to understand how sustainability initiatives support revenue growth, reduce costs, and mitigate risks. By contributing positively to sustainability and financial outcomes, clean energy tax credits present a compelling and elegant solution.
At the same time, it’s also unsurprising that policy uncertainty is giving sustainability managers some pause. With potential changes to the Inflation Reduction Act coming, it is tempting to take a “wait and see” approach. But what sustainability managers may not realize is that standing on the sidelines may actually be riskier than taking decisive action — and end up costing them more in the long run, too.
Achieving the Triple-Bottom-Line with Transferable Clean Energy Tax Credits
By making tax credits more accessible, transferable tax credits create a win-win-win: developers secure needed funding (profit), corporations cut costs while supporting sustainability (planet), and the clean energy economy grows (people).
Clean energy developers who lack sufficient tax liability to benefit from federal tax credits can transfer their credits to corporations with large tax appetites in exchange for what developers really need: cash. These transferable tax credit transactions place critical capital into the hands of developers, which they can, in turn, plow into project financing. On the other side of the transaction, the tax credit buyer can offset up to 75% of their tax bill. And they get to create tangible environmental impact by supporting clean energy financing.
Every dollar a corporation pays to a clean energy developer for a tax credit is a dollar that supports getting new solar panels, wind turbines, and batteries onto our grid. For corporations that buy advanced manufacturing tax credits, every dollar goes toward creating the American supply chains needed to build clean, affordable, and reliable energy. These tax savings can then be reinvested in other areas of corporate sustainability programs, including procuring power purchase agreements (PPAs) or unbundled renewable energy certificates (RECs).
The Explosive Growth of Clean Energy Tax Credits
The law that unlocked these tax credits — the Inflation Reduction Act — has undeniably impacted the economy since it was passed in August 2022. Between 2023 and 2024, the market for transferable clean energy tax credits skyrocketed, growing to more than $20 billion. Since the introduction of transferable tax credits, the overall tax credit market has nearly doubled to more than $40 billion, according to industry reports. This influx of capital contributed to a record-breaking amount of solar energy installations in 2024: almost 50 gigawatts (SEIA and Wood Mackenzie report). Fifty gigawatts is an enormous amount of power. It is the equivalent of the power generated by 25 Hoover Dams. And transferable tax credit buyers helped make that possible.
Making Smart Moves in an Uncertain Tax Credit Market
So, back to the question LevelTen fields daily: Should I wait until there’s more policy certainty before transacting?
I’ll break this down into three parts:
1. Experts Think a Full Repeal is Unlikely
But no policy clarity is expected until mid-year, at earliest.
Nobody has a crystal ball. But what we do know is that altering the transferable tax credit provisions of the IRA will require an act of Congress. And, industry experts believe that a full repeal is unlikely, due in part to the fact that there is bipartisan support for tax credits.
Furthermore, we are doing our part to advocate for Congress to preserve the critical transferable tax credits the IRA unleashed. LevelTen runs the world’s largest and most active clean energy marketplace, giving us a bigger platform, and a responsibility to do more for the industry. Through our contributions as a Clean Energy Buyers Association (CEBA) Leadership Circle member, we’re making two things clear to members of Congress. First, transferable tax credits significantly impact our customers’ ability to do business. What’s at stake is gigawatts of new, clean generation. Second, clean energy tax credits are crucial to building a stronger, more self-sufficient, and competitive American economy.
Even if Congress moves swiftly in legislative efforts this year, we expect it will take at least until May or June to know with confidence whether and how the transferable tax credit provisions will be impacted.
2. Acting Now is Safer than “Waiting and Seeing”
Precedent suggests finalized deals should be protected.
It’s completely understandable for corporate tax credit buyers to want more regulatory certainty before procuring tax credits. However, taking a “wait and see” approach may be riskier. It might seem counterintuitive, but taking action quickly to lock in a tax credit transfer can be a sound strategy for mitigating the risk of any changes to the IRA’s transferable tax credit provisions. That’s because, according to long-established precedent, change in tax law has time and time again been accompanied by a transition policy. Buyers who have finalized tax credit deals before any change in law should have their deals upheld by such a policy.
At last week’s Infocast Solar + Wind Finance & Investment Summit, industry expert Norton Rose Fulbright signaled that the first formal House Ways and Means Committee vote on what to include in the reconciliation bill could occur as early as April. Tax credit buyers and sellers that move quickly, ahead of this milestone, have a higher likelihood of their transactions being preserved as part of transition policy. That said, again, we must caveat that nobody has a crystal ball for what specifically may happen with the tax package – the broader point here is that transaction delay will only increase risk.
Many corporate buyers understand this. That’s why we’re seeing lots of demand. Corporate buyers continue to turn to LevelTen’s Tax Credit Marketplace to run RFPs and search live offers — with the aim of procuring more than $500 million in tax credits in the first quarter of this year alone. And that demand continues to rise. We are also seeing more corporates express interest in procuring PPAs and RECs alongside tax credits, utilizing this holistic procurement approach to reduce their tax bill, support new clean generation, and meet Scope 2 targets.
On the flip side, sellers are still moving forward with business as usual, aiming to secure buyers for their credits in the first half of the year. This cannot be overstated: tax credit financing is crucial to clean energy development. Purchasing tax credits should be viewed as an impactful investment in the energy transition – because it is.
3. Get the Facts, Make a Plan
Download our fact sheet to understand potential IRA changes, risk mitigation, and procurement strategies. We’ve created a fact sheet to help you make sense of it all. Things are changing quickly – and we’ll do our best to issue an update when there is a critical mass of new information. Our fact sheet covers:
- What could happen to the IRA in 2025
- What if there is a change in law?
- Essential considerations of taking a “wait and see” approach
- How risk can be mitigated through careful tax credit procurement
Download IRA Fact Sheet >
Perspective Based on Decades of Experience: The Industry is Resilient
I’ve spent 15 years in the clean energy industry, and LevelTen’s leadership team has collectively amassed a century of experience. This is not the first time the industry has faced uncertainty. In just the past five years, we’ve weathered market turmoil caused by COVID, the global shock of Europe’s energy crisis, regulatory whiplash from antidumping and countervailing duties – yet the industry has remained resilient through it all. There are many reasons to believe that the industry will continue to be resilient in the face of today’s challenges. Last year alone, LevelTen helped drive record-breaking progress, facilitating 62 PPAs and enabling 4.67 GW of new, clean energy.
Committed to Your Success in Clean Energy
Tax credits are just one piece of the puzzle. Since our founding in 2016, LevelTen has been committed to accelerating the clean energy transition – providing the marketplaces, software, and data that empower buyers and sellers to get deals done. If you have any questions about clean energy tax credits or clean energy procurement in general, contact us at info@leveltenenergy.com.
Download IRA Fact Sheet
