Transferability does not spell the end for tax equity investing Report

Insight 09 August 2023

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Report summary

For years, the best way for investors to use energy transition credits was to bring in a tax equity investor. But a new option became available with the passage of the Inflation Reduction Act — tax credit transfers. Transferability is a win for tax investors and taxpayers, but it is not always a good option for project developers. In this insight we look at the options available to developers and investors to monetize tax credits, and whether the government is getting the most from these incentive programs.

Executive Summary
If it can’t be used, it has no value
Tax equity investing, simplified
Transferability: lower cost, lower benefit
Determining the best option: time and project size
Are incentives better than subsidies?
An imperfect solution

Tables and charts

This report includes the following images and tables:

Project tax benefit: US$100 million solar investment in 2023
Standalone operators can't fully capture tax incentives
Value allocation in example tax equity partnership

Operator value leaks: tax equity partnership
Operator value leaks: transferable tax credit
Comparison of investment scenarios for the operator investor
Bonus depreciation phase-out impact on tax investor IRR
When bonus depreciation expires, operators will still be unable to efficiently use depreciation
Operator value gain: optional direct payment of tax credit