Insight
Transferability does not spell the end for tax equity investing
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
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.
Table of contents
- 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
What's included
This report contains:
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