Transferability is transforming clean energy project finance, say dealmakers

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The tax credit transferability provision introduced by the Inflation Reduction Act is significantly changing the landscape of clean energy project finance, according to industry experts at the American Council on Renewable Energy's Finance Forum. Gaurav Raniwala from GE Vernova highlighted that this new structure simplifies transaction closures, allowing for faster financing and enabling a broader range of market participants. The evolving tax equity market, which previously relied on a limited number of institutions, is now seeing hybrid structures that facilitate the sale of tax credits, with a notable increase in commitments expected in the coming years.

Despite the positive developments, there are concerns regarding the future of transferability due to potential restrictions from recent budget proposals. Crux's report indicates that while the medium-term policy environment remains uncertain, the U.S. clean energy economy is still poised for growth, having attracted nearly $340 billion in new investments last year. The speed and flexibility afforded by the transferability of tax credits are crucial for developers, allowing them to navigate financing more efficiently and adapt to market conditions without the need for long-term contracts.