Last year marked the historic first full year of transferability for clean energy and manufacturing tax credits. Since transferable tax credits started transacting in 2023, the market has matured rapidly. One indication of maturity is the strong pricing signals the market observed for clean energy investment tax credits (ITCs) and production tax credits (PTCs), signaling market confidence and strong demand among tax credit buyers.
Crux’s 2024 Market Intelligence Report provides an in-depth look at 2024 pricing trends based on analysis of Crux’s $25 billion transferable tax credit database. The report finds that 2024 tax credit deal pricing improved over 2023:
What drives pricing for tax credit deals?
There are numerous technology and tax credit types, ranging from credits designed to support utility-scale solar and wind to those for emerging technologies such as advanced manufacturing, biofuels, and hydrogen. Market data analysis illustrates the factors that impact deal pricing, including:
Larger deals attract higher prices. For example, the average price for all ITC deals in 2024 was 90 cents. For deals below $20 million, ITC prices averaged about 90.0 cents, while larger deals averaged 93.5 cents.
Average price by deal size tranche, PTC and ITC, 2024
There are a few reasons that large deals are more attractive to the market. Transaction costs are somewhat inelastic and constitute a fixed cost in terms of both the legal due diligence and the time commitment from all sides. Spreading these costs over a larger basis helps ensure that the “juice is worth the squeeze” for the tax credit buyer.
Additionally, larger deals can indicate a larger sponsor and therefore correlate with higher credit quality, experience, and strength of indemnities.
As the chart above shows, PTC pricing for projects of all sizes surpassed ITC deal prices. For instance, PTCs for deals below $20 million averaged over 92 cents, which was just below the ITC price for projects sized between $50 and $100 million. While there were circumstances when ITC pricing exceeded 95 or 96 cents, this occurred when the project developer had extensive experience, the underlying project was perceived as low risk, or the seller was investment grade.
PTC pricing is generally higher than ITC pricing because PTCs do not convey a risk of recapture to the tax credit buyer. The seller must just be able to substantiate that production of energy or a good occurred and that the item or unit of electricity was sold to a third party. ITCs, by contrast, do convey a risk of recapture to the buyer, as well as some risks associated with the cost basis that determined the value of the ITC. Their relative complexity compared to PTCs explains why they price less than PTCs, controlling for dealer size.
Greater competition also helps explain the pricing dynamics in the 2024 tax credit market. As the market becomes increasingly liquid and transparent, buyers’ comfort with transferable tax credits has also increased. That’s translating into greater competition for available tax credits. Crux’s market report finds that listed credits typically receive two or three bids.
Average bids per listed credit on Crux, by deal size tranche
The competition symbolized by multiple bids for each available tax credit has a logical impact on prices: it pushes them up.
Increased competition for tax credits has other effects, including driving pricing convergence across deal sizes and technology types. While larger tax credit deals do still attract a premium, competition-driven convergence has particularly benefitted smaller tax credit deals.
Individual tax credits have their own unique pricing dynamics. Utility-scale solar ITCs, for example, are well-established and understood by buyers. Tax credits for other technologies, such as advanced manufacturing or biogas, became eligible for purchase more recently. The experience and comfort level market players have with individual tax credits impacts their assessments of investment risk and pricing.
Pricing for individual tax credits is also shaped by the total supply of the credits available for purchase. Wind PTC pricing in 2024 illustrates what happens to prices when supply is constrained. In the first half of 2024, wind PTCs were plentiful, making up 33% of the tax credit market. But in the second half of the year, wind PTC supply dwindled to around 3% of the market. The result of this tightening supply was an increase in price, with deals at about 94 or 95 cents.
Market composition by technology type, 1H2024 versus 2H2024
A similar dynamic was at play with solar ITC pricing. In the first half of 2024, solar ITCs accounted for about half of all tax credits deals. Utility-scale solar ITCs are popular among buyers and were snapped up early in the year. By the second half of 2024, solar ITCs represented only about 17% of the market and prices for the limited pool of ITCs rose.
Most tax credit buyers are in the market for the current tax year because that’s where they have the clearest visibility into their tax liabilities and the collateral impact of a tax credit purchase. Some buyers may also be interested in purchasing tax credits generated in the previous year, though this market typically is less liquid.
Future-year tax credits typically trade at a discount to the current year — and this discount shrinks over the course of a year as the next tax year approaches. This discount helps incentivize the buyer to commit to a future tax credit purchase. In doing so, a buyer takes on risk that their future tax liabilities may not be sufficient to enable them to utilize the tax credits efficiently, so modest price discounts can help compensate them for that risk.
Buyers indicate that a counterparty’s credit rating is the most significant factor in determining whether to bid on a tax credit, according to Crux’s research on tax credit due diligence and risk mitigation. Seventy-three percent of buyers and advisors rated this as a top factor. Tax credit transactions are relatively low risk, but they are not completely riskless for the buyer, so the seller’s ability to indemnify the buyer ranks as a dominant issue. Alternatively, buyers are often willing to accept third-party insurance (in fact, many prefer insured deals).
Credit quality is positively correlated with deal price, but the correlation between insurance and deal price is less clear.
Because 2024 was the first full year of the transferable tax credit market, there was an opportunity to observe seasonal pricing trends. Prices varied by about 2.5% throughout 2024, meaning that a tax credit with an average price of 92 cents for the year attracted prices between 90.8 cents and 93.5 cents. Prices generally rose as the year progressed.
The variance can primarily be attributed to the behavior of tax credit buyers. Because purchasers buy tax credits to mitigate their tax liabilities, accurately gauging the volume of purchases needed depends on knowing what a buyer’s tax obligations are. Tax liabilities become clearer as the year progresses, which helps explain why demand for tax credits and pricing both increase toward the end of the year.
Another factor contributing to the end-of-year price increase is the fact that most buyers don’t purchase credits to meet past or future tax obligations. This means that the available pool of tax credits is limited to what is generated each year. Supply and demand balances annually.
Seasonality does not impact PTC and ITC pricing equally. PTC prices increased gradually and consistently as 2024 progressed, rising by about 2% from January to December. One explanation for this modest seasonal increase is that the way PTCs are generated closely aligns with the needs of tax credit buyers. Tax credit buyers file taxes on a quarterly basis. Because PTCs accumulate as a power plant or manufacturing facility produces electricity or products and often settle quarterly, buyers and sellers can match tax credit purchases with quarterly tax filings.
ITC approximate seasonality trend by month (factor, average = 1.00)
PTC approximate seasonality trend by month (factor, average = 1.00)
Understanding annual pricing trends is vital for both buyers and sellers of transferable tax credits. That’s why Crux developed the Cruxtimate, the first modeled market pricing tool for transferable tax credit transactions. The Cruxtimate takes into account nearly a dozen factors, including technology type, credit type, and deal size, and sets a bespoke credit price for each tax credit listed on the Crux platform.
Both the Cruxtimate and the 2024 Market Intelligence Report are built on Crux’s authoritative dataset of tax credit transactions. For more insights into the pricing data, download the report.
Crux platform users and partners can access the full report, which includes 20 additional pages of pricing data. To receive a copy of the full report, get started on Crux.
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Experts from the law firm Vinson & Elkins partner with Crux to prepare a detailed guide to the IRS's pre-filing registration portal. Learn how to access the portal to register transferable tax credits generated by eligible projects and facilities, as well as how to properly account for transfers in the context of tax filings.
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