Feb 20, 2024 · 27m · catalyst
Frontier Forum: Diving into the booming transferable tax credit market
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this Frontier Forum forum, Crux CEO Alfred Johnson analyzes the rapid growth and operational mechanics of the transferable clean energy tax credit market created by the Inflation Reduction Act. Drawing on comprehensive 2023 transaction data, the discussion covers pricing benchmarks, buyer-seller dynamics, hybrid tax equity structures, and long-term market scaling toward $100 billion in annual volume.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 18.3% of the talking time here. How this is scored →
Shayle as informed peer 3.8 Guest teaching 3.1 Guest disagreement 0.1 Shayle pushing back 0.0
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:25 Rejecting complete separation of tax equity and transferability
In a very collegial interview, Alfred gently pushes back on a common industry misconception, rejecting the idea that traditional tax equity and transferability operate as mutually exclusive markets.
Hardest push from Shayle ▶ 20:57 Pressing on definition of market resetShayle directly challenges Alfred to clarify vague phrasing by asking what an anticipated 2024 market reset actually looks like in practice.
Biggest teaching moment ▶ 13:00 Comparing transferability to historical 1603 Treasury grantsAlfred draws upon his experience at the Treasury Department during the 2008 financial crisis to explain why traditional tax equity freezes under market shocks and how transferability creates resilience.
Shayle holds their own ▶ 14:31 Listing specific IRA bonus credit provisionsShayle displays his strong grasp of clean energy policy mechanics by enumerating prevailing wage, energy community, and low-income community bonus adders.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Crux Market Survey Findings and Key Early Insights | 4 | 3 | 0 | 0 | Shayle asks an open-ended question referencing Crux's survey of 150 market participants representing $3.5 billion in deals. Alfred outlines key surprises, including high 45X advanced manufacturing volume and surprisingly strong credit pricing at 92 to 94 cents. | |
| Emergence and Motivations of New Tax Credit Buyers | 4 | 2 | 0 | 0 | Shayle prompts Alfred to break down buyer and seller motivations, diligence concerns, and market representation. Alfred explains how the buyer pool has expanded from 10 large banks to Russell 3000 corporations while sellers struggle with price transparency in bilateral deals. | |
| Transaction Pricing Trends and Real-Time Price Discovery | 3 | 3 | 0 | 0 | Shayle asks whether sellers are getting fair deals and how Crux addresses price discovery. Alfred shares specific pricing tiers, noting that multiple bids occur on 37 percent of listings on Crux, driving real-time price discovery. | |
| Democratizing Clean Energy Finance vs Traditional Tax Equity | 4 | 4 | 0 | 0 | Shayle asks about structural differences between transferable deals and traditional tax equity. Alfred draws on his Treasury background working on Section 1603 grants during the 2008 financial crisis to explain how sub-$50 million transferable deals democratize market access. | |
| Navigating Bonus Credit Adders and Regulatory Implementation | 5 | 3 | 0 | 0 | Shayle demonstrates specific knowledge of IRA bonus adders, citing prevailing wage, energy communities, and low-income community credits. Alfred explains structural approaches to negotiating adder contingencies and highlights secondary policy risks like pending R&D tax legislation. | |
| Pricing Variations Across Technologies and Rise of Hybrid Deals | 4 | 4 | 1 | 0 | Shayle inquires about technology pricing disparities and hybrid transaction structures. Alfred explains how tax equity partnerships monetize depreciation and step up basis before selling credits into the transferability market, noting implications of Basel III banking regulations. | |
| Projecting the 2024 Market Reset and Supply-Demand Shifts | 3 | 3 | 0 | 0 | Shayle asks Alfred to define the anticipated 2024 market reset. Alfred details how supply-demand dynamics shift as 2023 vintage deadlines pass, resulting in extended bidding cycles and potential price recalibration. | |
| Key Drivers and Sub-Market Dynamics Across Credit Types | 3 | 3 | 0 | 0 | Shayle asks for overarching forward-looking projections for the credit market through 2030. Alfred contextualizes Goldman Sachs' $3 trillion infrastructure projection and forecasts a $100 billion annual standardized credit market by the end of the decade. |
Statements from this episode (17)
Alfred Johnson: Section 45X credits were second most common deal type
“We found that 45 X was the second most broadly characterized or considered kind of transaction within the data set. And to be clear, 45 X's advanced manufacturing credits”
Alfred Johnson: Transferable tax credits average 92-94 cents, beating LIHTC pricing
“The average credit price that we found in the sample was 92 to 94 cents, and this is better average pricing than we see currently in the thirty-seven-year-old Lytec market”
Johnson: Most traditional tax equity capital comes from 10 large banks
“When you consider the baseline of traditional tax equity, the most of that capital is coming from 10 institutions, 10 of the largest banks.”
Johnson: Bilateral tax credit deals suffer from opaque price discovery
“And there's a, there was a huge finding in the data that that Lack of transparency is inhibiting confidence, and that they basically don't know whether they are getting a good deal or not. And that is particularly a problem when sellers are selling in bilatera…”
Johnson: First Solar tax credit deal hit high watermark at 96 cents
“The high end of the market Is 94 to 96 cents, and we've seen some very large transactions like the first solar Fiserv deal that priced at 96 cents on 45 X credits, and as far as I know, that is the high watermark in the market or around 96 cents.”
Johnson: Sub-$10M clean energy tax credits drop to 87-89 cents
“So at the smallest end of the market, the sub 20, sub ten million dollar Kind of credit sizes. Pricing does fall off a cliff. Like it gets a lot worse, but it goes down to 89, 88, 87 cents on a gross basis.”
Johnson: 37% of bid-receiving tax credits on Crux get multiple bids
“So we found that credits that are listed on Crux in 37% of cases where a credit received a bid, they received multiple bids.”
Johnson: Traditional tax equity was only economically viable above $50M to $100M
“So traditional tax equity tended to be transactions that, 50 or a hundred million dollars or above. It just really didn't make sense to go through the legal work necessary and the transaction structuring to do tax equity deals at less than those amounts.”
Johnson: Sub-$50M deals represent the majority of transferable tax credit market
“We found in our data set that smaller deals, so fifty million and below, Represented the majority of deals in the data set.”
Johnson: Crux has seen no deals proceed without prevailing wage adders
“To, as far as I know, we have not seen a deal yet that has moved forward without the prevailing wage and apprenticeship adder.”
Johnson: Pending R&D tax bill could reduce demand for clean energy credits
“This new tax bill that is winding its way through Congress and appears likely to pass has pretty extensive tax credits for R&D to the extent that that is passed and buyers can take benefit of those new retroactive R&D credits that limits demand that could be o…”
Johnson: Clean energy tax credit mega-deals transact at 94 to 96 cents
“The mega deals, call it the hundred million dollar plus kinds of deals, are transacting at 94, 95, 96 cents, and the trend of size impacting price is true across credit types.”
Johnson: Clean energy finance sees rise of hybrid tax equity structures
“We are seeing an increasing amount of so-called hybrid deals where a tax equity partnership is formed, and then credits are sold
Out of that partnership.”
Johnson: 2023 clean energy tax credit transactions will reach $7B-$9B
“If you trust our numbers, then it's something like seven to nine billion that will transact, but it's capped. And there was more demand than supply. There is still more demand than supply on those 23 credits.”
Johnson: 2024 transferable tax credit market may see pricing reset
“So I think you're gonna see supply and demand adjust over the course of the year, and you may see a bit of a reset on pricing as we go into a more of a larger market from the one that was in twenty-twenty-three.”
Alfred Johnson: Tax credit buyers prefer familiar technologies like wind and solar
“And though we're seeing some convergence, there is, we are seeing some sign that buyers are more comfortable with the existing technologies that That they have seen in the past, like wind and solar, than they may be with some of the new technology types”
Johnson: Annual clean energy tax credit market will reach $100B by 2030
“And in the world where we're at a hundred billion dollar a year Annual tax credit market that is, you know, five years, six years advanced from where we sit today. I think that market will be a lot more standardized. I think technology will sit at the center o…”