Currents Podcast Ep337 Summary

Episode Title: How Tax Credit Markets Weathered 2025
Host: Todd Alexander (A), Partner at Norton Rose Fulbright
Guest: Alfred Johnson (B), Co-founder and CEO of Crux
Release Date: February 26, 2026

Overview

This episode examines how the transferable tax credits market—and the broader clean energy financing ecosystem—weathered the challenges of 2025. Todd Alexander welcomes Alfred Johnson from Crux, a platform facilitating tax credit transactions, to discuss Crux’s third annual market intelligence report. Together, they break down why the market showed resilience amid policy uncertainty, shifts in energy demand, regulatory changes, and increased capital flows—especially regarding new clean energy technologies.

Key Discussion Points & Insights

1. A Stormy Year—But Remarkable Resilience

• Metaphor for 2025: Alfred likens the market to “a ship in the sea at night” (02:18), facing headwinds (policy changes, tariffs, supply chain issues) and tailwinds (continued capital inflow, falling interest rates, strong demand from hyperscalers).
• Main Finding: Despite multiple headwinds, capital deployment increased by about 6% from 2024 to 2025 (03:02).
   

"The ship is further along than we would have expected. More capital flowed into the industry." (02:59, B)

2. Growth in Tax Monetization and Direct Transferrable Credits

• Capital Numbers:
  • Total capital (‘clean economy’): $120 billion CAPEX in 2025
  • Total financing (including re-financings): Over $200 billion (04:23)
• Tax Monetization: Grew to $63 billion, a 20% increase over 2024
• Direct Transfers: Jumped from $28B in 2024 to $42B in 2025, a 27% increase (05:19)

"Direct transfers went from a $28 billion market in 2024 to a $42 billion market, which is a 27% increase." (05:17, B)

• Data Integrity:
  Crux aggregates these numbers through its platform data, market surveys (from law firms, banks, participants), and public filings, leading to high confidence in the figures reported (05:35–06:00).

3. Tax Credit Pricing & Transaction Timing

• Market Dynamics Shift: In 2025, 60% of volume transacted in the first half of the year, reversing previous years’ trend.
• Slight Decline in Prices:
  • IG-rated ITC: 94¢ → 93¢
  • Non-IG ITC: 91¢ → 90¢ (07:08)
  • IG-rated PTC: 95¢ → 94¢
  • Non-IG PTC: 94¢ → 93¢
• Buyer Demand Drop: Linked to reduced tax liabilities after mid-year tax law changes, driving a need to reassess tax capacity (06:54–07:36)

4. Hybrid Tax Equity’s Expanding Role

• Retained Tax Equity:
  • Pre-transferability: ~$20B
  • 2025: $36B
  • Retained portion of hybrid transactions now ~$22B
  • Growth largely enabled by greater transferability

"All of the growth in the market has come from the ability to transfer out of tax equity structures." (09:06, B)

• Investor Capacity:
  • Need for more investors is now the main market constraint
  • Crux has executed four deals totaling over $700 million (10:31)

5. Safe Harboring and Pipeline Concern

• Safe Harbored Solar/Wind:
  • Wind and solar under old tax credit rules: ~70 GW
  • Total safe harbor (all technologies): ~170 GW (11:10)
• Future Growth: Substantial backlog means tax equity market is likely robust through at least 2027 even as some tax credits phase out.

"...the market may continue to grow significantly at least through 2027." (13:15, A)

6. Battery Storage Booming

• Battery Deployment:
  • 2025: 19 GW, a 72% jump from 2024
  • Driven by demand from hyperscalers, lower costs, performance gains, new standalone storage credits, and high curtailment markets like California and Texas (11:56)

"Battery storage is categorically booming... a 72% increase from 2024." (12:10, B)

• Market Share: Storage (standalone + solar+storage) now accounts for 20–25% of the tax credit market

7. New & Niche Credits: 45Z, 45Q, Advanced Manufacturing

• 45Z – Clean Fuels: Now ~3–4% of tax credit volume, poised to grow with regulatory clarity (14:48)
• 45Q – Carbon Capture: Impact remains limited; few projects reaching completion; market awaits more volume from placed-in-service projects (14:57)
• Advanced Manufacturing (45X): Saw decreased pricing in 2025 pending guidance; sellers often held credits in anticipation of more favorable conditions

8. Shifting Market Composition & Tech Neutral Credits

• Tech Neutral Credits: Investors still prefer legacy credits, with a 1.5–2¢ price discount on tech-neutral compared to legacy ITC/PTC, but uptake should increase as old pipelines clear (17:43)
• Buyer Base Diversifies:
  • 2023: ~50 Fortune 1000 firms participated
  • 2024: ~150
  • 2025: ~250 (¼ of Fortune 1000), now broadly distributed across sectors
  • Those participating reduce their effective tax rates by approx. 3 percentage points (19:20)

"We're now up to about a quarter of the Fortune 1000 that has participated in the market...The average ETR...is about 25, and the average of those that do is about 22." (19:51, B)

9. Market Transparency Effects

• Pricing Convergence:
  • Public data and aggregation has made pricing more transparent, leading to faster, less negotiation-heavy transactions—at least temporarily
  • However, market cycles see eras of price divergence and convergence, depending on buy-side interest and seller urgency (24:29)
• Liquidity & Supply Dynamics:
  • 2025 saw a flush of unsold credits, especially 45X. Sellers can choose when to transact based on internal needs; Crux can precisely estimate fair market value at a given moment but not timing of future liquidity (26:10)

"We can tell you with accuracy what the credit would transact at in the market if it traded today." (26:59, B)

10. Segmentation by Technology and Deal Structures

• ITC vs. PTC Pricing: PTCs (especially from wind and large solar) trade at a premium over ITC; IG-rated sellers command price premiums
• Community vs. Utility Solar:
  • 51% utility-scale solar tax equity retained by investors; only 25% for community/C&I solar
  • Preferred equity, step-ups, and insurance are much more prevalent in community/C&I markets (20:03)
• Insurance Market Volatility: 2025 saw regulatory-driven shifts in insurance availability, influencing structuring and segment behavior

Memorable Quotes & Moments

• On Market Resilience:
  “The ship is further along than we would have expected.” (02:59, B)

• On Buyer Base Expansion:
  “We're now up to about a quarter of the Fortune 1000 that has participated in the market...It’s really a question of why aren’t you participating?” (19:51, B)

• On Battery Market:
  “Battery storage is categorically booming...a 72% increase from 2024.” (12:10, B)

• On Transparency:
  “We can tell you with accuracy what the credit would transact at in the market if it traded today.... The thing we can't tell you is when you will transact.” (26:59, B)

Timestamps for Major Segments

• [00:56] Introduction to Crux’s Market Intelligence Report
• [02:18] Metaphor for 2025 and overview of key findings
• [03:02] Capital deployment increase (6%)
• [04:23] Market size details ($120B CapEx; $200B total financing)
• [05:17] Direct transfer market growth ($28B→$42B)
• [07:08] Tax credit pricing dynamics 2025
• [09:06] Hybrid tax equity’s role and market growth
• [11:10] Safe harboring and what it means for coming years
• [12:10] Battery storage boom (19GW in 2025)
• [14:48] 45Z and 45Q updates
• [17:43] Tech neutral credits and market preference
• [19:20] Buyer diversification and effective tax rate impacts
• [20:03] Community vs. utility solar, insurance effects
• [24:29] Effect of transparency on market pricing
• [26:59] Predicting pricing vs. transaction timing
• [28:11] ITC/PTC/technology-specific pricing dynamics

Conclusion & Further Resources

• Report Access:
  Existing Crux clients already have the report; others can download the public version at Crux’s Website (22:14)
• Advisory & Tools:
  Crux provides detailed, actionable market intelligence, advises on transaction processes, and offers an advanced data platform for tax credit transactions (22:14, 23:00)
• Outlook:
  Continued stability and moderate growth expected through 2027, with segment composition shifting as market matures and policy evolves.

This episode is essential listening for project finance professionals, developers, and corporates active in the clean energy tax credit space, offering highly granular, actionable intelligence on recent trends, pricing, and the factors shaping the evolving market landscape.