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Crossroads: Marathon’s Matt Shanahan discusses investment environment for renewable energy

This week, Marathon Capital Partners’ Matt Shanahan joined Crossroads: The Infrastructure Podcast, to discuss the current state of the renewable energy sector.

Shanahan, who manages the tax equity advisory practice at Marathon Capital, discussed the critical role of tax equity partnerships and tax credit transfers in delivering federal renewable energy subsidies established under the Inflation Reduction Act (IRA) of 2022.

With the IRA’s massive increase in eligible tax credits for mature renewables like solar and wind, as well as emerging technologies like hydrogen and carbon capture, many developers are turning to the newly established transfer market to sell the rights to the tax credits generated by their projects, Shanahan said.

The total value of federal tax credits for renewable energy and decarbonization projects is projected to double, or even triple, thanks to IRA incentives, from a pre-IRA average of USD 18bn-USD 20bn a year.

“What we’re starting to see in the market is that the volume of traditional tax equity is probably about the same, but a lot of that growth, most of that growth, is coming out of the transfer market by US corporations acquiring tax credits,” Shanahan said.

The increase in federal funding, and the broadening of the universe of potential finance sources, has come at a critical time for the renewable energy sector.

When sudden development cost increases in 2022 reversed years of price declines, developers rushed to renegotiate offtake agreements for their projects to reflect rising development costs.

For the most part, Shanahan said, strong demand for renewable energy has allowed the sector to reset since then.

“It became very clear that the market for renewable power was strong enough that the offtakers renegotiated these power purchase agreements, and allowed these projects to move forward,” said Shanahan.

Listen to the entire podcast here.