DSD Renewables closes $140 million IRA tax credit transaction

The solar, energy storage and EV charging developer will transfer Inflation Reduction Act tax credits to corporate buyers.

DSD Renewables, a developer of solar, energy storage and EV charging stations for commercial, industrial and municipal customers announced it secured a $140 million tax equity investment from Morgan Stanley Renewables.

The transaction marks the first time DSD Renewables will transfer tax credits created by the Inflation Reduction Act (IRA) to corporate buyers. The IRA awards tax credits to project developers for 30% of the cost of an installed project through the Investment Tax Credit (ITC). Under a tax credit transfer transaction, renewable energy developers and owners are essentially able to sell tax credits for cash, making financing easier for project finance and business operations.

DSD Renewables said this transaction is among some of the first tax equity transactions leveraging IRA financial tools to support distributed generation assets. The investment will support power purchase agreements and community solar projects across the Northeast, California and Illinois, said DSD Renewables.

“The ability to transfer tax credits has created a more accessible tax equity market for solar project investment, helping accelerate the adoption of clean energy solutions across the country,” said Hannah McGovern, vice president of structured finance, DSD. “While the structure of these deals will continue to evolve, we expect to see more of these transactions close in the near future.”

The solar developer has raised over $2 billion in project capital and installed over 1 GW of distributed solar and storage projects across the United States.

“Transferability has emerged as a critical tool to scale electrical infrastructure to meet the rising demand for energy. This market rapidly matured throughout 2024 — its first full year — and signaled growing market confidence,” said Crux, a tax credit transfer marketplace operator.

Crux highlighted the boom year of 2024 for renewable energy tax credit transfers:

• Market volume tripled from 2023 to nearly $30 billion in 2024
• Average pricing for ITC and Production Tax Credit deals increased to 92.5 cents and 95.0 cents, respectively 
• 20% of deal volume now includes forward commitments