Getting Credit for Renewable Energy Investments

Dec 5, 2023

Companies can capitalize on the U.S. Inflation Reduction Act’s tax credits, which reward investments in domestic renewable energy and manufacturing.

Key Takeaways

  • The U.S. Inflation Reduction Act (IRA) offers tax credits to corporations that invest in domestic clean energy and manufacturing.

  • IRA tax incentives could total in the hundreds of billions of dollars in the next 10 years. 

  • To benefit, companies can consider strategies such as building or financing clean energy as well as buying renewable energy tax credits.

  • Investors can monitor renewable energy developers and companies contributing to the energy-transition economy for potential opportunities. 

Global companies have a new way to reduce costs while advancing their environmental objectives. The landmark U.S. Inflation Reduction Act (IRA), signed into law in 2022, aims to substantially lower the nation’s carbon emissions by directing federal spending to domestic clean energy development and manufacturing. It does so in part by offering tax credits to corporations that invest in or produce U.S. renewable energy. This allows businesses to save money by deducting a portion of investment costs, make progress toward their net-zero goals and bolster U.S. manufacturing jobs.


Over the next 10 years, IRA tax claims could total in the hundreds of billions of dollars,1 as corporations aim to capitalize on the benefits. Jorge Iragorri, Head of Renewable Energy Investments at Morgan Stanley, explains how corporations and investors should think about the opportunity.

What are the primary ways that companies can qualify to receive IRA tax credits?

There are a lot of options. Companies can receive tax credits for activities stemming from their own operations, which generally fall into two categories:

  • Constructing and operating clean energy projects, such as solar, wind, standalone storage and carbon sequestration, to name a few; and

  • Domestic manufacturing of clean energy equipment 

Additionally, corporations of all sizes are incredibly focused on purchasing tax credits via transfer under the IRA’s “transferability rules,” which allow companies to buy tax credits at a discount. Purchasing clean energy tax credits via transfer allows a much bigger universe of corporates to participate in clean energy financing and the U.S.’s decarbonization goals as it allows corporates to manage tax liabilities with a relatively simple transaction. We are seeing substantial demand for these types of transactions.

What should investors watch as they assess the landscape of companies with respect to IRA tax credits?

I would watch private and publicly traded energy producers with robust energy transition strategies, and companies that manufacture clean energy equipment such as solar panels, power inverters or electrolyzers for green hydrogen. 

Notably, while there are not too many renewable energy power producers that are publicly traded now, that may change in the next few years, as a result of the IRA. 

I would also watch the electric vehicles (EV) economy, whether it’s the EV manufacturers, charging-station companies or businesses that make the transmission infrastructure. The IRA paves the road for EVs to be a hypergrowth industry.

Could the U.S. election in 2024 be a threat to the Inflation Reduction Act?

Although the IRA was passed on Democratic votes, thousands of new jobs, including manufacturing jobs, are being created in more traditionally Republican states. That leads many in the renewable energy industry to believe that regardless of the 2024 election outcome, the IRA will likely remain in place.

Is there anything that companies and investors should watch at a global scale with respect to IRA tax credits?

The U.S. has been able to attract a lot of foreign direct investment as result of the IRA. Many non-American investors, ranging from pension funds to sovereign wealth funds, are coming into the U.S. to invest in renewables. Companies and investors should watch for how other global jurisdictions respond, as many are trying to figure out how to create their own versions of the IRA, to ensure domestic green energy growth.

More Insights