Crux raises funds as it builds market for transferable clean energy tax credits

The $18.2 million in funding will help Crux grow its team and scale the volumes of annual transferable credits into the billions, the company said.

February 1, 2024 Kavya Balaraman

Image: Pixabay

Crux, a sustainable finance technology company has raised $18.2 million in Series A funding, bringing its total funding to over $27 million.

The company was founded in January 2023 by Alfred Johnson, former deputy chief of staff to Secretary Janet Yellen at the U.S. Treasury Department where he was responsible for work related to digital assets, cybersecurity and technology, and more. He founded Crux to create a market for transactions of the newly transferable clean energy tax credits, included in the Inflation Reduction Act (IRA). The company’s latest round of funding was led by Andreessen Horowitz, and included participation by existing investors including Lowercarbon Capital, New System Ventures, Overture, and The Three Cairns Group.

“This new round of funding will help us build even faster, grow the transferable tax equity market at a critical moment, and expand our services — furthering our mission of making sustainable finance more efficient and interconnected,” said Alfred Johnson, CEO and co-founder of Crux.

Specifically, the company said that the new funding will help it grow its team, scale up the volumes of annual transferable credits to the billions and look into other offerings for clean energy projects.

Prior to the passage of the IRA, developers needed to rely on project finance structures called tax equity partnerships to monetize unused credits, Johnson told pv magazine USA. But the IRA substantially extended and expanded the use of tax credits to catalyze the development of clean energy and decarbonization projects, he added.

“Transferability has significantly increased access to capital for smaller projects and new technologies. Projects below [$50 million] are generally too small to attract a traditional tax equity investor. Now, those projects can sell credits directly to third party buyers,” Johnson said.

Earlier this month, Crux released its first Transferable Tax Credit Market Intelligence report, which estimated that between $7 billion and $9 billion in transferable clean energy tax credits were transacted in 2023. The transferable sector currently accounts for one-third of the entire tax finance market – estimated at around $23 billion in 2023 – and the report forecast a particularly strong growth for the sector.

The company has over $8 billion of credits currently available for sale and is working with clients that include project developers, tax credit buyers, banks, and others.

“Recent policy changes around the transferability of clean energy tax credits have propelled market growth beyond expectations, fundamentally transforming how clean energy and decarbonization projects are financed in the United States,” said David Haber, general partner at Andreessen Horowitz.

Looking to 2024, Johnson expects that this market will continue to grow and mature rapidly. At a micro level, a large proportion of prospective credit buyers who were not active in the market for tax credits in 2023 expect to get involved this year, he said – and if a large share of those buyers ultimately decide to pursue a deal, that would represent net new demand for tax credits.

“We also are starting to see some of the first deals that blend traditional tax equity partnerships and direct transfers inked. These hybrid deals will be used more frequently, and buyers are already reacting favorably to those credits,” Johnson added.

At a macro level, he said, the traditional tax equity market is relatively constrained due to a combination of factors.

In this context, the energy transition will be fueled by a transparent, efficient market for clean energy tax credits, said Johnson.

“Our platform is one part powerful data, stakeholder, and workflow management software built specifically for tax credit transactions. And, Crux is also the liquidity solution for buyers, sellers, and their intermediaries to transact,” he said.

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