The 45Y Clean Energy Production Credit After the Big Beautiful Bill

Since then, it’s catalyzed investment in a host of clean energy initiatives—including wind, solar, hydropower, and nuclear generation—with many project developers choosing to transfer and sell their production tax credits to corporate buyers in exchange for cash.

What is the 45Y production tax credit?

The 45Y production tax credit (PTC) was established by the Internal Revenue Service (IRS) to offer an incentive tied to the amount of clean energy that’s produced and sold.

The PTC is tech-neutral and encompasses all energy production facilities that produce zero emissions. 

Since the “One, Big Beautiful Bill Act” was signed into law on July 4, 2025, there are new rules and timelines for renewable energy producers looking to receive the 45Y credit. Eligible wind and solar manufacturers must begin construction on their facilities one year from the bill’s enactment and place them in service by Dec. 31, 2027. For other renewable technologies, the production tax credit phases out after 2032.

What technologies qualify for the 45Y PTC?

While the 45Y production tax credit is tech-neutral, the facility must have a greenhouse gas (GHG) emissions rate of no greater than zero. New additions or upgrades to existing facilities can also qualify, but only for extra energy that’s generated and if those upgrades start operating after Dec. 31, 2024. To prevent double-dipping, a facility can’t also get the 45Y credit for the same year or any earlier year if it’s already claimed an incentive under 45, 45J, 45Q, 45U, 48, 48A, or 48E of the Internal Revenue Code.

On Jan. 7, 2025, the IRS released final rules for the 45Y production tax credit and confirmed the eligibility of some of the most common types of clean energy projects, such as solar, wind, battery storage, nuclear, and geothermal. However, the requirements affected biogas, certain biomass, and renewable natural gas facilities, which do not qualify for the 45Y PTC.

How is the 45Y production tax credit calculated?

The 45Y PTC gives businesses a tax credit based on how much clean energy they produce. It’s calculated by multiplying the number of kilowatt-hours (kWh) of clean energy a facility generated by a set dollar amount assigned to the qualifying facility.

There are two types of set amounts for qualifying clean energy sites: 1) The base amount and 2) higher alternative amount. The base amount is 0.3 cents per kWh, while the higher alternative amount is 1.5 cents per kWh for facilities with a maximum output of less than one megawatt (MW), for which construction begins before the 60 days after the Secretary of the Treasury publishes guidance on 45Y, or for which prevailing wage and apprenticeship requirements are satisfied. However, we expect most production tax credits for eligible 45Y projects to go above this threshold.

Bonus incentives—known as adders—can also increase the overall value of the 45Y credit, with domestic content adders contributing an additional 10%, energy communities an extra 10%, and low-income communities a further 10% or 20%.

How to determine whether to use the PTC vs. ITC 

Developers looking to claim the 45Y PTC or the 48E ITC have a number of factors to consider, including capacity, capital expenditures (CapEx), and their eligibility for bonuses.

The 45Y production tax credit offers a performance-based incentive, paying out over 10 years based on the amount of energy a facility produces. This structure is beneficial for high-capacity projects, such as utility-scale nuclear or solar sites. An example highlighted by solutions and tech provider ICF indicates a 200 MW solar project with a 26% capacity factor, $1.25/WAC CapEx, and 2025 COD could yield approximately $90 million in PTC value at a discount rate of 8%. However, delayed returns make the PTC less appealing overall for projects with high CapEx or curtailment risk.

In contrast, the ITC offers an upfront benefit, which makes it more attractive for capital-intensive or lower-production projects. In this case, the same 200 MW solar project would receive a $75 million credit upfront under the ITC. 

Ultimately, PTCs are well-suited for high-capacity and low-CapEx projects with reliable output, while ITCs benefit projects that prioritize early returns, face higher CapEx, or qualify for bonus credits. Financing costs are also key: higher discount rates tend to favor the ITC due to its immediate payout, while lower rates improve the relative value of the PTC’s long-term stream.

Selling PTCs: Pricing, due diligence, and recapture risk

Selling transferable 45Y clean energy production credits involves several key factors when it comes to pricing, due diligence, and risk management. Credit pricing varies based on market demand, credit size, and perceived risk. 45Y credits are earned over a 10-year period starting at a facility’s placed-in-service date, with credit amounts varying annually based on the applicable rate, labor compliance, and construction timing.

As part of PTC due diligence, sellers must provide an organization chart, corporate documents, and audited financials to assess ownership, tax status, and reasonable forecast for expected generation in the current and coming years. Transactions must occur between unrelated parties, and any financing or ownership structures must not restrict credit transfers. The seller’s fiscal year-end and tax filing date affect transaction timing, and deals must close before filing. Buyers should also confirm there are no pending legal actions at closing or funding. They’ll also typically require tax insurance to protect against recapture risk, though some sellers may offer guarantees instead. 

Featured Tax Credit Sale

Basis Climate successfully facilitated the transfer of PTCs across three transactions for ACCIONA Energía representing combined solar and wind capacity of 890 MWac.

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How does the ‘One, Big Beautiful Bill Act’ affect 45Y?

On July 4, 2025, U.S. President Donald Trump signed the “One, Big Beautiful Bill Act” into law, marking changes for the 45Y clean energy production tax credit. 

The 45Y incentive’s transferability provisions remain unchanged under the new tax legislation. However, wind and solar facilities eligible for the production tax credit must begin construction within one year of the bill’s enactment and be placed in service by Dec. 31, 2027. Other applicable clean energy technologies will see the credit phased out after 2032. This makes it critical for developers and buyers to act now if they want to capitalize on the 45Y production tax credit.

Unpacking Trump’s Executive Order’s Impact on Wind and Solar

Further complicating matters, just days after the law’s enactment, an executive order was published demanding the Secretary of the Treasury terminate the 45Y credit for both wind and solar facilities within 45 days. The order specifically targets tightening construction rules and is aimed to prevent developers from taking advantage of legal loopholes. It’s also intended to further limit safe harbor provisions.

We are monitoring the situation closely and will provide updates as the IRS or Secretary of the Treasury releases new guidance or regulations.

Need help transferring your 45Y credit? Contact our team, and we’ll help you streamline the process.