Schneider Electric, ENGIE Enter Tax Credit Transfer Agreement Under IRA

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Schneider Electric, a digital energy and automation manager company recently announced its investment in a portfolio of Texas-based clean energy projects. Through this, it utilized a Tax Credit Transfer Agreement (TCTA) for solar and battery storage systems developed, built, and operated by ENGIE North America (ENGIE).

The contracted projects are expected to come online throughout 2024 and are estimated to enable Schneider Electric to get closer to its 100% renewable energy goal in the US and Canada. The agreement between ENGIE, a leader in the net-zero energy transition, and Schneider is among the first at this scale to take advantage of new tax credit transfer provisions in the Inflation Reduction Act (IRA) that will help companies meet their renewable energy goals.

“Schneider Electric is committed to achieving net-zero emissions across our operations by 2030. This new solar-plus-storage agreement for the US and Canada with ENGIE, a leading developer of renewables, will help us reach that goal,” said Aamir Paul, President, of North America Operations. He added “The IRA opens the door for innovative projects through its transferability clause and expands the range of entities that can benefit from tax credits in meeting decarbonization objectives. Schneider Electric is a leader in sustainability, efficiency, and the energy transition, and we are proud to ‘model the way’ with this tax credit transfer.”

The IRA’s transferability clause enables the transfer of eligible federal tax credits from renewable energy, clean energy manufacturing, and battery storage projects, among other clean energy projects. This new feature creates a feasible alternative to traditional tax equity structures. Tax credit transfer also enables Schneider’s Scope Two decarbonization when the investor-buyer procures associated environmental attributes as part of the transaction.

This is not the first collaboration between Schneider Electric and ENGIE. Since 2017, the two companies have joined forces on multiple projects, and have led clients through their procurement of renewable energy via virtual power purchase agreements (VPPAs) that exceed 1.6GW in total in North America alone. ENGIE’s investment and innovation in renewables have resulted in the company being named the leading developer of corporate energy PPAs in 2023 by BloombergNEF in its latest Market Outlook report and being ranked in the top three since 2019. ENGIE’s total corporate PPA portfolio in North America exceeds 6.5 GW.

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“This collaboration with Schneider signals a real step forward in accelerating the net-zero transition. The solar-plus-storage portfolio, coupled with the innovative tax credit transfer structures enabled by the IRA, helps expand the opportunities for an increasing set of corporate clients to meet their goals,” said Dave Carroll, Chief Renewables Officer and SVP, ENGIE North America. “This approach supports the continued growth of renewable energy and storage options in the US, which brings economic opportunities to an expanding set of communities alongside the transition to a lower-carbon grid.”

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“Schneider Electric’s North American renewable energy goal is commendable, and its advancement in accelerating its efforts. Schneider’s work demonstrates both the power of collaboration with essential partners in the energy industry and the innovation necessary to progress actionable solutions in our nation’s journey toward net zero,” said Sheri Givens, President and Chief Executive Officer (CEO), Smart Electric Power Alliance (SEPA). “SEPA values its members’ efforts in the clean energy transition, and Schneider’s leadership serves as an example of those companies at the forefront.”

According to Bloomberg (BNEF), the IRA’s tax credit transfer rules create a new set of possibilities for funding America’s energy transition. Most intriguing is the market for tax credits, which could greatly streamline the process of getting money to where it is most needed and is a step towards maturity as market participants discover together operating models that can scale.
Schneider Electric Tax Credit Investment Service

Schneider Electric was advised on the deal by consultants from its Sustainability Business, the world’s largest advisor on corporate renewable energy procurement. Schneider provides these consulting services on tax credit transfers to clients to help them take advantage of the innovative opportunities created by the IRA. It is estimated by Credit Suisse that nearly $1 trillion could be unlocked over the next ten years thanks to public and private spending mobilized by the IRA in climate and energy-related investments.

The tax credit transfer opportunities structured by Schneider Electric’s advisory team allow companies to simultaneously reduce Scope 2 emissions, capture favorable risk-adjusted returns on investment, demonstrate environmental leadership, and accelerate progress toward decarbonization goals. This requires an understanding of complex regulations, market uncertainty, energy and environmental attribute markets, and technology maturity curves. With its 20+ years of renewable energy advisory experience, Schneider Electric is uniquely equipped to guide enterprises through the complexities of the new tax credit investment landscape.
Leveraging the IRA for both private and public sector

The IRA has proven to be significant for Schneider Electric’s customers in the private, public, and residential sectors. The company has seen increasing demand for offsite and onsite renewable energy solutions and microgrid technologies using IRA-provided benefits, and growth in its residential consumer market in addition to corporate tax credit opportunities.

Schneider’s Sustainability Business is also helping its US public sector clients – predominantly schools and municipalities – to utilize IRA provisions to procure electric vehicles like school buses and emergency response vehicles and to implement onsite solar, providing tax relief to economically disadvantaged public entities across the country.