Renewable energy fintech startup Crux Climate launches with $4.6M in funding to provide a marketplace for IRA tax credits

Unknown to most Americans, the Inflation Reduction Act (IRA) passed last year is packed with several tax incentives to stimulate the climate economy and reduce renewable energy costs for organizations. The tax credits cover various clean business activities such as constructing electric vehicle infrastructure, wind power, solar power, nuclear power, clean hydrogen, and advanced manufacturing of component parts, among others.

While companies have a history of seeking tax credits that exceed their income, the process of doing so is often complex and opaque. Now, one stealth renewable energy fintech startup is on a mission to streamline and broaden access to this cash.

Enter Crux Climate, a digital marketplace that provides access to IRA tax credits. Crux is the ecosystem for clean energy developers, tax credit buyers, and financial institutions to transact & manage transferable tax credits, CEO Alfred Johnson said in his LinkedIn profile page. The Crux platform aims to make it easier for companies and organizations to discover the price of tax credits, which tend to trade at a varying discount to their full value. Sellers can then list their tax credits on option, get bids on those credits, and compare offers.

Crux was founded by CEO Alfred Johnson and his friend Allen Kramer (President). The two previously founded Mobilize, which was later acquired by Insight Partners-owned EveryAction in 2020. Prior to joining Mobilize, Alfred held the position of Deputy Chief of Staff at the Treasury Department. He has also served as the head of Sales/People at Clara Lending and held the role of Vice President at BlackRock. Additionally, Alfred worked at Assured Labor and Bain & Company prior to his tenure at Mobilize.

Crux co-founder and president Allen Kramer

Yesterday, Crux announced its first funding round of $4.6 million led by Lowercarbon Capital, CNBC reported. According to a report by Credit Suisse in September, around $500 billion worth of tax credits are expected to be monetized in the next ten years.

“The IRA creates a trillion-dollar pool of capital to de-fossilize our economy, but it’ll take a platform like Crux to unleash the flood waters,”  Clay Dumas, founding partner at Lowercarbon Capital, said in a statement.

The development of clean energy is expected to experience significant growth. But sustainable finance needs to become more efficient to keep up with the pace required. The IRA aims to make numerous tax credits available to companies that build facilities or produce clean power and materials, potentially amounting to hundreds of billions of dollars.

However, the market for transferable tax credits requires new standards, more buyers expanded financial products, and specialized software to thrive. That’s why Crux has positioned itself to streamline tax credit transactions, provide access to a large market, reduce risk, and increase trust.

How Crux Climate helps climate finance

Despite the fact that the IRA permits the buying and selling of tax credits among unrelated parties, the market remains primarily operated manually, resulting in slow and opaque transactions.

Climate companies must still locate a buyer for their credits, arrange a meeting, and negotiate a price based on the unique characteristics of the transaction. Furthermore, companies cannot accurately determine the competitiveness of a bid until they have explored multiple options.

“The tax credit market is very opaque,” explained Christopher Kemper, another Crux investor and the CEO of clean energy company Palmetto. “There are a few institutional players in the market that purchase tax credits at discount to market value in exchange for buying at volume. Transaction processes are highly involved, very complex, and can take 6 to 12 months to structure.”

“These transactions are wildly complex and very expensive, and about to grow by orders of magnitude in scale,” Bhatraju told CNBC. “I’ve seen how difficult it can be for solar projects to line up tax equity. They have hundreds of underlying documents and all of the possible stakeholders from developers, lenders, off-takers, lawyers, and accountants involved.”

The aim of Crux is to tackle this issue by establishing a centralized marketplace for both buyers and sellers, which is supported by a dedicated software platform.