Upon becoming law in 2022, the Inflation Reduction Act (“IRA”) extended the opportunity to generate investment tax credits (“ITCs”) to renewable natural gas (“RNG”) projects, incentivizing the development of new projects and enabling some projects already in the development pipeline to capture material new value. Specifically, the IRA provided for the generation of ITCs pursuant to Section 48 of the amended Internal Revenue Code of 1986 based on a percentage of eligible project costs.
Initial excitement cooled after the Treasury Department released guidance in November 2023 suggesting that the Section 48 ITC would exclude certain portions of biogas upgrading equipment from being ITC-eligible, making ITC modeling difficult for RNG developers. The Coalition for Renewable Natural Gas and the American Biogas Council led developers and other RNG industry stakeholders in seeking clarification of that guidance, resulting in finalized language specifying that equipment used to convert raw biogas into pipeline-quality RNG, including gas upgrading equipment, is ITC-eligible. The final language was applauded for reflecting “the realities of how biogas systems are built” by American Biogas Council executive director Patrick Serfass.[1] He expected it to “give biogas developers certainty on the eligibility of their projects for investment tax credits available to clean energy projects.”[2]
Since then, the market for ITCs generated by RNG projects has grown significantly – not only in terms of developers seeking to qualify for and generate ITCs, but also in terms of industry-agnostic market participants, including economic investors attracted to RNG portfolios by ITC value and U.S. federal taxpayers (corporate and individual) looking for tax mitigation strategies.
That interest translated into ongoing deal flow. In late 2024, OPAL Fuels Inc., a vertically integrated RNG operator, sold $11.1 million worth of ITCs to a subsidiary of Apollo Global Management, Inc. Shortly thereafter, EVENSOL LLC, another RNG operator, sold ITCs generated by two projects worth $34.5 million in aggregate. That same year, boutique investment bank Virentis Advisors, which focuses on RNG projects, announced having closed over $55 million in biogas ITC transactions. In February 2025, Aemetic Biogas, a subsidiary of Aemetis, Inc., sold $7.7 million worth of ITCs generated by the construction of dairy biogas digesters. ITC transactions continue gaining traction in mid-2025 – the ability of RNG developers to generate and monetize these credits provides early-stage cash that’s often essential to later project development.
“The $6 million of net cash proceeds received by Aemetis… is in addition to $11 million of cash proceeds from tax credits sold [previously], funding domestic energy production projects and reducing dependence on imported crude oil,” said Eric McAfee, Chairman and CEO of Aemetis, who also anticipated future deals.[3] “The next sales of investment tax credits will be generated by biogas digester and pipeline projects that are currently under construction and expected to be completed in Q2 2025.”[4]
As 2025 continues, renewable energy tax credits, including ITCs generated by RNG projects, seem poised to enjoy continued value and market demand – including from economic investors outside the industry and individual and corporate taxpayers interested in offsetting their tax liability with credits purchased at a discount.
[1] Wallace, J. (December 6, 2024). Biogas investment tax credit finalized with favorable language for RNG. Waste Dive.
[2] Id.
[3] Aemetis, Inc. (February 28, 2025). Aemetis Biogas Receives Proceeds From Sale of $7.7 Million of Investment Tax Credits. Biomass Magazine.
[4] Id.
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