Gevo Sells $20M in Biofuel Credits

LINCOLN, Neb. (DTN) -- Gevo Inc. sold about $20 million in investment tax credits through the Inflation Reduction Act (IRA) generated at the company's northwest Iowa renewable natural gas plant, according to a news release from the company.

The sale of the credits is expected to generate about $17 million for the company after fees, which the company said has generated cash flow for the plant that the company expects will continue to expand RNG production.

Gevo is considered to be one of the major players in the early development of a sustainable aviation fuel (SAF) industry.

The company announced last week that it was buying Red Trail Energy's ethanol plant and carbon capture and storage facility in Richardton, North Dakota, in a $210 million deal, https://www.dtnpf.com/….

The purchase will allow Gevo to expand its total annual sequestration capacity to 1 million metric tons.

According to a news release from Gevo, the company expects to make similar income as a result of the 45Z clean fuels production tax credit that has yet to take effect. The Biden administration has yet to release guidance on the 45Z credit.

At the Iowa plant, Gevo generates renewable natural gas by collecting manure on dairy farms and placing it in anaerobic digesters installed on those farms. That's where biogas is captured and then refined to replace fossil natural gas as a transportation fuel.

Gevo's commercial partner sells RNG from the Iowa plant in California.

"Using an estimated carbon-intensity score that incorporates the methane avoidance crediting aligned in the California Air Resources Board's low-carbon fuel standard, the RNG produced by the Gevo RNG facility is expected to yield upwards of 175,000 metric tons of carbon dioxide equivalent greenhouse gas emissions reductions annually," Gevo said on Thursday.

Gevo's CEO Pat Gruber said his company continues to "seek out ways" to make money for shareholders.

"This is just one example of how our mission to optimize renewable energy and seek out efficiencies creates opportunities," he said.

"Gevo RNG began as a low-carbon source of heat energy for our facilities but has increased in value as it helps to reduce use of fossil energy in transportation while creating cash flow and driving further investment in clean energy."

Net proceeds from the monetization of the tax credits improve Gevo's liquidity, the company said, increase cash flow from operations and improve the company's ability to fund SAF and other projects.

The Inflation Reduction Act has changed the way federal clean energy tax credits are monetized and has altered the way companies approach how they leverage investment and production tax credits for renewable energy projects, the company said.

The IRA permits the buying and selling of these credits for cash, Gevo said.

That creates a new avenue for companies seeking tax savings through a growing tax credit market, rather than requiring commitment to a long-term renewable energy investment with a sponsor.

"This area of tax credit transferability is continuing to develop, but the current market offers the advantage of acquiring credits at a discount, reducing the investment timeframe and providing a straightforward legal procedure in comparison to traditional tax equity dealings," Gevo said in a news release.

Todd Neeley can be reached at todd.neeley@dtn.com

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