The hottest topic in energy regulation is the President’s reconciliation bill. As passed by the House, the legislation effectively terminates the Investment Tax Credit (ITC) and Production Tax Credit (PTC) for wind and solar projects. These credits offset 30% of a clean energy project’s capital cost (ITC), or 1.5 cents per kWh generated over 10 years (PTC). The House version of the bill terminates the ITC and PTC for all projects, except nuclear that do not begin construction within 60 days of when the bill becomes law. Perhaps more important, any project that qualified for the ITC or PTC must be in service before December 31, 2028, in order to receive these credits.

The Senate’s version pushed the date that wind and solar projects need to commence construction from 60 days after the bill’s enactment to December 31, 2025, and includes a reduced credit value for projects that begin in 2026 and 2027. The bill removes the requirement for projects to be placed in service by 2028. The Senate version is more favorable for battery projects, with a phaseout beginning in 2033 and the incentive ending in 2036. 

The Congressional Budget Office projects that eliminating the ITC and PTC will reduce the budget deficit by about $300 billion from 2026 to 2035. For this reason, we expect that the final bill will significantly reduce the value of the ITC and PTC.  

There are three important takeaways for our clients: 

First, if you are in a market that allows you to lease property for a community solar project or you are interested in executing another type of onsite renewable project, you should move quickly. The value of such projects will materially decline if the project cannot qualify for the ITC or PTC.  

Second, well-financed renewable developers will be looking to lock down projects before the ITC and PTC are eliminated. There is an immediate market opportunity for financially strong clients who have available sites and are able to move fast. 

Third, if either the House or Senate version of the bill passes, it will significantly slow the development of wind and solar power projects. This is a bullish signal for power prices, particularly in markets like ERCOT, where large increases in renewable generation were anticipated. As the pace of new wind and solar projects declines, retail electricity prices are likely to rise, driven by growing demand that outpaces the development of new generation assets. 

In short, the reconciliation bill marks a turning point for clean energy incentives. Clients with renewable project opportunities should act quickly to preserve project value, while also preparing for a future with fewer federal supports and potentially higher electricity prices.