The OBBBA makes major changes to US tax incentives for solar, although notable concessions for the industry were secured by Alaska Republican Senator Lisa Murkowski.
Under the new law, projects that begin construction through mid-2026 will have four years to complete to retain the full 100% investment tax credit/production tax credit (ITC/PTC) currently available. This avoids the sharp drop-off previously projected for 2028. The legislation removes previously proposed foreign entity of concern (FEOC) excise tax, but does not remove FEOC restrictions themselves – ownership, material assistance, and foreign influence rules still apply.
Key provisions
The OBBBA introduces a requirement that projects be placed in service by the end of 2027 to access 48E/45Y tax credits, but projects starting construction within 12 months of the law’s enactment in July 2025 have a four-year completion window. This effectively extends 100% ITC/PTC eligibility through 2030 for projects that start construction by mid-2026.
The 48E tax credit will still be available for residential leasing companies. This covers up to 30% of the cost of systems leased or installed under a power purchase agreement. Section 25D tax credits, which are available to homeowners, will stop being available at the end of 2025.
Material assistance provisions will apply beginning Jan. 1, 2026, meaning projects starting construction in 2025 can claim full credits through 2029 without FEOC restrictions. Those starting in the first half of 2026 can do so through 2030, but with restrictions. Projects starting in the second half of 2026 must be in service by the end of 2027 to claim full value. No changes were made to the 45X integrated components provisions or phaseouts. Storage is now included in the domestic content step-up for 48E.
Projects located on federal lands managed by the Bureau of Land Management (BLM) face an additional condition: to qualify for the full 48E credit value, at least 20% of total project costs must be attributable to activities that occur on-site. This is intended to prevent developers from “papering” projects with minimal physical work while shifting expenditures off-site. The requirement raises compliance complexity, particularly where transmission and procurement costs account for a significant share of total budgets. This is likely a significant negative for certain large developers with large BLM portfolio/pipeline exposure.
Executive order
A July 7 executive order issued by President Donald Trump will affect eligibility for 45Y and 48E tax credits. The order also mandates the implementation of FEOC restrictions included in the OBBBA, which will deny credits to projects using certain Chinese equipment.
Treasury guidance issued in August 2025 states solar projects that started construction before Sept. 2, 2025, will be eligible for credits either by beginning “physical work of a significant nature,” or by incurring 5% of project costs. The test for what constitutes physical work of a significant nature will focus on the nature of the work, not the amount or cost. For solar, this could mean installing mounting racks or other structures.
Tax credit eligibility for projects starting construction after Sept. 2, 2025, varies by capacity. Installations larger than 1.5 MW will have to perform physical work of a significant nature before July 4, 2026 to be eligible, while those of 1.5 MW or less will qualify by incurring 5% of project costs by the same deadline. The guidance does not address beginning of construction rules for the purposes of FEOC restrictions – the US Treasury Department was reportedly drafting additional FEOC guidance as pv magazine went to print.
Residential market
The Section 25D tax credit, which covers up to 30% of eligible costs for a residential PV system expires at the end of 2025. This could bring approximately 500 MW of planned 2026 installations forward to 2025, while another 500 MW could be eliminated. About 1 GW is expected to be unaffected in high-rate, short-payback markets.
Transferable tax credit pricing for residential third-party owned (TPO) credits is under pressure from oversupply, policy volatility, and headline risk from bankruptcies. Only select buyers participate, valuing exemptions from prevailing wage and apprenticeship rules, customizable volumes, and lower placed-in-service risk, which allows additional discounts compared with other credit types.
Given that tax equity and tax credits represent more than half of the capital stack for TPO transactions, current market conditions make large-scale migration from 25D to TPO financing unlikely. Earlier estimates of up to 50% migration now appear optimistic, with some estimating the realistic figure to be closer to 10%.
In the loan market, the expiration of 25D may cause contraction – potentially around 50% – but the impact on loan pricing is limited to roughly 2.5% of system cost. This is because most borrowers do not fully prepay their loans with the ITC. Loans are likely to remain more attractive than TPO for many customers due to lifetime savings and the absence of annual escalators.
Utility-scale attrition
Recent market data point to mounting long-term pressure on US utility-scale solar. A publicly available filing from central region grid operator MISO shows one major developer withdrew 50 of 79 interconnection applications, while another withdrew 30 of 35. Attrition in the first phase of the interconnection process has risen to nearly 60%, compared to the historical average of 30%. Many of these withdrawn projects were expected to mature in 2029 or 2030, coinciding with the scheduled expiration of the ITC and PTC.
The combination of a slow and increasingly expensive interconnection process, higher equipment and construction costs, and policy uncertainty around post-2029 incentives is making developers less willing to commit capital to late-decade projects. This is contributing to a meaningful pullback in long-term development activity, even as near-term pipelines remain supported by OBBBA provisions.
Solar outlook
The OBBBA provides a meaningful runway extension for ITC/PTC-eligible projects, especially for those starting construction by mid-2026. However, the executive order introduces tighter construction-start rules, and accelerated FEOC implementation.
In residential solar, the expiration of the 25D tax credit for homeowners will likely cause a temporary demand surge in 2025 but is unlikely to be fully offset by TPO absorption. Loan financing remains comparatively resilient. In the utility-scale segment, extended eligibility supports near-term activity, but structural interconnection and cost challenges could shrink late-decade pipelines.
Overall, near-term conditions remain stable, but headwinds are building into the late 2020s. Policy clarity and financing capacity will be critical to sustaining growth in both segments.
About the authors
Jesse Pichel has over 25 years of experience as a Wall Street sell-side analyst and investment banker specializing in energy transition and disruptive technology. He has completed more than 300 transactions totaling more than $47 billion. Recognized as a pioneer in sustainable investing, he has built a broad industry network and, together with Roth, established a leading market share of public transactions in the sector.
Lev Seleznov is a senior associate on the Sustainability Investment Banking team at Roth Capital Partners, where he focuses on clean technology and the energy transition, providing financing and advisory services to small- and mid-cap renewables companies. He previously worked at a private equity search fund and a boutique credit-focused investment bank.
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