Recent industry checks suggest the possibility of another reconciliation bill is moving from speculation to something the market should monitor more closely. Discussions in Washington, DC, indicate policymakers may be evaluating additional changes to energy provisions, including measures that could support domestic manufacturing while potentially creating new challenges for project developers.
One area drawing attention is whether lawmakers could revisit treatment of safe harbored equipment or projects. While details remain highly uncertain, the possibility of penalties or reduced benefits tied to certain safe harbored assets has emerged as a potential risk scenario.
At this stage, the probability of a second reconciliation bill becoming law remains unclear, and many still view the odds as modest. Even the prospect of reopening the policy framework introduces a new layer of uncertainty for developers and investors. For a market already adjusting to shifting rules, the possibility of further legislative changes is an important variable to follow.
Market constraints
At the same time, parts of the tax equity market remain constrained, as some institutions continue to slow or pause participation in certain 48E transactions while awaiting additional clarity around FEOC and PFE requirements.
Recent market checks suggest the issue remains concentrated rather than systemic. Many investors remain active in 48E, but some large institutions continue to approach the market cautiously. More notably, insurers that underwrite tax equity transactions appear to remain a bottleneck in portions of the market, with some unwilling to take primary FEOC-related risk until additional guidance is issued.
That distinction matters. While attention has often focused on whether banks are “on pause,” several market participants increasingly point to insurance availability and underwriting terms as a more immediate source of friction. The underlying concern remains compliance uncertainty, particularly around effective control tests, debt exposure thresholds, licensing arrangements, and the diligence standards required to support transactions.
Funding costs
The practical impact is not necessarily a freeze in financing, but higher friction and potentially higher cost of capital. Developers continue to have financing alternatives, including smaller institutions, preferred equity structures, and an expanding tax credit transfer market, although these alternatives may come at a higher price.
That matters because even modest increases in financing costs can affect project economics, timing decisions, and in some cases procurement activity. Some developers appear to be reassessing timelines as they evaluate funding costs while balancing commercial obligations tied to power purchase agreements.
While some market participants have raised the possibility that prolonged delays in guidance could affect a big share of 2027 utility-scale PV volumes, views on magnitude remain mixed. Some believe the impact could be significant if delays continue too long. Others think those estimates are too high and expect the disruption to be more manageable. That divergence itself is instructive. It underscores how limited visibility remains.
Guidance timing
Much of what happens next may depend on the timing of the next round of guidance from the US Department of Treasury and Internal Revenue Service (IRS). Current expectations point to continued delays. Some still expect incremental guidance in the third quarter. Others believe final regulations may not arrive until 2027, citing the complexity of the issues, limited staffing at Treasury and the IRS, and the broader volume of rulemaking still required under OBBBA. There is also recognition that even once guidance is issued, implementation may not be straightforward. Legal challenges remain a possibility, which could introduce further delays.
The broader takeaway is that the solar market is not facing a single policy issue, but rather a growing stack of interrelated risks. Potential legislative revisions, delayed FEOC and PFE guidance, constrained insurance capacity, and higher financing costs are all contributing to a more complex development environment.
Importantly, these challenges are emerging against a backdrop of strong long-term power demand and continued need for new generation. That demand remains a powerful offset.
Until there is greater clarity on both policy and guidance, we expect investors and developers to stay selective, financing costs to remain elevated, and regulatory timing to be one of the most important risks for the sector to watch.
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 over 300 transactions totaling more than $47 billion. He is recognized as a pioneer in sustainable investing and has built a broad industry network. Together with Roth Capital Partners, he has established a leading market share in 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. Seleznov previously worked at a private equity search fund and a boutique credit-focused investment bank.
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