Adapt to thrive: maximising opportunities in the US energy sector

A new chapter in U.S. energy policy 

The One Big Beautiful Bill Act (OBBBA) marks a significant change to United States clean energy policy. One of the major aspects of the Act affecting renewable energy is the repeal of tax incentives for wind and solar from 2028, particularly the Investment Tax Credit (ITC) and the Production Tax Credit (PTC), which were enacted under the Inflation Reduction Act (IRA). For solar and wind projects to benefit from the tax credits before this repeal, projects must begin construction by 4 July 2026 or be placed in service by 31 December 2027. This shortens the timeline set by the IRA by 2-3 years, as previously projects had until the end of 2029 to be operational if they began construction in 2025, and 2030 if construction began in 2026. Historically, these tax incentives played a significant role in the financial structure of utility-scale wind, solar and storage projects. ^{1, 2}

Due to this change, Wood Mackenzie estimates that there will be 100 GW less wind and solar capacity installed in the U.S. between 2025-2035 than originally anticipated under the IRA incentives. Or the equivalent to wind and solar capacity growing by approximately 25% rather than 55% growth under the IRA framework.  

Implications for renewable energy developers

The elimination of the tax incentives could force developers to change their approach due to the shortened timelines. Projects that were profitable under the previous economic conditions of the IRA, may require restructuring through accelerated execution, revised financing terms or cost reductions to remain viable under the new policy. Projects in the development phase that lack permits may struggle to begin construction, putting them at risk of being ineligible for the tax credits.

The uncertainty surrounding permitting timelines, interconnection queues, and equipment procurement now carries more weight as developers must coordinate every aspect of a project's lifecycle with tighter financial and time constraints.

However, even after the tax credits are repealed, solar and wind may remain cost-competitive in comparison to fossil fuel alternatives. As co-head of private infrastructure at Partners Group in the Americas agreed, “we see opportunities all across the spectrum for new build, wind, solar and storage, which are actually competitive now on a levelised cost of energy basis with natural gas.”

Lazard’s analysis shows that the Levelized Cost of Electricity (LCOE) of unsubsidised utility-scale solar ranges from $0.038/kWh to $0.078/kWh, while onshore wind ranges from $0.037/kWh to $0.086/kWh. These values demonstrate that even if unsubsidised, solar and wind could be competitive or more attractive than building new conventional generators, which have estimated LCOEs ranging from $0.048/kWh to $0.251/kWh, depending on the technology. Furthermore, new solar and wind could remain competitive relative to operating existing gas peakers (Lazard estimates a marginal cost of gas peakers between $0.047/kWh and $0.170/kWh).

Figure 1. Lazard’s estimates of LCOE of new renewable generation compared to marginal costs of conventional generation 
 

Figure 2. Lazard’s estimates of LCOE of new renewable generation compared to new conventional generation 
 

Some investors still see the opportunity presented by renewables, particularly considering the expected increase in energy demand, which some say “will act as a tailwind for the industry even in the absence of the Inflation Reduction Act’s tax incentives.”  Even without the tax incentives, some investment companies remain committed to investing in utility-scale solar, onshore wind and battery storage, such as Climate Adaptive Infrastructure. Furthermore, with electricity demand increasing with the rise in Artificial Intelligence data centres and many other factors, some investors expect the industry to shift its focus away from government subsidies towards tech companies willing to pay a premium for renewable energy.  

Adapt and thrive

Developers need to consider the best way forward, the implications for current and planned projects, and understand the impact of the changes the ‘Big Beautiful Bill’ brings.

In the current climate, developers should consider:

• Reworking financial models with updated assumptions on tax policy, capital structure, and revenue outlook to assess the Bill’s impact on projects and consider pathways forward. The assessments could help developers select projects to focus on.  
• Compressing timelines and accelerating critical processes, such as permitting and procurement to ensure projects begin construction before the mid-2026 deadline. This could potentially mean refocusing on low-risk projects in the short term.
• Assessing supply chain strategies and cost-reduction opportunities, including sourcing materials and equipment to minimise procurement risk and contain overall project costs. 
• Diversifying revenue portfolio to help stabilise long-term revenues. For example, developers could consider engaging in bilateral conversations to secure Power Purchase Agreements (PPAs) and participating in different markets when available (e.g. capacity market, Renewable Energy Certificates (REC), etc). 

Understanding the short- and long-term implications of the Bill enables energy market players to identify and prioritise the low-risk, economically viable opportunities that the incoming legislation presents. While this requires an in-depth understanding of energy market policy and regulation; tariffs and energy purchase agreements; traditional and renewable energy infrastructure; understanding of the full value chain; and extensive experience with end-to-end project planning and implementation to ensure risks and costs are minimised, the opportunities to continue progress towards the low-carbon energy transition does not put the roll-out of clean energy out of reach. 

At Ricardo plc, we support utilities, developers, and regulators in responding to the shifting policy landscape. By combining expertise in regulatory strategy, power system economics and infrastructure planning, we help our partners navigate near-term challenges while building resilient, future-proof energy portfolios.