Market Update – Are Solar and Wind TTCs Coming Back

The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, changed the outlook for certain solar and wind tax credits included under Section 48E and Section 45Y of the Inflation Reduction Act (IRA). Instead of preserving the timeline created by the IRA, the OBBBA accelerated the phase out of certain clean electricity technologies included under these sections.

The practical effect is that solar and wind projects now face a narrower eligibility window and tighter compliance requirements.

The most important changes are:

• To remain eligible, solar and wind projects must be placed in service before December 31, 2027, or begin construction by July 4, 2026 (https://www.irs.gov/pub/irs-drop/n-25-42.pdf).
• Tighter FEOC restrictions: The law restricts access to 45Y and 48E where a project receives prohibited material assistance, ownership, or control from specified foreign countries, including China, Russia, North Korea, and Iran.
• Projects claiming 48E could also face full recapture if, within ten years after being placed in service, the project is considered to be under the effective control of a foreign entity of concern.
• Treasury and the IRS have now issued interim guidance on how taxpayers should calculate whether a qualified facility, energy storage technology, or eligible component received material assistance from a prohibited foreign entity (https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-certain-energy-tax-credits-regarding-material-assistance-provided-by-prohibited-foreign-entities-under-the-one-big-beautiful-bill).
• The residential solar credit under Section 25D was also cut off for systems installed on or after January 1, 2026.

The market impact has been material mostly in solar and wind. Business Group E2 reported that more than $34 billion in energy investments were canceled in 2025 (https://e2.org/reports/clean-economy-works-2025-year-end-analysis/). As cancellations increase and electricity prices remain under pressure, the political conversation is focusing on two questions: (1) whether wind and solar credits should be reduced and incentivize more reliable energy sources like nuclear or geothermal, and (2) whether some version of wind and solar may be needed for grid reliability, job retention, domestic manufacturing, and near-term power supply. Despite this, credits like 45X and 45Y have continued to grow and fill the gap left by the effects to solar and wind.

Discussions in Congress

As of May 2026, the congressional debate is centered on the consequences of OBBBA and the rollback of IRA era incentives. The issue is not cleanly divided between democrats and republicans. Some lawmakers are committed to ending support for intermittent sources and focusing on reliable sources, while others in both parties are focused on the economic and reliability consequences of removing incentives too quickly.

• Restoration efforts. House Republicans, including Rep. Brian Fitzpatrick and Rep. Max Miller, introduced the American Energy Dominance Act in April 2026. The bill would ease or reverse parts of the accelerated phase-out for the 45Y and 48E renewable energy credits (https://fitzpatrick.house.gov/2026/4/fitzpatrick-introduces-nabtu-built-energy-tax-credit-bill-to-lower-costs-and-power-american-growth).
• Reliability concerns. Supporters of the OBBBA changes, including Rep. Julie Fedorchak (R-ND), argue that wind and solar should not receive preferential treatment because they are intermittent resources. Their view is that federal policy should instead prioritize dispatchable power, including nuclear and fossil fuels (https://fedorchak.house.gov/media/press-releases/rep-fedorchak-introduces-bill-phase-out-intermittent-energy-subsidies).
• Data center demand. The rapid growth of AI and data centers has added another layer to the debate. Some lawmakers argue that large power users should bear more of the grid-cost burden (https://broadbandbreakfast.com/house-bill-to-offset-data-centers-impact-on-energy-costs-introduced/). Others see the same demand growth as a reason to keep renewables moving, because solar and wind remain among the fastest resources to deploy at scale.

2025–2026 Legislative Timeline and Status

• July 2025: OBBBA passed, shortening the expected IRA credit runway and creating prohibited foreign entity rules tied to ownership, control, and material sourcing.
• August 2025: Treasury issued guidance on beginning of construction requirements, making eligibility more difficult to preserve.
• February 2026: Senate Democrats introduced a Congressional Review Act resolution aimed at challenging the Treasury guidance.
• April 2026: House Republicans introduced the American Energy Dominance Act to loosen restrictions created by OBBBA.

The result is a policy split. One side wants to phase out incentives for wind and solar and redirect support toward dispatchable resources. The other side wants to keep at least part of the credit structure in place to protect jobs, support domestic manufacturing, reduce price pressure, and meet new load growth from data centers.

Appeal of Court Ruling Against Solar and Wind Restrictions

Separate from Congress, the Trump administration has been defending the 2025 restrictions through the courts and federal agencies. In April 2026, a federal judge in Massachusetts issued a preliminary injunction in favor of clean energy advocacy and trade groups that challenged the administration’s approach to renewable energy permitting.

The challenged policies came from a July 2025 memo issued by Interior Secretary Doug Burgum, which stated the goal of ending preferential treatment for what the administration described as unreliable, subsidy dependent wind and solar energy.

The policies require direct Interior secretary approval for many steps in the federal permitting process, block renewable developers from using an online tool designed to streamline environmental reviews, and effectively restrict wind and solar development on federal land.

Burgum criticized the ruling during an April 6, 2026, House Natural Resources Committee hearing and confirmed that the administration would appeal. That appeal keeps the permitting side of the fight active even as Congress debates whether to revisit the tax credit structure.

Conclusion

Based on the current political setup, a full return to the original IRA framework for solar and wind TTCs seems unlikely in the near term. The most likely scenario is a narrower comeback: targeted extensions, transition relief, and technical fixes that preserve credits for projects already in the pipeline, projects tied to domestic manufacturing, or projects needed to serve major load growth from data centers and grid demand. Politics are mixed.

The Trump administration is still pushing against wind and solar preferences, and some lawmakers remain focused on dispatchable generation. At the same time, rising power demand, project cancellations, job losses, and bipartisan interest in energy dominance create pressure to keep some incentives alive. In our view, solar and wind TTCs are likely to come back in the near term in a limited, negotiated form.

However, solar and wind credits have existed for decades, a future without some form of tax incentive related to solar and wind energy seems very unlikely. Reliability, affordability, manufacturing, and AI-driven electricity demand make the economics hard to ignore.