The long goodbye of the 30% federal Investment Tax Credit (ITC) for renewable energy projects under the Biden administration’s Inflation Reduction Act (IRA) is now playing out, with various timelines proceeding according to stages of construction. Canada-based Enverus Intelligence Research (EIR) has issued a report on the what the current class of projects sprinting for the wire will need if they miss the final deadline.
The conclusion is that developers of such projects, not to mention new start projects, will have to count on more lucrative power purchase agreements (PPAs) from off-takers, if not outright ownership of projects by deep-pocketed “hyperscale” power consumers.
For the study, EIR evaluated 3,236 U.S. photovoltaic solar and wind projects started after July 4, 2026, with first-power dates scheduled before the end of 2027. Of these, analysts concluded that 680 solar projects (along with 79 onshore wind projects) were dependent on the ITC for economic viability. In other words, the levelized cost of energy for these projects exceeded projected merchant power prices plus renewable energy certificate revenue absent the credits.
Brynna Foley, the EIR analyst who authored the report, told pv magazine USA that the repeal of the ITC really deters would-be financers of renewable energy projects.
“In lieu of being able to make these tax credit deadlines, you’re going to have to sign higher contract prices,” Foley said. “Your economics are not going to change, so you’re looking to your off-taker to make up for the lost credits with a higher contracting agreement. The alternative to signing these agreements as an off-taker is just buying the factory, like we saw with Google and Intersect.”
Earlier this year, Alphabet (Google) closed a $5 billion deal to acquire Intersect Power, a California-based developer of utility-scale solar and battery energy storage systems. Intersect is expected to focus on “energy parks” that co-locate Google hyperscale datacenters with generation and battery energy storage assets.
According to Foley, we have been fortunate to live in an age where a lot of demand for renewable technologies is coming from hyperscalers, AI developers and companies that have deeper pockets and strong motivations to meet their clean power commitments along with their power demands. In her opinion, signing on for higher PPA prices, if not outright behind-the-meter ownership, would not be a deterrent for a hyperscalers like Google that have strong sustainability targets and have historically pushed for clean energy.
“I think for them, because it’s something that’s core to their business, we don’t expect end of ITC to be much of an issue,” Foley said. “However, what we’ve heard anecdotally is that this starts to be a problem for other kinds of corporate off-takers that don’t have the same flexibility in their budgets. They just don’t have that same liquidity in their balance sheets to sign these higher contracts. And so that’s where we think we start to run into the problem.”
Adding to the problem, the EIR report said, is off-takers may have less flexibility where higher contract prices ultimately flow through to retail customers at the meter.
In the end, the repeal of the IRA tax credits put solar and battery storage projects into direct competition with other kinds of generating technologies. Other sources have problems of their own, from obsolescent oil and coal facilities to waiting lists for combined-cycle gas turbines to uncertainties attending new-technology nuclear plants. Demand is rising, and solar developers have advantages in speed and fuel costs, not to mention emissions, over the competition.
Foley said cost inflation is occurring across all generation technologies. Engineering, procurement and construction costs; labor costs; equipment costs are all going up. Ultimately, the question will always come down to how these economics pencil out for renewable projects.
“When we think about forecasting generation, we follow a techno-economic model that is generation agnostic,” she said. “Using updated OPEX [operating expenditure] and CAPEX [capital expenditure] and other pricing curves, we’re looking to meet whatever load in whatever area with the least cost option. In 2030, that might be solar. In 2032 it might be wind. It’s going to vary based on how those cost curves change over time.”
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