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Post-OBBB math: Renewables payback gets harder after 2027

  • sherry8120
  • Jul 9
  • 2 min read

Updated: Jul 9

Day 2 of our week-long review of the One Big Beautiful Bill Act (OBBB) brings us to the big one: the accelerated phaseout of solar and wind tax credits. 



🚨 Solar and wind tax credit is being phased out early -- in 2026/2027 rather than 2032


There are many details to this one, but essentially the 30% (or more) Investment Tax Credit (ITC) for new solar and wind projects will only apply for projects that begin construction by July 5, 2026 or that are placed in service by December 31, 2027.   


This will significantly impact the payback for on-site solar. Unlike the EV tax credit we reviewed yesterday, the federal renewables tax credit accounts for nearly 30% of the TCO of the average rooftop commercial solar installation.  Regional solar insolation levels and local utility policies around net metering are also important, but the expiration of the federal tax credit overwhelms those effects. 



Rooftop solar will likely be uneconomic in all 50 states for the average commercial facility. 


We used our CO2-AIM model to test the cost and payback of a rooftop solar installation (no storage) on a mid-sized warehouse in 2028, across all 50 states. With the federal tax credit in place, rooftop solar had a positive payback in about six states and marginal economics in another five states. 


Without the tax credit? Rooftop solar doesn’t pay back in any of the 50 states (see the top five states below). More things will change this calculation over time, including power prices, storage options, system costs, and resiliency benefits, but on-site solar won’t be a no brainer in most cases. 


Rooftop solar economics comparison for mid-sized warehouse in 2028 before and after OBBB


For off-site renewables, higher prices are likely, but the many dynamics of the utility-scale power market increase the uncertainty


Many of our customers look to Renewable Energy Credits (RECs) or green tariff programs to purchase renewable power from the broader electricity market.  With the cost of utility-scale renewable projects likely to rise and the volume of projects likely to fall, REC prices may also increase as more buyers compete for lower supply. 


But other factors in the market – including the AI boom and the potential growth of nuclear and geothermal - could create unanticipated consequences.  The only clear thing is to expect more uncertainty and volatility in REC and renewables pricing as these changes work through the energy system. 



Zooming out: A brief (and turbulent) history of the ITC and PTC 


The Investment Tax Credit (ITC) and Production Tax Credit (PTC) have long been cornerstones of federal support for clean energy subject to political volatility. Since the early 2000s, both credits have been extended, phased down, allowed to expire, and reinstated multiple times. 



Now, with the OBBB, the story might be shifting again. The proposed accelerated phaseout suggests a potential political turn away from long-term renewables support. But if the past is any guide, this "final" expiration could just as easily be revised by future legislation, depending on political winds and energy priorities. 



👉 Takeaway: Time to accelerate your planning for any on-site renewables and to explore strategies that reduce exposure to REC market uncertainty. 


Many companies have been looking at on-site renewables as a second or third step in their decarbonization plans. It’s likely time to reorder those steps to take advantage of the tax credits while they are still available. 



🔧 Need help navigating the post-OBBB world? 


We work with financially motivated companies to navigate decarbonization and operational excellence opportunities with specificity and affordability in mind.  



 
 
 
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