What does the end of the ITC mean for solar and storage?
The One Big Beautiful Bill Act ends clean electricity credits for wind and solar that miss construction and placed-in-service gates. Storage remains on a different §48E path.
For over a decade, the Investment Tax Credit (ITC) has been the cornerstone of U.S. solar finance. That era is ending. The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025 as Public Law 119-21, terminates the clean electricity credits under Section 45Y and Section 48E for wind and solar facilities that miss two statutory deadlines—reshaping how projects are financed, sequenced, and underwritten.
What two deadlines determine solar ITC eligibility after the OBBBA?
The statute sets two gates. Whether a given facility is eligible is a facts-and-counsel question; missing both gates generally ends credit eligibility:
- Beginning of construction by July 4, 2026. Projects that begin construction on or before this date may remain eligible if they also satisfy continuity and other applicable guidance, including the familiar four-year continuity safe harbor where it still applies.
- Placed in service by December 31, 2027. Wind and solar that begin construction after July 4, 2026 generally must be placed in service by December 31, 2027—a tighter standard, since completion depends on interconnection queues, permitting, and supply chains outside the owner's control.
For pipelines that cannot satisfy either test, the federal tax credit that has anchored tax-equity structures for a generation simply goes away.
What counts as beginning of construction after IRS Notice 2025-42?
IRS Notice 2025-42, issued in August 2025, limited the long-standing Five Percent Safe Harbor for most wind and solar projects, leaving the facts-and-circumstances Physical Work Test as the primary method. On June 6, 2026, the U.S. District Court for the District of Columbia vacated that notice in full in Oregon Environmental Council v. IRS, restoring the 5% spending safe harbor unless the IRS reissues guidance—though appeal risk and further rulemaking remain live possibilities.
The practical takeaways:
- Document everything: physical work of a significant nature, safe-harbor equipment spend, and contract dates must withstand diligence
- Continuity matters: grandfathered projects must still be placed in service within the four-year continuity window
- Regulatory risk is real: structures should be stress-tested against both safe-harbor outcomes
How is battery storage treated under the ITC after the OBBBA?
The OBBBA's wind-and-solar termination provisions do not put energy storage on the same clock. BESS projects are generally analyzed on a separate Section 48E path, still subject to foreign-entity-of-concern (FEOC), material-assistance, and other eligibility rules. That is a description of the statute—not a determination that any project qualifies.
This asymmetry is already changing how sponsors model hybrids. Storage-heavy strategies may retain credit value that solar-only pipelines are losing, and solar-plus-storage projects are typically modeled leg by leg, with different credit assumptions for each asset.
How should investors and developers underwrite post-ITC solar?
The end of the ITC does not mean the end of solar economics—it means underwriting shifts from tax-driven to fundamentals-driven returns:
- Documented construction-start positions matter. Assets with well-supported beginning-of-construction files may retain more optionality in diligence; that is not a price forecast.
- Projects that miss the credits must stand on fundamentals. PPA pricing, equipment costs, and interconnection timing carry more weight without an investment credit offsetting a substantial share of capex.
- The eligible pipeline may shrink. As fewer projects clear the gates, tax-equity and transfer counterparties are likely to concentrate on a smaller set of candidates.
How Sunlight helps
Sunlight Energy Investments underwrites solar and storage across both sides of the transition—reviewing beginning-of-construction documentation with counsel and counterparties, and structuring projects that miss credits around contracted cash flows. We do not provide tax opinions.
Developers and investors navigating the credit phase-out can explore our advisory services or contact our team.
