Renewable Power Purchase Agreement Prices About To Spike

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The Trump administration’s “One Big Beautiful Bill Act” (OBBBA) was full of all kinds of crap, rubbish, and bile. In short, it was named for what it was not — but that’s enough to fool most people. One thing the OBBBA did was rapidly phase out federal wind and solar tax incentives. The “tax credit cliff” is coming up on July 4 (ironically). Utility-scale renewable energy projects don’t have to be completed by then, but construction has to have begun (and then they have to be done and placed into service by December 31, 2027).

There will be a race to finish projects at the end of 2027, but there’s growing pressure to commit to projects right now, ASAP, in order to not miss that July 4 deadline.

“Clean energy buyers who are waiting for perfect macroeconomic conditions to execute renewable power purchase agreements (PPAs) are running out of time,” Ryan Kennedy of pv magazine writes. “According to a new market insight report from LevelTen Energy, the impending July 4 ‘tax credit cliff’ is poised to rapidly spike PPA prices, forcing corporate procurement managers to move with extreme speed or face soaring project costs. […]

“While a recent U.S. district court decision upheld the alternative construction-start test allowing developers to qualify by proving 5% of total project costs have been incurred, LevelTen warns that narrow timelines and bottlenecks around execution capacity will prevent most developers from leveraging this workaround.”

So, the message is clear: get your PPAs and project orders in ASAP, or pay a lot more soon. “The looming deadline means the total pool of safe-harbored, tax-credit-eligible projects is drying up.”

There are no more loopholes or extensions, and the market is going to respond with spiking PPA prices. “Supply is shrinking by the week, and prices are expected to be on a one-way trajectory upward into 2028 and beyond,” says Sarah Wolf, author of the LevelTen report. “Contracting with a tax-credit-eligible project today means securing terms that reflect today’s economics, before a no-tax-credit premium becomes the PPA market’s new normal.”

All of this while data centers and AI are demanding enormous amounts of new power capacity every day…. Oy vey….