Sunset of ITC means solar PPAs will do more heavy lifting

The federal tax credit that covered 30% of the cost of building new solar and wind projects is being phased out under changes to the Inflation Reduction Act. Large solar and wind projects that started construction after July 4, 2026, and were counting on that credit to make financial sense now face higher costs. A new analysis found that out of thousands of projects nationwide, hundreds of solar projects and dozens of wind projects depended on the credit to be worth building at all.

Without the credit, developers are turning to power purchase agreements, or PPAs, which are long-term contracts where a buyer agrees to purchase electricity from a project at a set price. To make projects pencil out, developers need buyers willing to pay more per unit of power. Some big tech companies with heavy electricity use and strong clean-energy commitments, sometimes called hyperscalers, have deep enough pockets to absorb these higher prices or even buy the projects outright, as Google did earlier this year with developer Intersect Power. Smaller companies without that financial flexibility may struggle to sign these pricier contracts, which could slow down new solar and wind construction in some areas.

None of this changes rebates or incentives for homeowners directly. It mainly affects large, utility-scale power projects and the corporations that buy electricity from them in bulk. But it is worth watching, since rising costs for new power generation, combined with growing electricity demand overall, can eventually influence local electricity rates and how quickly cleaner power sources get built in your region.