Analysts expect renewable energy PPAs for data center projects to rise 15–25% as federal clean energy tax credits phase out post-2026.

As clean energy tax credits phase out under the One Big Beautiful Bill Act (OBBBA), signed by President Donald Trump on July 4, 2025, developers face a fundamental challenge: the revenue lost from investment tax credits must be recouped elsewhere. According to industry analysts, the answer lies in significantly higher power purchase agreement (PPA) prices.

"That missing money has to come from somewhere to make the project pencil, and that will likely be through PPA prices," said Josh Price, director of intelligence and research at Crux.

The mathematics are stark. Camelot Energy Group analyzed a representative 200-megawatt solar facility and found that with a 30% investment tax credit (ITC), a PPA rate of $40 to $45 per megawatt hour would suffice. Without the tax credit and without ITC basis, that same project would require a PPA in the mid-to-high $60s—roughly a 50% increase in power price alone.

"If you don't have the ITC, you have to make that up with revenue and cost," said an industry analyst who spoke with Utility Dive. "There's not so much that a developer can do on cost as much as they can do to negotiate a PPA rate that is favorable, but that does push forward-looking power pricing to the higher end." This shift essentially transfers the financial burden from taxpayers to utility ratepayers.

The OBBBA's impact is not immediate. The law required wind and solar projects to commence construction within one year of enactment to qualify for the IRA's clean electricity production and investment tax credits, with a hard deadline of December 31, 2027, to be placed in service. A substantial pipeline of tax-advantaged projects will therefore complete construction and enter service between 2028 and 2030, creating a transition period rather than an abrupt cliff.

For projects missing the 2027 deadline, the prospects are grim. "If you miss the deadline coming up, it is highly unlikely or improbable that you will be able to get a project in the door and placed in service before December 31, 2027, unless you are just so far along from all the work you've done in years past that you are basically at the finish line," the analyst explained, noting that such cases would be "more of the exception than the norm."

Industry participants are already preparing. Chris Girouard, renewable energy tax credit attorney at Bryan Cave Leighton Paisner, expects the sector to "focus on their safe harbored projects through the end of the decade and lobby for changes in law that reintroduce tax credits applicable to wind and solar projects." Should tax credits return for projects beginning construction after July 4, 2026, development would "quickly pick back up," he added.

However, the industry's focus is diversifying. Renewed attention is flowing toward battery storage, nuclear, and other technologies. Energy storage tax credits survived the OBBBA's cuts to the Inflation Reduction Act intact, positioning batteries as a clear winner. "One thing that I feel confident in, is it'll be a lot of storage," Price said. "We've already seen a lot of storage deployment, and Q1 was a record quarter."

Bryen Alperin, managing director at Foss & Co, anticipates solar and wind credits may be "extended sometime in the next few years," but expects a potential project shortage around 2029–2030 that will be offset by ramped-up deployment in alternative technologies.

A separate challenge threatens to complicate planning: new foreign entity of concern (FEOC) rules introduced by the OBBBA. Though enforcement began this year, guidance remains limited. "The rules are still not clear, and everyone's obviously talking to law firms to try to get a better sense of the lay of the land, and we are dealing with an environment where it almost seems manufactured for confusion," one analyst noted.

Girouard found February guidance on calculating material assistance cost ratios "helpful to address market concerns," but warned that "the lack of guidance regarding the effective control rules continues to be challenging for the renewable energy industry." The sector awaits forthcoming IRS guidance that will, the industry hopes, "provide a practical approach to complying with the effective control regime."