States Take Action on Renewable Energy After OBBBA Curtails Tax Incentives

 July’s One Big Beautiful Bill Act (OBBBA) delivered upheaval to renewable energy tax credits, narrowing phaseout dates and adding layers of complexity to pending transactions at the federal level.

Some states have taken action to aid and encourage clean energy development in their states.

For wind and solar energy facilities to qualify for the tech-neutral Internal Revenue Code Section 45Y production tax credit (PTC) and Section 48E investment tax credit (ITC), construction must begin by July 4, 2026, or they must be placed in service no later than Dec. 31, 2027. For facilities that begin construction or place in service by the deadline, they can claim 100% of the credit until 2033.

The states that stood to lose the most from the repeal of the Inflation Reduction Act included Texas, Florida, Indiana, South Carolina and Illinois, according to June analysis by Cleanview Newsletter, a blog by a software platform that tracks clean energy data.

Julia Dinkel, associate director of public policy with Novogradac, said how much initiatives states take is often at the discretion of the political will within each state–and in its statehouse, with so-called “blue states” seemingly more amenable to accelerating green and clean energy endeavors than “red states.”

“It will largely depend on the governor,” said Dinkel. “Certainly, some Grand Old Party (GOP) governors are supportive of renewables.” They could be receptive to executive initiatives and, if bills to facilitate deployment were to come to their desk, they might be more receptive to signing them, said Dinkel.

The red/blue divide has layers. When President Donald Trump’s administration announced in early October it would terminate $7.56 billion in financial awards to more than 321 green and clean energy facilities, the impact weighed more heavily on blue states.

The U.S. Department of Energy also announced in September that it would “return more than $13 billion in unobligated funds” authorized in the IRA for clean energy endeavors.

Despite the changes, solar and wind facilities have seen the hardest push in the aftermath of OBBBA’s passage, said Dinkel.

“As we go along, I expect to see another push from states to adapt to the actual end of the credits,” said Dinkel.

Beyond state legislatures are utilities and regional organizations, said Dinkel. Three of the nation’s seven major regional transmission organizations developed and implemented or were in the process of implementing fast-tracking plans for energy resources as of September, including the country’s largest, PJM Interconnection.

The pressure to place in service before the end of 2027 is clogging already-packed interconnection queues, said Dinkel.

“It’s a major hurdle everyone is, rightly, freaking out about,” said Dinkel, noting that solar and storage facilities make up the bulk of facilities waiting for interconnection.

At least four states–Colorado, California, Maine and New York–have already taken steps to accelerate the production of renewable energy facilities.

Colorado

Colorado Gov. Jared Polis signed a letter in August directing state agencies to prioritize renewable energy facilities, including calling for the state to “integrate maximal clean energy by securing as much cost-effective electric generation under construction or placed in service as soon as possible, along with any necessary electricity balancing resources and supporting infrastructure.” Polis asked all relevant agencies in the Centennial State to prioritize expeditious review of new facilities, calling out those eligible for Section 45, Section 48 and Section 25D specifically, as well as requesting consultation, permitting and pursuing flexible interconnection.

“We must provide confidence to the clean energy industry that Colorado is open for business as tariffs, shifting federal rules, supply chain crunches and market uncertainty risk delaying investment in these affordable domestic energy resources,” wrote Polis. “In addition, we have a time-limited window for procurement of tax-advantaged wind and solar. … Getting this right is of critical importance to Colorado ratepayers; by maximizing the utilization of tax credits while they’re available and reducing future tariff uncertainty, the state can avoid billions of dollars in additional energy costs for decades to come.”

Polis’ Aug. 1 letter also included other initiatives, including evaluating the impact on rates for Coloradans associated with tariffs and expiration of the PTC and ITC.

California

In September, the California Legislature sent Gov. Gavin Newsom a slate of energy bills, including S.B. 302, which excludes elective payment and the transfer of certain energy tax credits from California gross income to incentivize renewable energy production in the Golden State.

Others, aimed at incentivizing, through financing and other means, the pursuit of green and renewable energy. One bill, A.B. 1207, extended and renamed through 2045 the state’s Air Resources Boards’ cap-and-invest program. The piece aims to adopt greenhouse gas emissions limits and emissions reduction measures.

The state Assembly also sent to Newsom’s desk A.B. 1408, which requires electric utilities and the California Independent System Operator to evaluate, consider and integrate interconnection as part of power transmission and distribution planning.

Interconnection remains an uphill battle in California, too, with engineering, electronics and technology publication TechXplore reporting that while the state has enough potential wind, solar and battery facilities to power statewide demand, they face an interconnection queue as long as five years.

Maine

In July, state utility regulators fast-tracked energy plans for nearly 1,600 gigawatt hours of power. Developers had two weeks to submit proposals. The state sought to bring enough energy generation online to power 13% of the state’s annual electrical usage. Developments that seek to use lands contaminated with per- and polyfluoroalkyl substances are given priority consideration.

New York

In August, New York Gov. Kathy Hochul requested state energy regulators undertake a high-level review of budget law and its impact on residents.

It’s a challenge to move quickly, however, as investigative nonprofit publication New York Focus indicated: The Empire State has approved 28 major wind and solar facilities in the past four years, but just one was operational as of a July report. Only one other was under construction.

In July, the state’s fire prevention and building code council introduced an all-electric building standard that prohibits gas and fossil fuels in most new buildings in the state.

Powering the Future

While the OBBBA creates fresh challenges, the renewable energy tax credits community has experienced adversity in the past, from launching the lifecycles of now-standard energy systems to the extension of incentives such as the ITC and PTC.

Stephanie Doyle, California state director for the Solar Energy Industries Association, said in a press release that progress will continue and states can play a role in that progress.

“State leadership on clean energy policy is more important now than ever,” said Doyle. 

States Take Action on Renewable Energy After OBBBA Curtails Tax Incentives | Novogradac