As Clean Energy Tax Credit Expiration Nears, States Rush Projects

 Speed running deployment

US states are moving to establish a pipeline of large-scale renewable energy projects that can qualify for billions of dollars in expiring federal tax credits.

California, Colorado, Minnesota, New York, New Jersey and Oregon are among the states expediting renewable energy projects eligible for a 30% investment tax credit. Those subsidies can help lower power prices as soaring electricity bills become a top issue in the 2026 elections and data centers drive up energy demand. But solar and wind farms need to start work by July 4 of this year and have four years to complete construction in order to qualify.

Mountains stand beyond solar modules in California.

“It is critical to get projects that qualify for these credits, primarily for customer affordability,” said William Walsh, vice president for energy procurement and management at utility Southern California Edison Co.

The California Public Utilities Commission earlier this year ordered Southern California Edison and the state’s other power providers to install an additional 6,000 megawatts of clean energy between 2030 and 2032 by pursuing “any viable projects that can still qualify for federal tax credits.” That’s enough capacity to power more than a million homes, and it’s expected to be largely supplied by solar and battery energy storage projects that have already applied for connection to the grid, according to Walsh.

Battery projects will still qualify for tax credits as long as construction starts by the end of 2033, though it can take years for developers to find suitable building sites, undergo environmental reviews and obtain necessary permits before breaking ground.

Walsh said that even without the new mandate, Southern California Edison has been “trying to essentially contract as much as reasonably possible” for projects that can obtain tax credits in part to fulfill ongoing renewable energy requirements to help the state achieve its target of carbon neutrality by 2045. Blue and purple states that have set goals to reduce carbon emissions or generate more renewable energy are the ones taking action to secure the tax credits, which developers can use to offset their tax liability or sell to investors.

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EQT AB, Europe’s biggest private equity firm, says the path to exiting investments in clean-energy developers and operators faces a growing number of hurdles.

In many cases, such assets have become too big to be absorbed by the kinds of private or industrial buyers PE firms traditionally turn to when looking for an exit, according to Alex Darden, the head of EQT’s infrastructure investment for the Americas.

Initial public offerings would be the natural next step, but because such companies often still have negative cash flows and complex risk profiles, the IPO route so far “hasn’t been developed enough” for PE investors to feel they can easily tap it, he said in an interview.

From California to New York, States Rush Clean Energy Projects - Bloomberg

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