With 12 months to reach this construction milestone, project developers have “a bit more time to see how projects’ existing development risks evolve before the ‘Do I safe harbor this project?’ question requires an answer and action,” Riester said.
There is a cloud hanging over relying on safe harbor provisions, however, noted Andy Moon, CEO and cofounder of Reunion Infrastructure, a company working in the multibillion-dollar market for clean-energy tax credit transfers. President Trump issued an executive order on Monday directing the Treasury Department to issue guidance restricting the use of “broad safe harbors unless a substantial portion of a subject facility has been built.”
That’s a “significant departure” from what project developers were planning for, Moon said. “Developers are scrambling to figure out how the Treasury might modify safe harbor rules.”
The clean energy the U.S. won’t be able to recover
Not all of the wind and solar farms that could get started in the next 12 months will be able to, said Jim Spencer, president and CEO of Exus Renewables North America, a company that owns and builds clean energy.
The new mid-2026 deadline will launch a rush to secure all the equipment that projects require. Some developers will inevitably be crowded out, unable to buy what they need in time.
“We’re a well-capitalized developer with the ability to buy equipment in advance,” Spencer said, but not all firms are in the same position. “A lot of the less well-capitalized developers may have good projects. But if they can’t grandfather those projects, either by starting construction or by procuring equipment, there’s not much of a value proposition there.”
That looming deadline also presages a big drop in new solar and wind projects later this decade, once the last ones eligible for tax credits are built.
“You’ll have a rush of safe-harboring” before the 12-month period expires, Moon said. “But greenfield development is going to freeze after that until the market adjusts.”
That’s because energy buyers won’t immediately want to accept the higher prices set by developers who lack the financial boost of tax credits. “There’s going to be a price-discovery phase, when project developers all of a sudden are missing capital for 30% to 40% to 50% of their project costs,” he said. “Electricity prices are going to have to rise significantly to make up the shortfall.”
Wholesale electricity prices could increase 25% by 2030 and 74% by 2035 due to the loss of low-cost renewable energy and a rise in the cost of fossil gas to fuel the power plants that will need to make up the difference, according to modeling of the law from think tank Energy Innovation.
The process of price discovery will lead to what Riester described as a “price correction” — energy buyers coming to terms with how much more expensive electricity will become and making deals accordingly. But that will take some time.
In the meantime, there will be a gap in the deployment of clean energy — by far the biggest source of new power on the U.S. grid. That gap will have consequences as power demand is climbing nationwide.
Slower power-plant growth will significantly disrupt the electricity needs of factories, data centers, big-box stores, and “everything that we want to bring back onshore” that are “teed to these power projects,” Sen. Thom Tillis (R-N.C.), one of three Senate Republicans who voted against the bill, said in a speech on the chamber’s floor in late June. The disruptions will cause “a blip in power service, because there isn’t going to be a gas-fired generator anytime soon.”
Developers face wait times of five to seven years for new gas turbines. Nuclear and geothermal power plants take even longer to build.
Eventually, the market will find a new equilibrium. If solar, wind, and batteries are the only power sources that can be built quickly in the near term, utilities and corporate customers will figure out a price they’re willing to pay.
“But on the way to that steady state, there will be a lot of rockiness in the market,” Riester said. During that time, Segue and many other energy-market observers predict a significant shortfall in new power supply to meet demand.
“There will still be tons of projects in that 2028 to 2031 window that get killed because visibility into economic viability fails to arrive before development expenses become uncomfortably high,” Riester said. “That’s where the capacity shortage is likely to peak” — when Trump’s presidency will be over.
Great Job Jeff St. John & the Team @ Canary Media Source link for sharing this story.
