The pace of US renewable energy project contracting has escalated significantly since federal legislation enacted in July reversed landmark wind and solar tax credits, pushing power purchase agreement prices 4% higher, according to an Aug. 13 report by renewables marketplace operator LevelTen Energy Inc.
"Early data indicates that the [One Big Beautiful Bill Act's] new dynamics between development timelines and tax credits have already changed the math on [power purchase agreement] pricing," the report said.
Wind and solar projects that begin construction within 12 months of the bill's enactment would receive 100% of the tax credits' value and would receive a safe-harbor provision allowing them to keep full credit eligibility, provided the projects enter service within four years. All other wind and solar resources would have to enter service by the end of 2027 to qualify for the credits.
As a result of those deadlines, "we're seeing top projects move into exclusivity in a matter of weeks, and buyers who wait are increasingly left with fewer options, at higher prices," LevelTen said. "It's impossible to overstate how quickly these assets are flying off the shelves."
Developers are adapting to the rapid shift. LevelTen surveyed 86 US developers after the bill passed, with 86% of respondents looking to "either accelerate construction timelines or reprioritize assets," and 52% anticipating a focus on buying other projects.
"If you can buy something rather than build something today, that's a choice almost everybody is going to make," Peter Gardett, head of energy transition research at financial services platform Karbone, said during an interview. "Everything that is an existing, in-the-ground asset is holding up really well or getting a higher-than-expected valuation."
When it comes to contracting, developers plan to modify their buyer pool. Of the developers surveyed by LevelTen, 34% expect to sign PPAs with more datacenter operators and 30% anticipate more deals with utilities and load serving entities.
Developers such as Clearway Energy Inc. and AES Corp. reassured investors during second-quarter earnings calls that those larger customers can absorb higher offtake prices.
Hyperscalers and regulated utilities understand the "scarcity value of a project that has a permit, that can be interconnected, that has a viable supply chain and a sponsor that is able to capitalize and build it," Clearway President and CEO Craig Cornelius said on an Aug. 5 earnings call.
AES CFO Stephen Coughlin said during an Aug. 1 call that datacenter customers "have an incredible need for new power, and future expirations of renewables incentives are unlikely to slow this down."
"Our expectation is that PPA prices will adjust to fully remunerate invested capital at attractive returns," Coughlin added.
Analysts at Guggenheim told clients July 7 that the industry should reach a point "during the next few years" where building utility-scale wind and solar is viable without production and investment tax credits as long as PPA prices rise.
According to LevelTen, solar PPA prices will need to increase by a range of at least $8 to $17.50 per megawatt-hour, "in order to maintain their economics and financeability without tax credits."
