The Next Phase of the Renewable Energy Market: Competing on Economics Rather than Incentives

The One Big Beautiful Bill (OBBB) has accelerated the transition to a renewable energy market where project economics, not federal incentives, are becoming the primary driver of investment decisions. For corporate energy buyers, this means procurement strategies will increasingly prioritize long-term value, risk management, and execution certainty over tax optimization.

What Happened?

OBBB significantly accelerated the rollback of many clean energy incentives created under the Inflation Reduction Act (IRA). Most notably, it shortened the availability of production and investment tax credits for many wind and solar projects, introduced stricter eligibility rules, like the new Foreign Entity of Concern (FEOC) restrictions, and eliminated or accelerated the sunset of numerous residential and transportation-related clean energy incentives. Projects that previously expected years of policy certainty are now operating under much tighter timelines.

While the headlines focused on the loss of tax credits, the more meaningful change is that project economics can no longer rely on federal subsidies as the primary driver of investment decisions. Developers, investors, and corporate buyers are increasingly evaluating projects based on their standalone economics, reliability, and strategic value rather than tax optimization alone.

What regulatory action is still coming?

Although the legislation has been enacted, implementation is still underway. Treasury and the IRS continue to issue guidance on several key provisions, particularly the new FEOC rules, domestic supply chain requirements, and the documentation necessary to qualify for remaining tax credits. These regulations will ultimately determine how broadly or narrowly the remaining incentives can be utilized, meaning developers continue to face regulatory uncertainty even after the legislation's passage.

More broadly, both federal and state-level policy and regulatory friction have increasingly constrained renewable project development. Permitting, interconnection, and other regulatory hurdles have slowed development of new wind projects, limiting the pace of new supply additions. As supply becomes more constrained amid growing electricity demand, these market pressures can be amplified, contributing to higher costs and tighter market conditions across the sector. 

What trends are emerging considering these regulatory changes?

Trend #1: Corporate procurement is becoming increasingly price-driven

As renewable energy costs rise and supply becomes more constrained, corporate buyers are placing greater emphasis on the underlying economics of a transaction. Factors such as delivered cost, reliability, congestion risk, basis risk, and execution certainty are increasingly driving procurement decisions. 

As a result, attributes buyers have historically preferred, such as new-build projects or specific technologies like wind, must now compete on their economic merits.

Trend #2: Storage is becoming more important than solar alone.

Amidst hotter temperatures, trends toward electrification, rapidly increasing data center load, and more intermittent generation, the demands on the grid are only intensifying while the physical constraints remain unchanged. As the grid seeks to increase reliability by awarding flexibility, batteries are becoming an economic asset, rather than just an add-on to maximize tax benefits. 

Trend #3: Projects must stand on their own economics 

During the IRA era, a project's economics often depended on tax credits. As incentive availability becomes less certain, the value previously provided by subsidies must increasingly be supported by market fundamentals. 

As a result, buyers are placing greater weight on factors that have always mattered, but now carry more of the economic burden, including:

• Electricity prices
• PPA price competitiveness
• Retail bill savings 
• VPPA settlement performance
• Long-term downside risk 

Looking Ahead 

The scheduled retirement of the many federal clean energy incentives marks the end of one chapter in the U.S. renewable energy market. However, this does not signify the end of renewable energy. Far from it. While subsidies accelerated deployment, they were only one of several forces driving investment. These forces include rising electricity demand, expanding corporate decarbonization commitments, growing data center demand, aging grid infrastructure, and the increasing demand for reliable, low-cost power, all of which continue to support clean energy development. At the same time, developers and investors are becoming increasingly disciplined in how capital is deployed. As interest rates, return expectations, and opportunity costs evolve, projects must not only attract buyers, but also generate sufficient returns to satisfy investor's hurdle rates. The market is likely to become more selective, more disciplined, and increasingly focused on projects that create lasting economic value independent of federal incentives. 
 

Want to talk through what this means for your organization?

Schedule your Clean Energy Strategy Office Hours with Trio’s Clean Energy Advisory team to explore procurement options, navigate regulatory uncertainty, and identify opportunities to build long-term value in a market increasingly driven by project economics.