𝗜𝘁 𝗖𝗼𝘂𝗹𝗱 𝗔𝗹𝘄𝗮𝘆𝘀 𝗕𝗲 𝗪𝗼𝗿𝘀𝗲

A👏 443-word👏under 3-minute👏 read

After scanning the various OBBBA analyses, the consensus is that it could have been worse. I assume that makes those in the solar industry feel better.

The reality is that it can always be worse. It could also have been better.

What has prompted me to write a postscript to the OBBBA is that many of the articles glossed over the fact that it will get worse.

I’m referring the President’s latest executive orders that instruct the Treasury Department to “bring the hammer down” (my words) on solar and wind developers. That hammer will take the form of stricter guidance on what constitutes the start of construction and the requirements around the foreign entity of concern (FEOC) rules.

These yet to be defined guidelines present multiple challenges.

Until now, the bar was low for what constituted ‘beginning of construction.’ A developer could basically break ground and allocate minimal capital. The bar will be set much higher, even if it elicits litigation.

The Trump administration has shown a willingness to risk litigation. In fact, litigation is a strategy because it costs adversaries time and money.

Suffice it to say that Treasury will push the envelope to set the bar as high as possible.

Avoiding violating the foreign entity of concern may be slightly less problematic. True, many components are sourced in China. Still, developers should be able to ensure that their materials are sourced from countries not subject to FEOC. It may reduce their margins, but it won’t necessarily be a show stopper.

Despite the EO’s 45-day timeline to issue guidance, don’t hold your breath that final guidance for either rule will be published within that window. This will create an additional challenge: securing investment capital.

Investors aren’t keen on lending money to projects that ultimately can’t pencil. Thus, if the ITC is necessary for a project to work financially, it may be impossible to secure funds.

Further, guaranteeing investors that a project will adhere to the ‘beginning of construction’ or ‘placed in service’ requirements is even more problematic. Developers have little control over the timing of permits and interconnection.

Ensuring that that a project will start construction by July 4, 2026, or, if they miss that window, commence operation before the end of 2027 may require a leap of faith. I don’t think investors make a habit of placing financial bets on faith.

The bottom line is that securing investment capital is going to get a whole lot more challenging. Although the dates and conditions of the final OBBBA were slightly more favorable, the reality may end up far worse, and closer to the original version authored by Congress.

#solarpower #renewables #OBBB #OBBBA