The US solar sector is facing major policy headwinds as federal legislation rolls back key incentives that had supported renewable energy growth. The changes, introduced under the OBBBA (budget bill), mark a sharp departure from the Inflation Reduction Act (IRA) framework and are expected to weigh heavily on clean energy deployment.

While President Donald Trump has continued to promote an “all of the above” energy approach on the campaign trail, his second administration and the Republican-led Congress have moved to curtail support for solar, wind, and electric vehicles through budgetary measures and executive actions.

End of 48E and 45Y Credits

At the center of the changes are the accelerated phase-outs of the 48E Investment Tax Credit (ITC) and the 45Y Production Tax Credit (PTC). These demand-side incentives, introduced under the IRA, were designed to remain in place until US greenhouse gas emissions had fallen 75% from 2022 levels. Both have been credited with driving record levels of solar and wind deployment over the past two years.

Under the OBBBA, however, the timeline for eligibility has narrowed significantly:

· Projects beginning construction more than 12 months after enactment (July 4, 2025) must be placed in service by Dec. 31, 2027, to qualify.

· Projects that begin within the first 12 months are “safe harbored” if a substantial portion is built, allowing them to qualify so long as they reach commercial operation by mid-2030.

Market Outlook

Analysts warn that the abrupt loss of tax credit support will have long-lasting consequences. Wood Mackenzie forecasts that cumulative US solar installations through 2035 could fall 17%, reaching as little as 375 GW.

In the near term, developers are expected to accelerate project timelines to secure eligibility. BloombergNEF (BNEF) projects a short-lived boom in 2025–2026 as projects rush to qualify, followed by a sharp 41% decline in installations after 2027.

“Permitted projects are well-positioned, but unpermitted developments face growing uncertainty as permitting bottlenecks threaten to push completion dates outside eligibility windows,” Wood Mackenzie said.

Uncertain Path Ahead

The US clean energy sector, which had counted on the IRA to provide long-term certainty for investors and developers, now faces a compressed timeline and a more challenging policy environment. Industry groups warn that the rollback of incentives could undermine progress toward decarbonization goals while shifting investment momentum to other markets with stronger policy support.