Key Takeaways
What happens now that the 48E commercial solar tax credit construction deadline has passed? Projects that did not begin construction by July 4, 2026 must now be placed in service by December 31, 2027 to qualify for the 48E commercial solar tax credit. While battery storage remains eligible for tax credits through a planned phase-out in 2032, commercial, utility-scale, and third-party-owned solar projects face tighter timelines, potential supply chain pressure, and higher financing costs as developers race to preserve incentive eligibility.
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The solar industry was turned on its head last year when H.R. 1, the One Big Beautiful Bill (OBBB), officially passed into law. This budget reconciliation bill made sweeping changes to many government programs, but in solar terms, it put swift and official deadlines on the federal solar tax credits.
We broke down all the changes made to solar in a previous article, but in short, the bill eliminated the residential 25D tax credit immediately at the end of 2025 instead of the planned phase-out through 2032. The 48E commercial tax credit was extended until December 31st, 2027, with an exception for utility-scale projects that began construction by July 4th, 2026.
Now that the deadline has passed, let’s examine what that will mean for the solar market going forward.
Table of Contents
What was the deadline?
The OBBB put in an exception for the tax credit expiration for any project that began construction by one year from the bill’s original signing date, July 4th 2025. If a project began construction by that date, it could claim the tax credit until 2030.
The deadline aimed to allow time for utility-scale projects to become operational. Solar largely has three classes of system sizes:
- Residential – projects below 50 kW
- Commercial – projects 50kW to 2 MW
- Utility Scale – projects 2MW and above
Residential and commercial projects are generally granted permission to operate a few weeks to a few months after construction. Construction itself can range from a single day for residential to a month or so for commercial projects.
Utility-scale, on the other hand, because of their size and scale, can take months to a year to build, and as long to be fully approved to come online. So the exception was put into the bill to allow for massive-scale projects to begin building and come online, or “placed in service”.
Now that we’ve officially passed the July 4th, 2026 deadline, projects will need to be placed in service (achieve permission to operate) by December 31st, 2027 to claim the federal solar tax credit.
What Projects will be affected?
While the intent was for utility-scale projects, all projects taking the 48E tax credit will be affected. This includes utility-scale, commercial, and third-party ownership projects, such as leases, power purchase agreements (PPAs), and prepaid options.
While the residential end (leases, PPAs, and prepaids) can still install well before the end of 2027, commercial and utility projects that have not yet begun construction are now under a strict time limit to be completed by the end of 2027.
Will energy storage be affected?
Energy storage is not included in this deadline expiration. Under the OBBB, battery storage commercial and utility-scale projects are eligible for the 48E tax credit until a planned phase-out in 2032. What this means is that projects could potentially lose out on the solar tax credit but still qualify and reduce costs by applying the storage tax credit.
Storage can also see increased credit values depending on factors such as prevailing wage, apprenticeship compliance, domestic content, and if the project is in a low-income or energy community.
What does this mean for the solar market going forward?
There are a few big effects this tax credit deadline will have going forward. First and foremost, any project that has not yet begun construction will need to be fast-tracked to secure tax credits that were undoubtedly part of the calculation for savings.
Even projects that have begun construction need to be hyper-aware of market conditions and the supply chain. A delay in supply, interconnection, or any other area that could push their placed-in-service date until after December 31st, 2030 could be disastrous.
The larger concern comes in the form of price increases for commercial or utility-scale PPAs. Projects that have not hit this year’s deadline and won’t be able to be quickly placed into service by the end of 2027 will need to be remodeled financially to remove tax credits from the equation. According to reporting in PV Magazine, immediately following the OBBB passing last year, PPA prices for utility-scale projects immediately jumped 7% in a single quarter.
Looking ahead, research done by LevelTen Energy cited in the same PV Magazine article says that some developers are modeling in 40% to 50% PPA price increases for projects ineligible for the tax credit. In some regions, early data is suggesting that PPA prices could double without the tax credits.
Residential customers don’t need to fret as of yet. But this modeling shows what the residential lease and PPA market could look like once the 48E tax credit expires at the end of 2027. So does this potential for price increases mean the utility-scale solar market is dead? No chance.
Despite not having a tax credit in a couple of years, power from solar is still significantly cheaper and a more predictable way to receive energy compared to the traditional electric grid that is always increasing rates.
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