Recent federal tax credit changes have created new timing, financing, and valuation considerations for wind farms and solar generation facilities.
Federal Tax Credit Deadlines for Wind and Solar Projects
Under Public Law 119-21, wind and solar projects that begin construction after July 4, 2026, generally must be placed in service by December 31, 2027, to qualify for the Clean Electricity Production Tax Credit or Clean Electricity Investment Tax Credit.
The July 4, 2026, date is significant because the law was enacted on July 4, 2025, and provided a 12-month window for projects to begin construction under the earlier credit rules.
Beginning-of-Construction Rules Remain Uncertain
IRS Notice 2025-42, issued in August 2025, originally required most wind and solar projects to satisfy the Physical Work Test to establish the beginning of construction. The notice retained the previously available Five Percent Safe Harbor only for solar facilities with a maximum net output of 1.5 megawatts or less.
Industrial-scale, utility-grade solar facilities typically range from several megawatts to several hundred megawatts. As a result, most were treated the same as wind projects and did not qualify for the safe-harbor exception.
Preliminary activities—including planning, permitting, financing, environmental studies, and general site preparation—do not, by themselves, establish the beginning of construction under either test.
On June 6, 2026, the U.S. District Court for the District of Columbia vacated Notice 2025-42 in full in Oregon Environmental Council v. IRS, holding that the IRS acted arbitrarily and capriciously in eliminating the Five Percent Safe Harbor for wind and most solar projects.
As of August 31, 2026, developers could again rely on either the Physical Work Test or the Five Percent Safe Harbor to establish the beginning of construction. However, the government could appeal or seek a stay, and Treasury could issue new guidance. Given this uncertainty, developers and their advisors may choose to document satisfaction of both tests rather than rely solely on the safe harbor.
Potential Effects on Project Economics
These changes—including continuing uncertainty over which beginning-of-construction test will ultimately govern—have caused developers, owners, and investors to reevaluate:
- Project schedules and construction commitments
- Financing and tax-equity structures
- Expected project returns
- Qualification for federal tax benefits
Projects that cannot clearly demonstrate a qualifying beginning of construction under the test that ultimately controls may have greater difficulty qualifying for federal tax benefits.
This could result in revised project economics, changes in power purchase agreement pricing, development delays, or the cancellation of projects that are no longer financially feasible.
Despite the changing federal tax credit environment, the U.S. Energy Information Administration continues to forecast growth in renewable generation. Its August 2026 Short-Term Energy Outlook projects utility-scale solar capacity increasing from approximately 151 gigawatts in 2025 to 224 gigawatts in 2027. Wind capacity is expected to increase from approximately 159 gigawatts to 179 gigawatts over the same period.
Valuation Considerations for Wind and Solar Facilities
The effect of these changes on wind and solar valuations will vary from project to project.
Federal tax benefits can influence projected cash flows and investor returns, but their effect on value depends on several factors:
- The project’s development status
- Its ownership and tax-equity structure
- Contractual arrangements
- Operating history
- The ability to transfer tax benefits to a potential buyer
- The strength of its beginning-of-construction documentation
The strength of a project’s documentation—particularly while the safe-harbor rules remain subject to uncertainty—may affect how a lender, investor, or appraiser assesses risk.
Implications for Existing Operating Facilities
The changing development outlook may also affect existing operating facilities.
A reduction in new development could limit future competition in certain markets. At the same time, uncertainty surrounding federal policy, financing, transmission, power prices, and renewable energy certificate markets may increase the risks perceived by potential owners and investors.
The new federal tax provisions do not establish a uniform increase or decrease in value. Their impact must be considered in relation to the specific property and the market in which it competes.
Renewable Energy Valuation Experience
evcValuation has extensive experience valuing wind farms, solar facilities, and other complex power generation assets throughout the United States.
For a more detailed discussion of valuation methodology, see our article, “Wind Farm Valuation Update: A Deeper Dive into the Income Approach for Ad Valorem Taxation.”
If you are evaluating how changing federal policies or market conditions may affect the value of a facility, contact us to discuss your valuation needs.