How the “One Big Beautiful Bill Act” affects the solar industry
In May 2025, the U.S. House of Representatives narrowly passed the "One Big Beautiful Bill Act" (OBBBA), a comprehensive budget and tax reform package championed by President Donald Trump. While the bill encompasses various provisions, its potential impact on the solar energy sector—both residential and commercial—is particularly significant.
Key Provisions Affecting Solar Energy
Elimination of Residential Solar Tax Credits
The OBBBA proposes to terminate the Residential Clean Energy Credit (Section 25D) after December 31, 2025. This credit currently offers a 30% tax incentive for homeowners installing solar panels, battery storage, and other qualifying systems. Its removal could deter homeowners from investing in solar energy solutions by significantly lengthening their ROI.
Restrictions on Leased Solar Systems
The bill seeks to eliminate tax credits for leased residential solar installations for any taxable year beginning after its enactment. This change would significantly impact third-party ownership models, such as solar leases and power purchase agreements, which have been instrumental in making solar accessible to a broader demographic.
Accelerated Phase-Out of Commercial Tax Credits
Commercial solar projects currently benefit from the Investment Tax Credit (ITC) and Production Tax Credit (PTC). The OBBBA aims to expedite the phase-out of these credits, with the PTC set to conclude by the end of 2031. Such changes could hinder the financial viability of large-scale solar projects.
Limitations on Tax Credit Transferability
Under the Inflation Reduction Act (IRA), developers can transfer certain tax credits to unrelated parties, facilitating project financing. The OBBBA proposes to end this transferability for projects commencing construction more than two years after the bill's enactment, potentially constraining financing options for future projects.
Foreign Entity Restrictions
The bill introduces earlier restrictions on projects involving "foreign entities of concern," particularly targeting Chinese-owned companies. These provisions could complicate supply chains and affect projects relying on international partnerships.
Potential Impacts on the Solar Industry
Residential Sector:
The removal of tax incentives and restrictions on leasing models could lead to a decline in residential solar installations. Homeowners may face higher upfront costs, making solar less accessible, especially for low-to-middle-income households.
Commercial Sector:
Accelerated phase-outs of tax credits and limitations on transferability could deter investment in commercial solar projects. Developers might face challenges in securing financing, potentially leading to project delays or cancellations.
Job Market:
The Solar Energy Industries Association estimates that up to 330,000 jobs could be at risk due to the proposed changes. The rollback of incentives may lead to reduced demand for solar installations, affecting employment across the sector.
Energy Costs:
Analysts warn that the bill could result in a 7% increase in household energy costs, as the transition to renewable energy slows and reliance on traditional energy sources persists.
The "One Big Beautiful Bill Act" presents a significant threat for the U.S. solar energy sector. While aiming to reform tax and budget policies, its provisions will likely slow the momentum of renewable energy adoption, impact job growth, and increase energy costs for consumers. As the bill moves to the Senate, stakeholders across the industry will be closely monitoring developments and advocating for provisions that support the continued growth of solar energy in the United States.