The race is on | Solar project investment in a post-ITC world
Dark clouds spread over the U.S. solar industry in 2025 when the federal government rescinded the Investment Tax Credits (ITC) with the passage of the so-called One, Big, Beautiful Bill Act (OBBB). However, investment in solar remains strong for 2026 and beyond, as soaring energy demand continues to drive development of community solar, solar + storage and distributed generation projects across the country.
Despite the uncertainty that plagued the solar market with everything that happened in the solar industry last year, the outlook for this year looks strong, according to Alex Flamm, managing director of alternative investment manager AB CarVal.
“In my opinion, the outlook for solar in 2026 is better than any year prior due to demand, cost advantages and a clearer view on potential policy impacts,” Flamm says. “The bulk of new U.S. power generation for the past decade has been solar plants and wind farms, and renewables and storage are expected to continue dominating new generation power in the U.S. and globally.”
In early January, AB CarVal increased its funding support for Renewable Properties, a developer and investor in small-scale utility, community solar, energy storage, and EV charging infrastructure projects. The agreement included an increase to Renewable Properties’ existing corporate capital facility with funds managed by AB CarVal by $40 million to a total of $120 million to support new project opportunities and acquisitions, as Renewable Properties looks to expand its development into new markets and accelerate project development in existing markets.
Looking at the solar landscape following last year’s turmoil, Renewable Properties founder and CEO Aaron Halimi predicts a “robust” year for the industry.
“I think 2025 was a highly volatile year,” Halimi says. “There’s a lot of uncertainty on the regulatory landscape, obviously, things around tariffs on the supply chain, and then the One Big, Beautiful Bill and the sunset of the ITC. So that led to a flurry of activity.”
Halimi adds that developers and IPPs that were well capitalized were able to take advantage of safe harbor rules to protect their project pipelines and still take advantage of expiring tax credits, leading to “a fair amount of activity” in 2026.
“I think 2026 will probably be a record-breaking year in terms of deployment,” Halimi says, but adding that “it gets a little bit fuzzier” and tougher to forecast once the industry reaches 2029 and 2030, when the ITC is completely gone following the Safe Harbor allocation.
“But what the industry has going for it today, which it historically really hasn’t had, is a tremendous demand, or insatiable demand, for electricity in kilowatt hours. We went from flat to negative load growth over the last 20 or so years, to load growth that’s up and to the right in effectively straining electricity markets in some areas of the country,” he explains. “And while that demand is great, these are infrastructure projects that take a long time to build, and so you’re naturally going to have a supply-demand imbalance. I think that supply-demand imbalance will carry the industry through in a post-ITC world. What that looks like is to be determined, but for the next year, and really through 2029 and 2030, it’s robust.”
Overall, there has been a clear directional shift in investor attitudes toward renewable energy, according to Jorge Vargas, CEO of Aspen Power, which specializes in project finance, solar development, and O&M and project optimization.
“The overall capital flowing into renewables continues to grow globally, but policy uncertainty and changing rhetoric from the current administration has sent contradictory signals about the long-term stability in the U.S. market,” Vargas says. “At the same time, the growing demand for grid resilience and flexibility driven by the AI boom is pushing investors to look past the noise and focus on the fundamentals: solar remains the cheapest and fastest energy solution to deploy. The bottom line is investors are piling into renewables because of practicality. Renewables have shifted from a ‘values’ play to an infrastructure-grade asset class, and investors are following demand, predictable returns, and durability, not headlines.”
Why solar remains attractive to investors
Despite some regulatory and policy uncertainty on the federal level, solar remains attractive to investors because of high energy demand and the return on investment.
“I think solar is so attractive to investors because it still yields a good return profile,” Halimi says. “You have an asset class or a product that is competitive relative to its peers. Renewables, solar + storage or standalone solar and standalone storage, is cost competitive with other conventional forms of power. And not only is it cost competitive, but it also can get online quicker.”
Halimi explains that cost competitiveness and quicker deployment capabilities makes renewables a good solution to meet soaring energy demand, especially regarding the “AI race.”
“Everything with the AI race here in the U.S. vs. China, our constraining variable is electricity,” he says. “The cheapest, quickest new generation that the country can add to the grid is renewables. It’s solar, storage and wind.”
Flamm explains the type of projects that are most attractive to investors right now.
“Private capital investors are seeking cash flows and risk-adjusted returns, and the scale potential in energy transition investments is also attractive,” Flamm says. “Project-level financings on in-construction and operating assets, as well as private financings secured by projects from development through operating stage are also interesting.”
As a greenfield developer, Renewable Properties specializes in distributed generation, with small-scale utility and community solar projects that range from 1 to 20 MW in size. The company both acquires projects to complete and sells projects to other firms, with Halimi adding that the company has acquired about a third of the projects that are either operating or under construction, while the rest were financed and developed from the ground up.
“We get a good vantage point in terms of working with tax equity and debt in the market, as well as working with other IPPs,” Halimi says. “I’d say tax equity, debt and other equity investors, whether they’re project or corporate investors, like community solar because a portion of the rate, or 100% of the rate, is variable and indexed to either retail or wholesale power prices.”
Halimi explains that there are different caveats based on how community solar works in different states. However, in a broader sense with an inflationary environment or where there’s a known supply-demand imbalance, basic economics indicate that prices will increase when demand is higher than supply.
“If you own a project that gets to ride that wave, it could be a nice investment,” Halimi says. “We see a tremendous amount of interest in that.”
On the flip side, Halimi admits that having a the certainty of a long-term PPA with a fixed price for 15, 20 or 25 years can also be beneficial.
“We’re seeing a flight to quality or a flight to known entities,” Halimi says. “For example, a few of our executive partners have said, ‘OK, we’ve done deals with a bunch of people in the market. Of those people, we only want to work with a subset, and we’re shutting down new business.’ So there’s some capital providers, with tax equity and debt specifically, are saying, ‘Hey, we’re not open for business with new customers. We’re just going to focus on a subset of our existing customer base.’ Because again, there’s a lot to do, and the constraining variable isn’t necessarily projects or the capital, but it’s the people power to actually do the work and take these projects all the way to completion.”
Safe harbor and the solar rush
The OBBB set a deadline of July 4, 2026, for solar projects to begin construction or meet safe harbor criteria to qualify for the ITC. Projects starting after this date face restricted eligibility, with stricter domestic content and Foreign Entity of Concern (FEOC) rules. This deadline has created a rush in the solar market.
“We are seeing general urgency to begin construction for renewables, but the safe-harboring of tax credits to solar and wind projects potentially through 2030 placed-In-service dates is positive,” Flamm says. “Also, battery storage and carbon capture retain 100% eligibility for tax credits through 2033 plus another four years of safe harboring.”
The big rush was last year, Halimi says, as companies had to meet safe harbor criteria by Dec. 31, 2025, to quality for the ITC and lock in rates without the new sourcing restrictions. These safe harbored projects must be placed in service by Dec. 31, 2029.
“I think a lot of people have already safe harbored their future,” Halimi says. “For example, we’ve safe harbored our business plan through the end of 2029, and we did that last year because you had the benefit of not only preserving the ITC, but you had the benefit of safe harboring yourself against the FEOC provisions, which the restrictiveness of them is still TBD. We kind of have a sense for what they are, but the true guidance on them has yet to materialize.”
Final FEOC guidelines were expected to be published at the end of January, but so far the U.S. Department of Treasury has only released preliminary guidance. Solar companies can follow interim guidance, but those rules could be voided once the final rules come out. Halimi explains that the big rush of activity came last year. As a developer, Renewable Properties is looking longer term to secure investors for project over the next five to seven years, into what Halimi calls “a new horizon that takes you into a post-ITC world.”
Treasury, IRS release preliminary FEOC guidance
“As we think of our business post-2030, there’s certainly going to be solar with no ITC, and we believe that that solar energy will still be competitive, and we believe there still will be community solar that pencils and makes sense,” Halimi says. “But we’re also going to be doing standalone storage right, and we’re doing standalone storage now. We just completed construction of our first solar + storage project. We just started construction on our first standalone storage project. Both of those are in our home state of California, and have a pretty robust standalone energy storage pipeline where the ITC isn’t set to sunset there, I think, until 2033-2034.”
Halimi says the safe harbor rules provide “a fair amount of runway” for developers to take advantage of the expiring tax credits. However, the regulatory environment does pose some challenges for developers, particularly regarding FEOC, tariffs, domestic content and where companies are sourcing their supplies and equipment.
“For a community solar developer like ourselves, it’s yet to truly impact us, and that’s because our development cycle can be two to three years from project inception to completion, whereas on the utility-scale side, it’s more five to seven years,” Halimi says. “A utility-scale developer starting a project from scratch today has to think of that project in a post-ITC world. They’re forced to. There’s no way they’re going to come online before that. Whereas a community solar developer, if I started something today, I’d still come online before 2029 or 2030, and so we’re thinking about it, but it’s not yet impacted our nuts and bolts development strategy. It has certainly impacted the way in which we procure equipment and where we procure equipment from.”
In that vein, Renewable Properties has partnered with a domestic solar panel manufacturing company to supply its projects. Halimi says the company “read the tea leaves” as the tariffs and OBBB came about and pivoted its business strategy toward domestic content.
“If we’re going to navigate this, let’s navigate it in a way where we actually get some incentive with an additional 10% ITC,” he says.
Forecasting solar project investment in 2026
Despite some political headwinds, the case for solar has a solid foundation.
“Solar’s resilience through administration cycles is driven by fundamentals, not politics,” Vargas says. “Even as federal incentives and rhetoric shifts, demand for solar remains anchored to economics and core grid needs. We need to generate green electrons in both red and blue administrations. Bipartisan priorities that persist across administrations, such as lowering costs and strengthening grid reliability, have created a consistent effort to adapt solar to changing policies, allowing solar to course-correct without stalling.”
Halimi reiterates that the outlook for solar project investment and development remains “robust” for 2026.
“We’re seeing robust interest from our existing tax equity investors, robust interest from our project lenders, and then we’re seeing a lot of interest from some of our partners in the space that buy some of our projects,” he says. “Of the 125 MW we’re going to do this year, we’ll probably sell about 50 MW of those and hold on to 75 MW of it. Interest still is pretty strong. If you’re well capitalized, experienced, have a track record, and develop good quality projects that are safe harbored, then I think there’s a strong demand for that.”
On the other hand, for companies that may not be in firm financial footing, Halimi says investors are interested in acquiring businesses and projects.
“There’s a lot of people circling the space right now looking to consolidate the industry,” Halimi says. “A lot of people believe the smaller developers are going to get bought by the bigger developers, and projects will get bought and consolidated. We’re starting to see some of that, but not nearly to the degree that I think the large infrastructure investors or institutional investors think will occur.”
Whether solar developers are looking for investors to support new projects or to divest themselves of existing assets, Halimi sees activity ramping up in 2026 and beyond.
“It was a busy 2025 navigating all the ups and downs,” Halimi says. “And then, towards the end of 2025, it’s like, right, the policy landscape is now certain. It’s not ideal. It’s not what we wanted. But at least we now know, and then people very quickly just focused on executing. And now people that have the capital, the know-how, and the people are doing it. It’s kind of like the foot race, and the race is on.”
