Renewable Energy Infrastructure: Impact of the One Big, Beautiful Bill
US Capitol

Key Takeaways

What happened: The One Big, Beautiful Bill (BBB) phases out clean energy investment and production tax credits by end 2027, much earlier than the Inflation Recovery Act’s plan.  

The impact: We expect this to result in intense investment activity by developers as they rush to start construction in order to secure tax credits for as many projects as possible. Medium-term projects may need to raise their electricity sales prices and cut capex costs to compensate.

The demand factor: Rising U.S. electricity demand growth, renewable energy projects’ ability to adapt to changing economics, and gas turbine supply constraints help mitigate any adverse impact of Federal subsidies ending.

The newly-passed budget bill’s early sunset of clean energy investment tax credits will likely fuel a near-term spike in renewable energy infrastructure deal flow. Longer-term impact is mitigated by renewable generation’s historically-observed ability to adapt to changing project economics, and the U.S.’ surging electricity demand growth.

The BBB: What happened

The 2022 Inflation Recovery Act (IRA) extended and restructured existing clean energy investment tax credits (ITC) and production tax credits (PTC) on zero-emission generation and storage facilities.1 These credits were due to sunset in 2032, or when the U.S. Treasury Secretary determined that the country had achieved a 75% reduction in greenhouse gas emissions from the production of electricity compared to calendar year 2022, whichever is later. 

The One Big Beautiful Bill Act of 2025 will sunset the ITC and PTC much earlier. Nothing changes for projects that begin construction within 12 months of the bill’s enactment as they will be grandfathered in no matter when they become operational. All other other projects must begin operation by end of 2027 in order to be eligible.

The ITC, explained

The ITC, the most relevant tax credit for renewable energy infrastructure lending, allows a project to generate a transferable tax credit based on a percentage of its eligible investment costs. It was originally enacted in 1978 for a flat value of 10%, then raised to 30% in 2005. 

The ITC was modified and/or extended in 16 different budget bills before the IRA. Most recently, the Consolidated Appropriations Act of December 2015 added a gradual step-down in credit value from 30% in 2018 to 10% in 2022. This phaseout was modified and extended in the 2018 and 2021 budget bills. 

The IRA attempted to create a stable, long-term structure for existing clean energy tax credits that would shield them from the whims of Congress. Enactment of the BBB is a challenge, but tax credit policy volatility is something with which the renewable energy industry has decades of experience.

Impacts of the tax credit change

The aftermath of the BBB is likely to cause an intense near-term spike in renewable energy project activity as developers and sponsors rush to start construction in order secure the ITC for as many projects as possible. 

This will also cause a significant increase in renewable energy infrastructure lending deal flow for the next 12 months and beyond, with follow-on opportunities to invest in projects as their construction is completed and they go into operation. 

Medium-term projects unable to meet the new ITC deadlines may need to adjust their economics in order to be viable. The expected adjustment will be higher negotiated long-term electricity sale prices (PPAs) with utilities and large corporates, as well as more efficient pricing from suppliers that comprise project capex.

The demand factor

Regardless of the Federal tax benefits available to renewables projects, the U.S. is currently experiencing a level of electricity demand growth last seen in the 1980s (Exhibit 1). Utilities have been caught on the back foot by the sudden rise in power demand, and they need reliable power. Forecasts show potential power shortages nationally, due to onshoring of manufacturing, growth of data centers, retirement of coal plants, and more.2 

The market share of renewable energy sources has grown consistently over the last two decades, even when it was more expensive than conventional power sources (Exhibit 3). 

Today, however, the costs of battery storage and solar panels have fallen to the point where renewable generation and storage is increasingly competitive with—if not cheaper than—combined cycle natural gas on an unsubsidized basis (Exhibit 2).3 

The average turnkey price of battery electricity storage systems has fallen 54% over the past two years, from $356/kWh to $165/kWh.4 This is especially important as the growth of co-located and standalone battery storage installations increases utilities’ ability to rely on solar and wind as baseload.

Exhibit 1: Electricity demand growth is hitting levels not seen in over 30 years
Average annual load growth
Exhibit 1: Electricity demand growth is hitting levels not seen in over 30 years

As of 12/31/24. Source: Grid Strategies, FERC.

Exhibit 2: Renewable generation and storage is competitive with natural gas on an unsubsidized basis
Levelized cost of electricity, unsubsidized ($/MWh)
Exhibit 2: Renewable generation and storage is competitive with natural gas on an unsubsidized basis

As of 06/10/25. Source: Lazard LCOE+ 2025

Even in Texas, where the Electricity Reliability Council of Texas (ERCOT) is estimating an 8% compound annual growth rate in peak electricity demand between 2024 and 2031, the majority of forecast new capacity is solar and storage.5 

While the Energy Information Administration reports 19 GW of combined cycle natural gas capacity is scheduled to come online by 2028, only 4 GW is currently under construction. Expansion of natural gas generation capacity is currently limited by severe supply chain constraints. There is a reported waitlist of five years for gas turbine deliveries, along with sharp increases in project costs.6 

We expect that the renewable energy project market will successfully adapt to the medium term phase-out of Federal tax benefits, as it has adapted to tax credit changes before, and that renewable generation will continue to grow its status as a core element of the U.S. power mix.

Exhibit 3: Renewable energy infrastructure growth shows low cost sensitivity
Exhibit 3: Renewable energy infrastructure growth shows low cost sensitivity

As of 07/07/25. Source: Lazard LCOE+ June 2025, EIA.

A note about risk: The principal risks are generally those attributable to bond investing. Holdings are subject to market, issuer, credit, prepayment, extension and other risks, and their values may fluctuate. Market risk is the risk that securities may decline in value due to factors affecting the securities markets or particular industries. Issuer risk is the risk that the value of a security may decline for reasons specific to the issuer, such as changes in its financial condition.

IM4639524 / IM4639540

1 Taxpaying projects must pick between the ITC and the PTC, they cannot apply for both

2 NERC 2025 Summer Reliability Assessment, published 05/14/25, for example. 

3 Energy Information Administration, Levelized Costs of New Generation Resources in the Annual Energy Outlook 2025, published 04/15/25, and Lazard, LCOE+, published 06/10/25. 

4 As of 01/20/25. Source: BNEF Battery Storage System Cost Survey.

5 ERCOT, 2024 State of the Grid, published 03/14/25, and Long-Term Load Forecast Update, published 04/07/25. Over 2024-2029, ERCOT forecasts a 41 GW increase in solar capacity, a 26 GW increase in battery storage, and 7.6 GW increase in thermal generation. 

6 S&P Global, “US gas-fired turbine wait times as much as seven years; costs up sharply,” published 05/20/25

Past performance does not guarantee future results. This market insight has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain statements contained herein may represent future expectations or other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Fund holdings are fluid and are subject to daily change based on market conditions and other factors.

Notice to qualified Canadian recipients: This document has been prepared solely for informational purposes and is not an offering memorandum or any other kind of an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, instrument or investment product or to participate in any particular trading strategy. It is not intended and should not be taken as any form of advertising, recommendation, investment advice or invitation to trade. This information is confidential and for the use of the intended recipients only. The distribution of this document in any Canadian jurisdiction is restricted to recipients that are qualified “permitted clients” for purposes of NI 31-103 and “accredited investors” for purposes of NI 45-106 and, in Ontario, subsection 73.3(1) of the Securities Act (Ontario). This document may not be reproduced, redistributed or copied, in whole or in part, for any purpose, without the written consent of Voya Investment Management. Each recipient confirms its express wish that all documents evidencing or relating to the sale of the securities and all other related contracts and documents be drafted in the English language. Chaque personne ayant reçu ce document confirme sa volonté expresse que tous les documents attestant de la vente des titres ou s’y rapportant ainsi que tous les autres contrats et documents s’y rattachant soient rédigés en langue anglaise. 

Voya Alternative Asset Management LLC (“VAAM”) is relying on the non-resident investment fund manager registration exemption under section 4 of MI 32-102 in Ontario and Québec. Please note that: (i) VAAM is not registered in Ontario or Québec to act as an investment fund manager, (ii) VAAM’s principal place of business is located in the City of New York, NY, USA, (iii) all or substantially all of VAAM’s assets may be situated outside of Canada, (iv) there may be difficulty enforcing legal rights against VAAM because of the above, and (v) VAAM has appointed McMillan LLP as agent for service of process in Ontario (c/o Leila Rafi, Brookfield Place, 181 Bay Street, Suite 4400, Toronto, Ontario M5J 2T3) and Québec (c/o Enda Wong, 1000 Sherbrooke Street West, Suite 2700, Montreal, Québec H3A 3G4). 

Voya Investments Distributor LLC (“VID”) is relying on the international dealer exemption pursuant to section 8.18 of NI 31-103 to offer securities to permitted clients in each of the provinces of Canada. Please note that: (i) VID is not registered in Canada to act as a dealer, (ii) VID’s principal place of business is located in the town of Windsor, CT, USA, (iii) all or substantially all of VID’s assets may be situated outside of Canada, (iv) there may be difficulty enforcing legal rights against the adviser because of the above, and (v) VID has appointed McMillan LLC as its agent for service of process in Alberta (c/o Julia C. Loney, TD Canada Trust Tower, Suite 1700, 421 7th Avenue SW, Calgary, Alberta,T2P 4K9), British Columbia (c/o Cory Kent, Suite 1500, 1055 West Georgia Street, PO Box 11117, Vancouver, British Columbia,V6E 4N7), Ontario (c/o Leila Rafi, Brookfield Place, 181 Bay Street, Suite 4400, Toronto, Ontario M5J 2T3), and Québec (c/o Charles Chevrette, 1000 Sherbrooke Street West, Suite 2700, Montreal, Québec H3A 3G4); Stewart McKelvey as agent for service of process in New Brunswick (c/o Paul Smith, Suite 1000, 44 Chipman Hill, Brunswick House, PO Box 7289, Station A, St. John, NB, E2L 4S6), Newfoundland and Labrador (c/o Neil Jacobs, Suite 1100, Cabot Place, 100 New Gower Street, P.O. Box 5038, St. John’s, NL, A1C 5V3), Nova Scotia (c/o Marc Reardon, Queen’s Marque, 600-1741 Lower Water Street, Halifax, Nova Scotia B3J 0J2) and Prince Edward Island (c/o Paul Kiley, 65 Grafton Street, P.O. Box 2140, Charlottetown, PE, C1A 8B9); Taylor McCaffrey LLP as its agent for service of process in Manitoba (c/o Norman K. Snyder, 9th Floor, 400 St. Mary Avenue, Winnipeg, Manitoba, R3C 4K5); and Kanuka Thuringer LLP as its agent for service of process in Saskatchewan (c/o Laurance J. Yakimowski, 1400-2500 Victoria Avenue, Regina, Saskatchewan, S4P 3X2). 

Notice to United Kingdom residents: The Fund has not been established, notified, registered or approved in accordance with local law and/or regulations implementing AIFMD in the United Kingdom or the European Union. This term sheet is for the use of the named addressee only and should not be given, forwarded or shown to any other person (other than employees, agents or consultants in connection with the addressee’s consideration thereof).

For use by qualified institutional investors and financial professionals only. Not for inspection by, distribution to or quotation to the general public.

Top