By Nichola Groom
June 26 (Reuters) – U.S. solar developers have secured federal subsidies for a wave of projects large enough to nearly double current capacity, rushing to beat a July 4 deadline that could send renewable power costs sharply higher.
The projections reflect the loss of valuable renewable energy tax credits worth at least 30% of project costs, a change that threatens to raise U.S. energy prices amid surging demand driven by artificial intelligence.
The phaseout of the 20-year-old subsidies, accelerated under President Donald Trump’s 2025 tax law, could drive contract prices for wind and solar energy up by 40% to 50%, with early data from Texas showing prices for some deals up 120%, according to an analysis by LevelTen Energy.
The shift comes as Trump administration policies seek to slow renewable energy development, increasing reliance on fossil fuels despite natural gas turbine supply bottlenecks and mounting pressure for federal support for coal.
U.S. President Donald Trump has repeatedly argued that renewable energy sources like solar and wind are too expensive, receive unfair subsidies, and are less reliable than fossil fuels because they depend on the wind blowing or the sun shining.
“President Trump’s priority is expanding baseload power for the American people, and he will continue to unleash reliable, affordable, and secure energy,” White House spokeswoman Taylor Rogers said in an email.
The looming tax credit loss has created a pipeline of more than 200 gigawatts of solar capacity with credits effectively secured, according to energy research firm Wood Mackenzie — nearly enough to double the current U.S. solar fleet. Solar is the fastest growing U.S. electricity source.
Buyers that fail to secure contracts with projects in that pipeline will face far higher costs.
“It should give caution to folks that are waiting on the sideline,” said Connor Valaik, a senior manager at LevelTen, which connects renewable electricity sellers and buyers. “The future is not the rosiest with this tax credit cliff.”
The data is preliminary because project developers have rushed to preserve tax credit eligibility by “safe harboring,” which can include starting site construction work, buying key equipment, logging worker hours or spending a portion of project costs, before July 4. Under federal tax rules there is a four-year window to complete those facilities, many of which are still seeking buyers for their power.
Contract proposals are increasingly including subsidy-free cost estimates because projects in early stages of development may not be able to clinch tax credit eligibility, LevelTen said.
Even without subsidies, utility-scale solar and onshore wind are the cheapest forms of energy generation, according to a 2025 analysis by investment firm Lazard. Community and industrial solar installations are also competitive with natural gas and nuclear power plants.
MORE EXPENSIVE BUT STILL COMPETITIVE
Solar project developers said their silver lining is that renewable energy, excluding the tax credits, will be less expensive than retail power in the coming years due to soaring electricity prices driven by data center demand.
“We can initiate projects… at the same level of profitability in three years that we can today, because the price of energy has already escalated so dramatically in the areas that we’re doing business in, with no sign of slowing down,” said John Witchel, CEO of Durango, Colorado-based commercial solar developer King Energy.
Developers are already planning for a new market.
Revel Energy, a commercial solar developer in Irvine, California, has secured tax credits for about 10 projects, but typically does 15 a year.
Tyler Crossno, the company’s digital marketing manager, said customers installing solar will likely break even on their investment in five to six years without the tax credit, versus around three years currently.
The backlog is expected to sustain U.S. installations through the end of the decade, according to energy policy research organization Energy Innovation, which forecasts new utility-scale capacity will contract in the early 2030s.
“That is inevitably going to drive prices up,” said Jake Schueller, a partner with Woven Energy, which helps tribes develop energy assets.
(Reporting by Nichola Groom; Editing by Lincoln Feast.)
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