The One Big Beautiful Bill Act: Reshaping U.S. Energy Project Development

The One Big Beautiful Bill Act: Reshaping U.S. Energy Project Development

The passage of the One Big Beautiful Bill Act (OBBBA) marks a pivotal shift in U.S. energy policy, fundamentally altering the landscape for project developers, investors, and the broader energy sector. By amending the Inflation Reduction Act (IRA), the OBBBA introduces new deadlines, restructures tax credits, and imposes foreign entity restrictions, all of which compress the window for clean energy incentives and increase compliance burdens. 

1. Compressed Timelines and Stricter Eligibility

The most consequential change is the imposition of a hard deadline for the IRA’s technology-neutral tax credits: the clean energy production credit (Section 45Y) and the clean energy investment credit (Section 48E). Under the OBBBA, projects must either begin construction by July 4, 2026, or be placed in service by December 31, 2027, to remain eligible for these credits. This is a significant acceleration compared to the original IRA timelines.

For developers in planning or permitting stages, these new deadlines pose a major challenge. Financial models based on the IRA’s longer-term credits may no longer be reliable, and many projects could struggle to meet the accelerated requirements. In contrast, projects already in service and claiming credits under the original IRA rules are generally considered safe. 

2. Foreign Entity of Concern (FEOC) Restrictions

A second major change is the introduction of FEOC rules, which disqualify projects from tax credits if they involve prohibited foreign entitieseither as the taxpayer or through their supply chains. Projects beginning construction after December 31 of this year that receive material assistance from entities with ties to countries like China, Russia, Iran, or North Korea will be ineligible for Section 45Y or 48E credits.

“Material assistance” is broadly defined and can include sourcing key components, financing, or licensing intellectual property. For example, a solar project sourcing modules from a Chinese supplier after the cutoff date would lose eligibility. The U.S. Department of the Treasury is expected to issue further guidance, but until then, developers face significant uncertainty in structuring supply chains and financing. 

3. Impact on Financing Strategies

The compressed eligibility window will have immediate effects on financing strategies, especially for wind and solar projects. Tax equity investors are likely to focus on projects that can realistically begin construction by July 4, 2026. Developers may need to secure financing earlier, potentially at higher premiums, or turn to alternative capital sources, such as direct equity or state-level incentives.

Merchant projects, which rely heavily on federal credits, may be paused, downsized, or abandoned, while utility-backed projects with secured offtake agreements may continue, albeit with tighter margins. Battery storage projects are somewhat less affected by the timing changes but must still comply with FEOC supply chain restrictions. Notably, storage projects that begin construction by the end of 2033 retain full eligibility for the Section 48E investment tax credit, providing some continuity. 

4. Strategic Adjustments for Developers and Investors

In light of the revised deadlines, developers and investors should categorize their projects into three groups:

• Projects that are safe-harbored.
• Projects that can be accelerated meet the July 4, 2026, deadline.
• Projects that cannot meet the deadline.

For the second group, prioritizing supply chain procurement from non-FEOC sources and accelerating preconstruction activities is essential. All projects should audit and potentially restructure supply chains to ensure compliance with the new rules. The Treasury Department is expected to issue stricter guidance on what constitutes the beginning of construction, so vigilance is key. 

5. New Incentives for Fossil Fuels

The OBBBA introduces several new programs for coal, oil, and gas producers, including 100% bonus depreciation for qualified production property and a 2.5% production cost incentive for coal. The bill also mandates new onshore and offshore lease sales, reduced royalty rates for coal, and enhancements to the Section 45Q tax credit for carbon capture. These incentives may drive increased investment in fossil fuel infrastructure, especially in supportive states. 

Conclusion

The OBBBA represents a fundamental shift away from the broad, long-term support for renewables under the IRA, moving toward a more targeted and restrictive framework. For wind and solar, the new deadlines demand speed and agility. For battery storage, the focus shifts to supply chain compliance. Meanwhile, fossil fuels gain new direct incentives, reshaping the U.S. energy investment landscape with new risks and opportunities for every sector.