Section 48E Under Fire: How the One Big Beautiful Bill Reshapes Clean Energy Investment Tax Credits

The renewable energy landscape shifted dramatically on July 4, 2025, when the Senate passed the One Big Beautiful Bill Act (OBBBA), fundamentally altering the trajectory of clean energy investment tax credits. For developers, investors, and stakeholders in the renewable energy sector, understanding these changes to Section 48E of the Internal Revenue Code isn’t just important—it’s critical for survival in an increasingly competitive market.

The Clean Electricity Investment Tax Credit under Section 48E, once a cornerstone of the Inflation Reduction Act’s renewable energy strategy, now faces systematic elimination. These changes are more than regulatory tweaks; they represent a fundamental shift in federal clean energy policy that will impact the industry for years.

One of the most significant changes is the aggressive phase-out schedule, which leaves little room for delays. The new timeline is as follows:

This rapid phase-out puts enormous pressure on developers who are already dealing with challenges like supply chain disruptions, permitting delays, and long interconnection queues. Projects that were once financially viable may now struggle to secure financing under the reduced credit levels, forcing developers to completely restructure financial models and reassess risks.

In addition to the shrinking credits, domestic content requirements are also tightening. Projects claiming credits under Section 45Y or 48E must meet these escalating thresholds:

This is a major challenge for an industry that has long relied on international supply chains, particularly for solar panels and wind components. Meeting these requirements will demand far more than switching suppliers—it will likely require:

The Senate’s bill delivers another blow by removing five-year Modified Accelerated Cost Recovery System (MACRS) depreciation for projects using Section 45Y or 48E credits. Without accelerated depreciation, projects will face:

This makes it harder for clean energy projects to compete against traditional energy developments, which continue to benefit from faster depreciation and favorable tax treatment.

Despite the challenges, developers and investors can still navigate this new environment through smart, strategic action.

Accelerating project timelines to start construction by the end of 2025 is the most direct way to maximize available credits. This may require:

For larger projects that can’t meet the 2025 deadline, phased development offers a practical solution. By breaking a project into smaller, independently viable phases, developers can:

However, this approach requires careful coordination of financing, technical design, and infrastructure sharing to keep all phases viable.

Rather than seeing domestic content rules as an obstacle, forward-thinking companies may treat them as a competitive opportunity. By investing early in domestic supply chains—through long-term contracts or even equity stakes in manufacturers—developers can:

Developers and investors may also need to rethink their overall portfolios, balancing projects with different timelines and credit exposures. A diversified approach could include:

This strategy helps reduce risk while maintaining steady growth.

The Section 48E changes require developers to fully revise their financial models. Key metrics—such as internal rate of return (IRR), debt coverage ratios, and equity requirements—must all be recalculated to account for:

In many cases, power purchase agreement (PPA) pricing will also need to be adjusted to reflect new project economics.

Navigating these changes will require close attention to evolving regulatory guidance from the U.S. Treasury. Developers should expect clarification on:

Early consultation with legal and tax experts will be essential to avoid compliance risks. Developers should also keep an eye on potential future legislative changes that may further adjust these rules.

Though these new requirements present significant challenges, they may also lead to long-term improvements across the renewable energy industry. Developers that focus on:

are likely to emerge stronger. Many industry observers believe this wave of change will spur new technologies, expand U.S. manufacturing, and drive innovation in project design and construction processes.

The changes to Section 48E represent a major turning point for the clean energy industry. The combination of reduced credits, stricter domestic content rules, and slower depreciation creates intense pressure to act quickly and strategically.

Success in this environment depends on:

For companies that can adapt rapidly, significant opportunities remain. The question isn’t whether the rules have changed—it’s whether developers will change fast enough to thrive in this new reality.

The clean energy sector has a history of overcoming challenges through innovation and resilience. Those who act decisively now are poised not just to survive—but to emerge as leaders in the next phase of the industry’s evolution.