One Big, Beautiful Act (OBBA): The Impact on Solar
It’s been difficult to keep up with the ever-changing federal policy landscape, but given the recent House passage of the One Big Beautiful Bill Act (“OBBA” a.k.a. “HR.1”), we wanted to provide an update on how this legislation may impact our work.
By Sanne Wright and Isaac Baker
It’s been difficult to keep up with the ever-changing federal policy landscape, but given the recent House passage of the One Big Beautiful Bill Act (“OBBA” a.k.a. “HR.1”), we wanted to provide an update on how this legislation may impact our work. Like Biden’s 2022 Inflation Reduction Act (IRA), the OBBA is a reconciliation bill–a special type of legislation that allows for expedited consideration of tax, spending, and debt limit laws. Unfortunately, the OBBA’s impacts on the clean energy industry are significant and, at present, are designed to undo many of the climate investment provisions of the IRA. If passed into law, the language in HR.1 would eliminate tax credits for all wind and solar projects after a sooner-than-expected cutoff date. While the bill’s final contents are far from certain, things are moving quickly. Below, we dive into which solar incentives have been affected so far and how.
In case you haven’t already read it, please check out our recommended 2025 tax credit strategy. It includes a summary of the safe harbor provision, which allows customers to lock in their tax credits under FY 2025 rules if Congress eliminates the credit for future projects.
Summary Table
Detailed Summary:
Section 48(e) Clean Electricity Investment Tax Credit (ITC)
This policy currently provides a 30% base tax credit for commercial solar projects and other carbon-cutting technologies. Under the new bill, this tax credit is eliminated for all projects that do not:
Meet safe harbor requirements within 60 days of the bill’s passage AND
Get placed in service by December 31st, 2028
In other words, in order to hold onto the 30% tax credit, projects already satisfying the safe harbor requirement must be completed by the end of 2028. Projects not yet started have to meet safe harbor requirements within 60 days of the bill’s passage, which is expected to be this year, and then be completed by the end of 2028. This will leave a very narrow window to claim what has become a critical incentive for many projects.
Foreign Entity of Concern (FEOC) Provisions
The bill also tightens restrictions on foreign involvement in solar projects through their supply chain. Given China’s prevalence in the solar supply chain (see our recent blog post on the impact of tariffs) and its status as a foreign entity of concern, it will become virtually impossible to source many of the key components of a solar project. This restriction will become a significant hurdle if the Senate does not eliminate or significantly modify this provision.
Residential Leasing Restrictions
Further - the potential for “operating leases” is eliminated. Operating leases allow a financing entity to own the system for a predefined period of time in order to monetize the tax credit after which they can transfer ownership or continue to lease the system to the host customer. For context, the operating lease is a structure that has been widely used with single-family homeowners, farms, and other small businesses.
The bill also, in a very targeted way, is seeking to eliminate the ability of a 3rd party to claim a 48(e) credit for a solar project on a single-family home (buildings where the resident would otherwise be able to claim the 25D residential tax credit if they were purchasing a system). Preventing third-party owners from claiming the tax credit would gut residential leasing, which is a critical tool to make solar and storage financially viable for homeowners.
Section 48(e) Elective Pay
Elective Pay, implemented under the IRA, allows the 48e tax credit to be captured by tax-exempt entities as a check reimbursement from the IRS. This includes 501(c)3s, tribal nations, and other governmental and public entities. While Elective Pay was not explicitly eliminated in the One Big Beautiful Bill Act, it will only be applicable for tax-exempt entities whose projects meet safe harbor requirements in 2025 and are in service by the end of 2028.
Section 48(e) Transferability
Transferability, also implemented under the IRA, allows for-profit entities to monetize the 48e tax credit by selling it to other for-profit entities. Transferability is useful for companies that have limited tax appetites, need cash, or want to avoid the complexities of tax equity arrangements. For those projects that manage to capture the 48e tax credit despite the impending restrictions, this provision remains intact.
Bonus Tax Credits
Bonus Tax Credits of 10% or 20% were also implemented under the IRA and, depending on which combination of adders a project qualifies for, can increase the total tax credit to between 40% and 70% ( between Domestic Content, Energy Communities, and Low-Income Communities Bonus Tax Credits). Eligible projects are those located in or benefiting low-income communities, including federally subsidized affordable housing. Those located near active or retired fossil fuel infrastructure, brownfield sites, or in census tracts with high fossil fuel industry employment alongside rising unemployment rates receive an additional 10% bonus. Projects sourcing a sufficient percentage of their equipment domestically can receive yet another 10% bonus.
We have already submitted more than 150 bonus tax credit applications on behalf of our clients to meet the priority deadline and will continue to do so through the final deadline on August 1, 2025. Though the bonus tax credits were not explicitly mentioned in the One Big Beautiful Bill Act either, they remain intact only as long as the 48e tax credit does. With the 48e tax credit’s existence under threat, the stakes for projects relying on bonus tax credits are even higher.
Section 25(d) Residential Clean Electricity Investment Tax Credit
This policy, which currently provides the 30% tax credit for residential solar projects, suffered the largest blow. Under the new bill, the tax credit is eliminated for residential projects that are not placed in service by December 31st, 2025. While this does not have direct implications for the commercial projects Resonant Energy works on, this is devastating news for the industry at large and, if implemented, will result in massive job loss in the residential clean energy sector (which provides over 50% of all solar jobs).
What now?
With the One Big Beautiful Bill Act officially passed in the House, the Senate has already begun working on their version in response. Historically, House reconciliation bills initiate the biggest changes to the law. Substantial modifications are expected in the Senate, who often play the role of “narrowing the approach.” We will continue to track policy updates and are prepared to carry our projects through the worst-case scenario. For the most recent policy updates, make sure you are subscribed to our newsletter.
If the changes outlined here are passed, we will work with our clients and partners to ensure safe harbor requirements are met as soon as possible.We will work with clients to expedite contract signing and materials ordering to ensure that we can secure the tax credit for as many projects as possible.
Between the previous Trump administration and the COVID-19 pandemic, navigating change and uncertainty has become one of Resonant’s most-exercised muscles. Luckily, our goal has always been to champion projects at the margin of our industry and our commitment to that remains as strong as ever. Stay tuned.
Resonant Energy 2022 Massachusetts Climate Bill Summary
May 5, 2022 - Update on lawmaker negotiations
By Leonard Schloer and Isaac Baker
On April 14, 2022, the Massachusetts state senate passed an extensive revision and expansion to last year’s sweeping Climate Bill. This year’s bill, the “Act Driving Climate Policy Forward,” is likely to go through changes as it is reviewed by the house (full language available here). It is up to us as stakeholders in clean energy and environmental justice to advocate for this bill and ensure it stays intact in the few months before it is voted on by the House.
While this year’s bill is not quite as extensive as last year’s, there is still a lot to unpack, especially for small-scale solar. Before we dive deep into all the relevant proposed legislation, here is the high-level synopsis of the three most significant issues for Resonant that will impact our work with affordable housing, nonprofits, and low-income households across MA:
Outlawing Predatory 3rd Party Electricity Contracts
$426 million has been taken from mostly low-income households through ballooning electricity contracts negotiated between predatory energy suppliers and residential customers. These contracts have fabricated an undue burden on families and (understandably) fostered public distrust in energy providers within low-income communities and communities of color. These predatory organizations have made the work of communicating about positive next steps households can take to actually save money on their electric bills much more difficult. This section will outlaw new and renewing predatory competitive supply contracts in the residential market.
Increasing the Single-Phase Net Metering Cap to 25kW AC
A net metering cap increase to 25kW AC for single-phase projects is significant. Dozens of Resonant solar projects have been limited to 10kW AC in size not because of limited roof space or low electricity usage, but simply because they needed to stay below this policy threshold to ensure they would receive full value net metering credits for any excess production in summer months. Raising the cap makes sense, and would be great news for residential households that are increasing their usage by electrifying heating, cooling, and personal transportation and would also help small commercial projects, like the nonprofit and affordable multifamily projects we work on.
Expanding the Single Parcel Rule Exemption
The single parcel rule has severely limited the benefits of going solar for organizations with multiple buildings on a single tax parcel, or multiple electrical meters on a single building. This change brings a blanket exemption for affordable housing providers and significant exemptions for other organizations and scenarios (e.g. condo developments with scattered single-family homes or townhouses on a single parcel). It’s a common-sense change that will have a huge positive impact. Without this in place, we have to spend thousands on legal fees preparing briefs for the DPU to review exception requests, which can take over 12 months for them to review and approve.
These are transformational changes, but the bill needs your support to ensure it isn’t watered down in the coming months.
The best thing to do right now is to call your State Representative since the senate has already voted in support of these issues.
You can find your local legislators and their contact information at:
https://malegislature.gov/search/findmylegislator
If you’re interested in more than the top three issues, keep reading!
What follows is intended to summarize the provisions that will impact Resonant Energy and our community’s areas of focus: environmental justice and equitable solar PV deployment. For more summary of all of the climate provisions not just related to solar PV, including EVs, wind power, and changes to natural gas policy, check out the WBUR Bill Summary.
Section 4 Overview - Clean Energy for Higher Education & Technical Schools
This section amends a previous bill to add matching grant funding for solar PV, battery storage, and other clean energy projects at public higher education institutions and vocational-technical schools.
This is great news for our publicly-funded learning institutions in Massachusetts, many of which may not have the upfront capital to benefit from investments in clean energy. Savings from these projects will hopefully open up more resources (and cleaner air) for students in the Commonwealth.
(Lines 49-63; pages 4-5)
Section 6 Overview - Clean Energy Workforce Development Program
This section adds a requirement for the Massachusetts Clean Energy Center (MACEC) to start a workforce development program geared toward the clean energy economy. This program will specifically target women- and minority-owned small businesses (W/MBE), as well as residents of environmental justice (EJ) neighborhoods, former fossil fuel workers, and any other underrepresented populations within the clean energy workforce.
(Lines 67-92; pages 5-6)
Section 7 Overview - Clean Energy Investment Fund
Following the previous section, this adds another responsibility for the MACEC; a clean energy investment fund. This fund will have broad objectives around clean energy. It will seek to support:
Clean energy research and development in the technology space
Clean energy training programs at public higher education and vocational institutions
Matching federal funds for clean energy research projects in Massachusetts
Clean energy infrastructure improvements
The fund will also support studies investigating:
The relationship between clean energy infrastructure and existing natural habitats and ecosystems
The intersection of commercial fishing and clean energy industries
All good things, in our opinion!
(Lines 93-128; pages 6-8)
Section 35 Overview - Single-Phase Net Metering Cap Increase
This section increases the cap to qualify for net metering credits on a single-phase system to 25kW AC, from 10kW AC. 10kW AC was a relatively small amount for most buildings other than a single-family home. As a result, many solar installations limited themselves to this cap, even if more building usage and roof space were available.
This change will allow many more types of properties to take advantage of the favorable full net metering rates, and ultimately bring more renewable energy to the commonwealth’s grid. While a proposal to raise this cap to 60kW for both single and three-phase was rejected (which would have been very impactful for our affordable housing and nonprofit projects that currently face a gap between 25 kW-AC and 60 kW-AC in the state’s policy around net metering), this section still marks progress for small scale-solar.
(Lines 327-330; page 17)
Section 36 Overview - Market Net Metering Update
As an addendum to the previous section, this section clarifies that for single-phase projects greater than 25kW AC, Market Net Metering Credits (MNMC) will be applied. MNMCs are generally worth about 60% of the net meter credit value.
Previously, MNMC were applicable to single-phase projects over 10kW AC (and three-phase over 25kW AC). With the change in section 35, this section updates that language as a logical follow up to keep all of the definitions lined up and consistent.
(Lines 331-338; pages 17-18)
Section 37 Overview - Expanding the Single Parcel Rule Exemption
This section brings much-welcomed relief to the rule limiting a single net metering facility per tax parcel. The change will allow unlimited net metering facilities for affordable housing (defined as low or moderate-income). It will also allow unlimited net metering facilities up to 2 MW AC; on any public or government-owned parcel, on any “separate and distinct” rooftops on a parcel, or installed more than a year apart on a parcel.
This is big news for Resonant and our partners, as many of the affordable housing providers we work with have multiple buildings on the same parcel. Over the past few years, we have worked to streamline the exemption process to overcome some of these hurdles, but we welcome any easing of these restrictions. This will save time and money on projects for many of our current and future clients.
We are looking forward to the wacky interpretations surely to come from the unsurely-worded “separate and distinct rooftops” definition.
(Lines 339-354; page 18)
Section 43 Overview - Outlawing Third Party Residential Electricity Contracts
This section outlaws the sale of individual retail electricity contracts sold by non-utility companies. As evidenced in a recent AG report (and written up by WBUR), these scam contracts charged residential customers an extra $426 million over five years. Lower-income residents were disproportionately affected by these contracts. In many cases, these door-to-door scammers would sell contracts promising lower utility rates for the first year, with ballooning rates for following years hidden in the fine print.
It goes without saying this is great news for residents. Some of these contracts were also binding in such a way that they prevented solar PV installations without exorbitant contract buy-outs. All of them created ill will and skepticism of our industry through hyper-aggressive marketing and sales tactics. A ban would be good news both for Massachusetts residents, as well as the clean energy industry.
(Lines 500-508; page 25)
Section 50 Overview - A Successor to SMART
Rounding out the relevant items on this bill is a requirement for the Department of Energy Resources (DOER) to provide the legislature with recommendations for a successor to the Solar Massachusetts Renewable Target (SMART) incentive program.
These recommendations should consider many of the same factors that the current SMART program attempts to consider; the various benefits of distributed generation facilities (from financial and emissions savings to equity benefits), time-differentiated rates, and the siting of projects in underserved areas (in more densely populated EJ communities instead of greenfields in central MA, for example).
The DOER is given a deadline of December 31, 2022, to submit these recommendations. However, we shouldn’t expect a successor program to actually come into effect for another few years, as the SMART program was only just recently extended.
(Lines 654-667; page 32)
If you are interested in moving these issues forward, again, the best thing to do right now is call your State Representative, since the Senate has already voted in support of these issues.
You can find your local legislators and their contact information at:
https://malegislature.gov/search/findmylegislator
Thank you!