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Major Changes to Renewable Energy Procurement

A major reversal in solar and wind regulation in the U.S. began to take effect over the last quarter. On July 4th, President Trump signed the Budget Reconciliation Bill to reverse much of the progress made in the 2022 Inflation Reduction Act (IRA). Subsequent Executive Orders by The White House seek to compound the mistake of withdrawing clean energy tax credits, creating a new economic reality for clean energy in the U.S.

SR Inc’s Q2 2025 U.S. Opportunity Index will focus on the near-term implications of these tax credit and tariff shifts, providing an analysis of the utility-scale solar and wind virtual power purchase agreement (VPPA) market in the wake of political change in the U.S.

Changes to Renewable Tax Credits

For context, the IRA was the single largest investment in climate and energy in American history. The IRA’s Investment Tax Credit (ITC; Section 48E) provided clean energy developers with a direct tax credit of 30% and bonus tax credits of 10-20% for meeting criteria such as siting in an energy or low-income community or using equipment from domestic content. The IRA’s Production Tax Credit (PTC; Section 45Y) provided clean energy developers with tax credits per kWh of electricity generated: 2.75 ¢/kWh base plus an additional 0.3 ¢/kWh for using domestic content and/or siting in an energy community. Two years of the IRA (2022-2024) led to $265 billion in clean energy and manufacturing investments, creating over 330,000 American new jobs in the U.S. According to a report by Climate Power, as many as 400,000 American jobs are now at risk in wake of the Budget Reconciliation Bill.

Under the Budget Reconciliation Bill, projects that began construction and operations before 2025 are unaffected. To qualify for the ITC or PTC moving forward, projects must either begin construction by June 2026 (12-month safe harbor) or commence operations before the end of 2027. Projects starting construction by mid-2026 will have until 2030 to begin operations and still receive the full ITC and PTC benefits established under the IRA. Projects missing these deadlines will not receive tax credits.

SR Inc’s Net Zero Consortium for Buyers (NZCB) is experiencing a surge of activity as both developers and clean energy buyers race to capture the remaining government incentives for new clean energy. Since the passage of the Budget Reconciliation Bill at the beginning of Q3, LevelTen reports that the average cost of U.S. wind and solar PPAs have gone up by 4%. Furthermore, 68% of procurement teams feel the need to “act immediately” to lock in energy supply, with buying clean energy a top priority for 95% of teams surveyed. The demand for procurement is met with almost a third of developers saying they plan to suspend or cancel projects because of the Bill. The implication is that prices will continue to rise, especially after the tax credits expire in 2028, making NZCB’s Reverse Auctions more necessary than ever.

Other Federal Actions Have Affected Solar and Wind

Solar and wind development was further complicated by The White House’s July 7 Executive Order seeking to further tighten eligibility guidelines. Treasury was given 45 days to create more stringent ITC and PTC guidance that align with the new tax bill. The eligibility and amount of the tax credits has always depended on the year in which a solar or wind project starts construction. On August 15, the Treasury Department and IRS released guidance replacing the previous 5% start of construction test (paying at least 5% of project costs and showing continuous work on a project) with a requirement that construction begins when “physical work of a significant nature” begins. There is still uncertainty about how much work will be required, but this change is yet another way the fate of renewables in the U.S. has been altered.

Separately, on August 7, the Department of the Interior launched a comprehensive review of offshore wind regulations that paused new offshore wind project approvals, rescinded all Designated Wind Energy Areas, and eliminated the requirement to publish or update the five-year offshore wind lease schedule. These steps build on a July 29 announcement introducing stricter oversight of renewable energy projects on public lands—particularly targeting wind, though solar is also affected.

These U.S. regulatory changes have key implications for NZCB’s U.S. procurements: 1. projects having a pre-2028 COD are being prioritized; 2. there will be a rush to bring projects online by the end of 2027; and 3. prices will increase (detailed in the quantitative section below). Fortunately, we have seen this accelerated transaction velocity in the past when the ITC and PTC regularly lapsed every two years (something the IRA corrected) and anticipated it well before the Budget Reconciliation Bill was signed into law. NZCB participants have been able to act early and move 2026 procurements into 2025 and be well-positioned to preserve time as a key negotiating lever for buyers in negotiations for 2027 COD projects.

Recent Solar and Wind Trends and Analysis

Solar, wind, and storage accounted for 99% of new U.S. electricity capacity in Q1 2025, according to WoodMac and SEIA’s Q2 2025 report. Solar dominated new capacity in Q1 2025, accounting for 69% of all new electricity-generating capacity added to the grid, led by Texas and then Florida. Utility-scale projects dominated installations in both states and large corporate buyers, including Meta, Amazon and Verizon, secured 55% of contracted projects, primarily in Texas.

In 2024, the U.S. solar industry added approximately 40.5 GW_dc of capacity, marking a 4% YoY growth. With the Budget Reconciliation Bill’s tax credit cuts in effect starting 2028, the near term will likely see a rise in solar adoption in a rush to meet tax credit deadlines. Given the long timeline for natural gas construction, solar is likely to maintain its dominance in the near term.

The Budget Reconciliation Bill also introduced Foreign Entity of Concern (FEOC) restrictions starting in 2026 prohibiting projects with content from countries such as China, Iran, Russia, and North Korea from receiving the ITC and PTC. The U.S. added 8.6 GW of solar module manufacturing capacity in Q1 2025, bringing the U.S. total to 51 GW. Comparatively, China’s Q1 2025 produced roughly 190 GW of modules – a 24% YoY increase – bringing the total manufactured in China to 1,080 GW by mid-2025. China's dominance in the solar module manufacturing industry has helped accelerate the learning rate of utility-scale PV globally.

Doyne Farmer and Lennart Baumgartner from Oxford University published a working paper in May demonstrating that since the 1980s, solar PV costs have fallen by roughly two orders of magnitude while onshore wind costs have declined by about one order of magnitude. Solar module costs have been declining at a steady 12% per year since 1990 and wind costs have dropped 4% per year. They forecast that by 2050, solar levelized cost of energy (LCOE) could fall to between $3-15/MWh. Their study is complemented by a University of California Berkeley study suggesting LCOE-based learning rates of 24% for solar and 15% for wind per doubling of capacity. SR Inc is persuaded that cost declines due to technological learning rates are likely to continue – as they have through previous regulatory shifts. However, the 12% annual cost improvement in solar and batteries will not be sufficient to offset the withdrawal of the 30-50% subsidies, at least for transactions completed in 2026 and 2027 for projects that will come online after 2027, which will also be subject to further tariff-related cost increases.

The learning rate trend is notably lower for wind than solar, as is the installation capacity. In Q1 2025, wind energy made up 17% of new generation capacity, more than double compared to Q1 2024, however, tariff-based uncertainties and cost increases drove turbine orders down 50% in the first half of 2025, reaching their lowest level since 2020. Comparing both solar and wind to natural gas, renewables still hold a competitive advantage in both cost and deployment speed. Gas turbine manufacturers like NextEra Energy report up to seven years of backlogs for orders to be fulfilled. The delay has contributed to a threefold rise in construction costs for new gas-fired facilities. While permitting delays impact both sectors, the thousands of MW of queued renewables and their faster deployment cycles position solar and wind as more agile and economically advantageous, particularly with natural gas construction costs hitting a ten year high from costing $1,200-$1,400 per kW in 2013 to $2,200-$2,800 per kW in 2025. The White House’s “Unleashing American Energy” Executive Order on January 20 highlights efforts to accelerate pipelines and LNG approvals, but setbacks for natural gas remain.

Corporate VPPA Deals Trends and Analysis

FTI Consulting recently estimated that 54 GW (11%) of solar and wind capacity currently in the queue are likely to be impacted by the tax credit cuts for projects planned from 2026 to 2029. FTI further maintains that another 49 GW (43%) of proposed projects planned for 2030 through 2034 are no longer financially viable under the new policy. Meanwhile, grid operators across the country are forecasting record-breaking load growth through 2030. Consequently, the opportunity created by long-term VPPAs deserves special attention as electricity prices are expected to rise across many U.S. markets for some time. The imperative to act quickly in the U.S. market has never been greater.

To help SR Inc’s Member-Clients understand if, when, and how to transact in this shifting renewable energy market, we can look at CEBA’s historical tracker of clean energy deals announced by energy customers since 2014. The most significant surges occur between 2016-2018, 2020-2022, and 2023-2024, corresponding closely with periods of robust tax incentives, but with a 1–2-year market response lag.

Q2 NZCB Transaction Activity

In Q2 2025, SR Inc guided and represented more than dozen Member-Clients in aggregated VPPAs through the NZCB. We were happy to just announce an aggregated solar VPPA procurement in Italy with four Member-Clients including Synopsys, Autodesk, and IDEXX. With our initial 1 GW goal achieved, the NZCB now focuses on our new bold target: 10 GW of VPPA advanced market commitments (AMCs) for new renewable energy through 2030.

Why Participate in the NZCB?

SR Inc Member-Clients have made the NZCB the leading platform for the aggregated procurement of utility-scale clean energy in the U.S. and now, increasingly, in Europe. Many SR Inc Member-Clients with geographically dispersed electric loads are keenly interested in the impact and scalability of VPPAs. Current GHG accounting rules make this appeal particularly strong in the U.S. / Canada and Europe’s AIB countries, where companies can apply the energy attribute certificates (EACs) to any sites within the respective boundaries.

Despite their appeal, conventional VPPAs are typically out of reach for all but the largest, most geographically concentrated energy users. When most SR Inc Member-Clients aggregate their load across the U.S. / Canada or European AIB countries, they still lack sufficient scale to command the transaction structure, ESG impact terms, and pricing needed to make VPPAs favorable to buyers.

VPPA 2.0: Democratizing Utility-Scale Clean Energy Procurement

Fortunately, SR Inc’s NZCB offers a different approach. With VPPA 2.0, Member-Clients can create economies of scale, experience, and intellect by aggregating their demand. This auditable corporate procurement process, distinguished by its Reverse Auctions, has become core to many SR Inc Member-Client decarbonization strategies. Together, SR Inc Member-Clients are democratizing utility-scale renewable energy procurement, expanding access to clean energy’s environmental and financial benefits beyond the world’s largest energy users to include their value chains and more regularly sized high-credit enterprises.

PC EACs for Market Credibility

The growing concern about the reputational risks of unbundled EACs has driven increased pricing for purchaser caused EACs for several years now. (For readers unfamiliar with “PC EACs,” they are generated by a project caused by the procurement of those EACs via a long-term transaction that served as the proximate cause of the project’s financing).

The modeled cost of buyer-favorable, VPPA-sourced EACs (i.e., PC EACs) rose $1.85 per EAC on average across wind and solar in all U.S. hubs over the last year as the volume of closed VPPA transactions continues to surge (22GW were closed in 2024, exceeding the former high of 17GW in 2022). While the average modeled U.S. VPPA cost was $15.78 per PC EAC in Q2 2024, it cost $17.63 ($18.65 for solar and $16.61 for wind) in Q2 2025. This overall increase, coupled with the surge in volume of closed deals, reflects the true value of U.S. PC EACs. However, SR Inc procurements achieve significantly better results than that average, thanks to the NZCB’s professionally managed U.S. and European competitions, culminating in disciplined Reverse Auctions shaped to benefit corporate buyers.

Another factor SR Inc’s NZCB monitors closely is historical and projected earned wind and solar prices across hubs. In Q2 2025, our 22-year earned price indicator did not change for wind and increased 2% for solar across active VPPA hubs compared to the prior quarter, reflecting lower volatility than prior quarters.

AI Demand Surge

Factors including AI data center proliferation, continued cloud migration, cryptocurrency mining, manufacturing onshoring, electrification (including the migration to EVs), and battery energy storage have driven a surge in power usage. The unprecedented demand for renewables and fossil fuels, as highlighted in the below studies released in Q2 2025, will likely put upward pressure on prices:

• The Bank of America Institute published a report in July outlining the key drivers for U.S. demand growth and forecasting U.S. electrical demand growth at 2.5% CAGR between 2024-2035. This is a stark increase from the 0.5% CAGR between 2014-2024.
• ERCOT (the Texas grid operator) projects a 40% increase in electricity demand growth by 2030, with summer peak demand growth of over 60%. The historical annual energy growth rate between 2014-2024 was 3.1% and the forecasted growth rate from 2025-2031 is 13.6%.
• The Energy Information Administration (EIA)’s Short Term Energy Outlook July forecast shows nationwide U.S. retail electricity sales to ultimate customers growing at an annual rate of 2.2% in both 2025 and 2026. The forecast reflects rapid electricity demand growth in Texas (ERCOT) and several mid-Atlantic states (PJM), where electricity demand is expected to grow at an average rate of 11% in the ERCOT region and 4% in the PJM region from 2025 to 2026.
• ICF’s analysis shows that U.S. electricity demand is expected to grow 25% by 2030 and 78% by 2050. For residential customers, electricity rates could increase 15% to 40% by 2030 depending on the market.
• National Electrical Manufacturers Association (NEMA) estimates electricity demand will grow by more than 50% over the next 25 years. NEMA predicts data centers followed by transportation electrification are the leaders for demand growth.

Electricity price projections show demand growth offsetting some of the downward price effects from increased renewable energy and storage additions, though higher-than-average natural gas prices are currently limiting this downward pressure. The growth of AI investments, which is strongly supported by the Trump Administration, represents a structural shift in the demand curve, placing sustained upward pressure on electricity prices and capacity requirements. To balance this demand growth and maintain grid reliability, there is a strategic opportunity to expand renewable generation and storage capacity. Such investments would not only diversify supply and mitigate price volatility but also align long-term growth with sustainability objectives.

Quantitative Analysis

To better quantify U.S. VPPA market dynamics, the NZCB has published the NZCB VPPA Opportunity Index quarterly since 2019 to help advance SR Inc’s mission to accelerate the development and adoption of best practices in more sustainable business. The NZCB VPPA Opportunity Index enables comparison of potential wind and solar VPPA performance across U.S. hubs using common analytics. Based on proprietary SR Inc analytics and data from LevelTen Energy and REsurety, it reflects both prior actual (backcast) performance and carefully modeled forward pricing. Noteworthily, the Index is based upon VPPA offers, not executed transactions, made over the prior quarter.

Key findings from SR Inc’s NZCB Q2 analysis include (which exclude the outliers of CAISO South Wind and NYISO Long Island Solar):

1. Top quartile offered wind VPPA prices across the country were up 7% on average from the previous 12 months, while offered solar VPPA prices were up 2%.
2. Realized electricity prices have continued to correct down to more historically typical levels. Average trailing 12-month (TTM) realized wind electricity prices in Q2 2025 were down 9% (to $22.36) across active hubs from the TTM in Q2 2024 and realized solar electricity prices were down 17% (to $31.63) from Q2 2024.
3. The combination of higher VPPA prices and lower realized prices caused expected cashflows in the TTM for a 10MW wind VPPA to drop $221K from Q2 2024 to Q2 2025 (to negative $1.1M) and drop $225K (to negative $769K) for a 10MW solar
4. Our longer-term view Opportunity Index shows that average modeled cashflow through Q2 2040 per 10MW VPPA across active hubs decreased $148K in Q2 (to negative $695K) versus Q1 2024 for wind and increased $32K (to negative $367K) for solar.
5. In Q2, wind VPPAs modeled to be less expensive in 20% of all active hubs versus buying reputationally riskier unbundled EACs (based on the typical average cost today of $3.59 for a 10-year strip of unbundled EACs), and solar VPPAs modeled to be less expensive in 31% of all hubs.
6. The average modeled hub annual cashflow for a 10MW wind VPPA would have been $566K more expensive than buying the equivalent number of reputationally riskier multi-year unbundled EAC strips, and the average modeled hub annual cashflow for a 10MW solar VPPA would have been $281K more
7. Price modeling shows that ERCOT solar presented modeled opportunities for better-than-breakeven cashflow in Q2. The average modeled ERCOT annual cashflow for a 10MW solar VPPA was $101K.
8. For wind, price modeling continued to show that ERCOT South presented the best modeled opportunity in Q2, which was negative $95K per 10MW VPPA.
9. To underscore the importance of NZCB’s procurement process, 2025 Q2 NZCB procurements for PC EACs from to-be-built solar were below the Q2 P25 VPPA prices for the same hubs, despite also providing more than a dozen specially sought and secured buyer-favorable risk management terms required by risk-averse, environmentally motivated corporate procurement teams.

The NZCB VPPA Opportunity Index intentionally simplifies complex markets. Nevertheless, many NZCB participants find the rendering helps them begin to understand the market dynamics and financial implications of VPPA-based renewable energy strategies.

When NZCB participants wish to pursue specific VPPA opportunities, SR Inc offers stakeholder briefings and detailed, customized analytics before transacting. This bespoke financial, legal, and market expertise helps VPPA offtakers to develop a timely procurement strategy; implement the procurement strategy in an auditable way; and structure, contract, and negotiate the transaction in a buyer-favorable manner. SR Inc supports NZCB buyers throughout the corporate procurement process, helping them to navigate rapidly changing markets such as the one we are in today.

*Methodology

• To calculate average annual cashflows, SR Inc multiplies 1) the difference of technology-shaped realized market prices (2018-2025) and forecasted technology-shaped electricity futures market prices (2025-2040) versus top quartile VPPA prices in each hub by 2) the typical total annual production for 10MW offtakes for wind and solar, respectively.
• SR Inc uses 36K MWh production per year for 10MW of wind and 24K MWh per year for 10MW of solar to provide “apples-to-apples” comparisons for both technologies across hubs.
• The top quartile VPPA price assumes a scaled offtake of at least 50MW, but SR Inc uses 10MW because it is typically the minimum individual corporate offtake required within 100+ MW aggregated procurements for NZCB participants.

Data Sources

• The NZCB Opportunity Index is developed from proprietary analytics and multiple data providers, which include:
  • LevelTen Energy PPA Price Index North America top quartile VPPA pricing data for Q2 2025 (all proposed projects of 8+ years)
  • REsurety CleanSight Discover actual average, technology-shaped realized market prices for Q3 2018-Q2 2025 and technology-shaped future market price forecasts for Q3 2025-Q2 2040 (as of July 29, 2025) based on multiple electricity futures markets.

If you have additional questions or would like to learn more about the NZCB, please contact info@sustainround.com.