Why Starting Construction by July 4, 2026 Can Lock in Lower Costs for Solar PPAs

Federal tax credits bring down the costs for commercial-scale solar projects by 30%, but they’re starting to go away. That will mean higher costs, at least in the near term and possibly for years to come, to build solar power projects at schools, hospitals and businesses, even if those solar customers don’t buy solar panels themselves but get solar through a power purchase agreement.

Most K-12 schools and hospitals, as well as many businesses, that go solar use PPA financing to avoid high upfront costs of purchasing equipment along with the risk and responsibility of operating and maintaining their own solar systems to produce the most energy all year round and in all kinds of weather. And since under a PPA, solar developers buy and own the solar panels, they receive any available federal tax credits for equipment and installation. In turn, developers pass along the savings to their PPA customers through lower PPA rates.

When those tax credits disappear, PPA rates will increase, making it more expensive for customers to go solar through a PPA. But now, there’s a brief window of just a few months for customers to go solar through a PPA and lock in savings from the tax credits.

Tax Credits Gone for Homes but Still Available for Commercial Customers for a Limited Time

A federal tax credit covering 30% of the cost to buy and install solar panels and other equipment was extended through at least 2032 by the Inflation Reduction Act in 2022. However, when President Trump returned to office at the beginning of last year, he made it a priority to shift support from clean energy to fossil fuels and nuclear power. To implement his energy agenda, Congress passed the One Big Beautiful Bill Act in 2025, which, among other things, pushed up the dates when the federal tax credits for solar power, whether on homes or at commercial scale, would expire.

On January 1 of this year, the federal tax credit for residential solar ended. This was big news and led many people to believe that all tax incentives for solar stopped at the same time. But the truth is that the federal tax credit for commercial solar was given a bit of a reprieve and will last for a couple more years. Yet, the devil is in the details, as is so often the case with tax incentives.

The commercial solar tax credit, taking off 30% the cost of equipment and installation, will continue for the next two years under two separate tracks depending on when a solar project begins construction. Wth the apparent goal of encouraging projects to start earlier, those that kick off in the next few months are given a big advantage in timeline through a safe harbor rule:

1. Projects that start construction before July 4, 2026 receive a full four years to complete (qualifies for safe harbor)
2. Projects that begin after July 4, 2026 only have a maximum of 18 months to complete, and in any event must be finished by December 31, 2027 (no safe harbor)

What this means for schools, hospitals and businesses that want to go solar through a PPA is that their best chance to get a lower PPA rate is to book a solar project that would start before July 4 of this year. That gives their project the most generous completion deadline, which will reduce risk in today’s solar market where construction delays are likely to be common. Demand for equipment, workers, and permit applications are all likely to rise as solar projects try to get in under the July deadline to meet the safe harbor requirements for the federal tax credits.

Those projects that are not able to start by July 4 must contend with a much shorter timeline to qualify for tax credits. At most, they’ll have a year and a half to complete. But the longer they wait into 2026 and 2027 to get started, solar projects may have a year or less to get done.

Everybody’s Scrambling to Go Solar, so Competition is Fierce for Equipment, Labor, and Permits

In a perfect world, it’s possible to start and finish a commercial-scale solar project in a year or less.

But today’s market is far from that perfect state. As the clock ticks on and deadlines loom, competition has already started to grow for limited supplies of equipment and workers. Likewise, the backlog of applications at city and county permitting offices will lengthen.

At some point in late 2026 or early 2027, the likelihood of starting and finishing a solar project by the tax credit deadline of December 31, 2027 will decline to zero.

All this means that schools, hospitals, and businesses that have been eyeing solar and might want to get it with no upfront cost through a PPA are well advised to act soon.

It’s hard to say exactly what effect the loss of federal tax incentives will have on solar projects. But one thing is certain: costs will certainly be higher without tax credits, and supply chain issues will become more stringent, at least for a period until the market adjusts to the new conditions.

Make no mistake, solar will continue to grow and spread even once tax credits are gone. But the transition may be bumpy and it could take months or years for costs to come back down.

Meanwhile, every month that a school, hospital or business waits to get solar is another month that they’re paying higher electric bills — leaving money on the table.

AI Data Centers Are Bringing Unprecedented Spikes in Power Demand and Prices

Relying on your electric utility for 100% of your power might not have been such a big deal in the recent past, as demand for electricity in the United States remained relatively flat for more than a decade, according to the US Energy Information Administration. During that time, utility costs in most places grew at about the same rate as general inflation, more or less.

But starting in the past couple years, all of a sudden, demand for electricity began to rise, as AI data centers, along with EVs, began to come online. While the trend is strong nationwide, demand for electricity has spiked in Virginia, the world capital of data centers and the #2 importer of electric power from out of state.

Over the coming years, experts predict an AI energy crunch that will, at a minimum, raise electric bills for everybody. Even worse, a growing imbalance between constrained power supplies and rapidly rising demand could lead to rolling blackouts and an energy crisis reminiscent of the gas lines and pain at the pump felt in the 1970s — but this time around, the crisis will come not from too little oil but from too little electricity.

Any school, hospital or business that relies on affordable, reliable electric power should consider contingency plans now. And one of the best is on-site solar power, which provides control over costs and, if battery storage is included, resilience and reliablity too.

Act now or forever hold your utility electrons.