Project finance had a very strong 2025 as any sort of reduction in clean energy project volume, due to industry policy tailwinds, was more than offset by resurgent deal flow from LNG and some from mega A.I. hyperscale data center financings.

But industry experts in clean energy project finance didn’t really see much of a drop-off and don’t expect to see much of one in 2026 even with some defined policy changes being implemented: Solar-and-wind projects can still qualify for the full tax credits implemented under the Inflation Reduction Act (IRA), but with FEOC restrictions being implemented on the supply chain, and then those same tax credits will start to sunset after July 4, 2026, before fully expiring at the end of 2027.

“There are generous grandfathering rules in place, such as starting construction prior to the end of 2024 to avoid FEOC that will ensure steady deal flow in 2026 and 2027,” said Eli Katz, a partner and Global Vice Chair of Latham & Watkins Energy & Infrastructure Industry Group, adding that as the industry moves further way from January 1, 2025, there is still a liberal standard adding that there might be an on-rush of deals in the 1H26 as projects have to be under construction by July 4, 2026 to avoid the tax credit sunsetting.

“We’ve seen a surge in safe-harbor activity, with market participants choosing to move forward rather than wait for further guidance on FEOC,” said Michael Tatarsky, managing director of investment bank CRC-IB.

Standalone storage is and is expected to remain a major source of power generation moving forward as both data centers need storage to support its massive power needs, while also providing power to grids who remain in desperate need of power today, and down the line given forward load forecasts.

Katz estimates that a good portion of his developer-clients at this point are either re-purposing sites for storage or adding co-located storage components and expects this trend, if anything, to accelerate in 2026.

While the OBBBA left standalone storage tax credit and tax credit transfers intact, it would not budge on FEOC restrictions and experts expect the storage supply chain to be more challenged by these restrictions than the solar supply chain, where companies such as T1 Energy and Q Cells continue to add and expand new factories in the US.

The stakes are enormous as NPM Interconnection queue data shows that 197 pre-operational storage projects, across 23 GW, reached an advanced stage for the 12 months, ended December 2024, while 295 projects, across 42.29 GW, reached an advanced stage in the 12 months prior to December 2025.

The projects which reached an advanced stage are also more geographically spread over the past 12 months, away from hotbeds such as ERCOT and CAISO, as projects within Southern Company and Puget Sound Energy reached an advanced stage while, there were increases in SPP and PJM, year-over-year.

“The core intellectual property for some of the battery technology remains in China,” said Katz alluding to the likes of CATL and others and so the question remains on how “permissive or tight FEOC rules will be around this.’

Despite overall deal flow expected to remain consistent in 2026, Katz observed there is a possibility of overall structural changes coming, more driven by FEOC than tax credit sunsets at this point.

“Bank lenders are being more judicious about whether to lend into non-recourse financing for early-stage development projects while private credit lenders may show more flexibility adding that traditional tax equity investors are also slowing down a bit due to FEOC, and that has led to some further supply-demand imbalance.

There also remains alternative funding sources as well as preferred equity which emerged in non-recourse project finance as the likes of Peregine Energy, BayWa r.e. and Cypress Creek Renewables have utilized them in recent weeks. The market has been beneficial to projects that otherwise might have trouble securing traditional tax equity.

“Preferred equity is often viewed as a simpler, more flexible capital solution, and in certain structures, can offer compelling economics relative to traditional tax-equity,” noted Tatarsky.

Both Katz and Tatarsky also don’t really forecast any change in pricing for these deals, as the industry has faced tax-equity cliffs before and lenders remain comfortable that safe-harbored pipelines are in place to ensure deal flow in the next few years before the 2029 cliff date.