How political and economic disruption is causing a rethink in solar and storage financing

Certainly, much of this stems from the ongoing uncertainty, and increasing hostility, of federal policies aligned against the clean energy transition, but according to Ronak Maheshwari, director of US renewable energy investment bank CRC-IB, there has also been a struggle for renewable power projects to secure the equity necessary to get off the ground.

“The two pieces where there is a lot of push is in restructuring the capital stack at the platform level, and finding ways to bridge the project development and construction capital, because now the projects need a lot more equity,” Maheshwari explains to PV Tech Premium exclusively this week, discussing trends in US renewable energy finance.

“And the second piece is there is a lot of near-term demand in terms of actionable items to get the pipeline executed with the safe harbouring rules changing, as well as some of the incentives going away if you don’t start construction—for solar and wind at least—in the near-term,” he added, suggesting that the safe harbour rules that enshrined Investment Tax Credit (ITC) support for projects for which construction started before 2 September, helped create a sense of urgency for project financing in the US.

Market challenges for US renewables

This combination of urgency for securing new capital, and the challenges associated with meeting demand for equity financing in particular, has left US renewable energy financing in a precarious position.

“That whole project finance structuring is going to change drastically, which means you have a high level of equity commitments, and a good level of investor backing overall, to sustain in the current environment,” explains Maheshwari. “A lot of these transactions will happen to fund that equity to make sure that the projects continue to get built, and you’re not getting to a situation where you don’t have cash in hand to build these assets.”

This disruption is also likely to impact different clean energy technologies to different extents. Maheshwari will speak at Solar Media’s Solar & Storage Finance USA event in New York next week, on a panel about financing strategies for standalone storage projects in particular, and draws comparisons between the plight of solar and battery energy storage systems (BESS) in the current financing environment.

“As you would have seen in the last year, it’s getting easier to get your virtual power purchase agreements (PPAs) signed up, coming from a lot of corporates, on the PV side of things with growing data centre demand,” he explains. “It’s kind of challenging right now to get the same thing running on the storage side due to some modest summers and low volatility in the last couple of years.”

“What has happened is that we’ve had more modest summers over the last couple of years—particularly in the ERCOT and CAISO markets—which has caused the volatility to go down, and that has caused a lot of distress in terms of the underwriting standards for some of these storage assets.”

Maheshwari adds that securing capital is becoming “harder and harder”, particularly for standalone storage, but also for co-located solar-plus-storage assets. While many forecasts expect solar and storage installations to hit record levels in 2025—the US Energy Information Administration (EIA) expects 32.5GW of new solar capacity to be added in 2025, alongside 18.2GW of new BESS, both record figures—Maheshwari suggests that new financing structures will be necessary to realise these lofty predictions.

Part of this stems from the longstanding financial challenge associated with adding batteries to a solar project, namely that this will increase capex in an environment where equity financing is already difficult enough to procure, and Maheshwari argues there is “a need to finance things front-end”.

“I think where a lot of the market is moving right now is to get short-term contracts for BESS, to the extent possible for a five-to-seven-year period, in any structured form, so they can get the initial financing,” he says, noting that these projects will begin to turn real profits after this period. “And then post-year seven, they start to move to a merchant-heavy [basis] for a lot of these assets.”

Rethinking financing mechanisms

While this approach of a five-to-seven-year contract, followed by merchant revenue, would imply a level of stability for the first period, followed by more lucrative gains in the aftermath, Maheshwari says that investors need to be prepared for volatility even within the contracted period of a project.

“We’re trying to balance out the volatility over a five-to-seven-year period—say there’s a couple of bad years, and then one extremely good year,” he says. “What a lot of these products are trying to do is [function] so in your bad years, they’ll true-up for a project to go up to the target revenue, which is set in terms of understanding where the market average is going to be, and then they’ll take back [profits] in the years when volatility goes through the roof.”

“We’re seeing trends in the volatility where the volatility is volatile,” he adds.

He also notes that increased PPA prices could help shift the emphasis away from the post-contract years as the primary revenue generator for these projects, as higher PPA prices could help maximise returns during the contracted years of a project. This week, figures from LevelTen Energy showed that ongoing policy challenges had driven North American PPA prices up 4% quarter-on-quarter, and that solar had become the most expensive technology on a per-megawatt-hour basis on its non-market-averaged prices index.

“The PPA prices are increasing, which is getting up to a point where a lot of investors can make their returns through these initial contracts, instead of just waiting for the merchant pricing to [change] in the long-run,” adds Maheshwari.

The increasing PPA prices for solar, in particular, could also shift the balance of power, or at least the balance of responsibility, between solar and storage within a co-located asset. Maheshwari argues that, in the current financing environment, solar assets face more pressure than storage assets to generate a return on investment.

“The co-located story continues to build up, and we’re trying to find ways to make sure that the allocations of risk are done appropriately between the two assets. We’re seeing a lot of pressure at this point on the PV assets, to basically take the load of the storage assets on the financing, but again, that can flip over time.”

Diversification of portfolios

Regardless of where risk and expectations are allocated within solar-plus-storage assets, there is a clear trend towards greater technological diversification in energy generation projects. While this is nothing new in the renewable power sector, Maheshwari suggests that a desire to diversify one’s investment portfolio has led to new demand for investment in natural gas projects.

“I think there are a decent number of players who have started diversifying [and] in general looking a bit at natural gas, while they still continue to build renewables,” he explains, going on to suggest that now, renewable energy is both widespread, but still underpinned by volatility, that investors are looking to fossil fuels as a hedge against the clean energy financings that make up the majority of their investments.

“The industry, in general, is formalising in a way where you can’t choose one versus another, it’s very hard to just do natural gas as well—given the timelines to procure and highest costs for the gas turbines and all of that taking much longer—but at the same time, people are trying to hedge their investments in renewables as well.”

“It’s less to do with the fact that people are trying to slow down renewables given the near-term growing demand and ability to build them faster than any other technology, it’s just having more flexibility in the long run, to make sure they have the option to prioritise, and that they’re not holding back just because the economics moved a lot for one asset versus another.”

This trend has been reflected in a number of significant investments in the US energy space, such as the 2025 Integrated Resource Plan (IRP) of utility Georgia Power. The plan, which sets the utility’s investment and project commissioning plans for the next decade, included a number of expansions for fossil fuel projects, which drew criticism from several corners of the US energy sector, and reflects this idea that diversification of one’s energy portfolio can be broadened to include fossil fuels.

Uncertainties around securing finance for new renewable energy projects could also drive new trends in market activity, says Maheshwari.

“With the project-level equity needs increasing, we expect to see a lot of consolidation and a lot of M&As happening in the next couple of quarters, to maybe a year,” he explains.

Ultimately, disruption has become the name of the game in US renewable energy finance, with federal policy, market dynamics and investor behaviour all trending towards uncertainty. Maheshwari concludes by saying that, with federal policies such as the One Big, Beautiful Bill Act (OBBBA) looming over US renewables, being prepared for disruption, and working with others in the industry to best prepare for these changes, is perhaps the best course of action.

“Understanding and talking about the trends in the market—and working with industry to get to a place where we can find solutions in the near-term—[is important] but it’s a challenging time because we need a lot more near-term activity to make sure these assets continue to build over the next three quarters, as we hit that first hurdle of OBBBA,” he says.

PV Tech publisher Solar Media will host the 12th edition of the Solar & Storage Finance USA event on 21-22 October 2025 in New York. Panellists will discuss the fate of US solar and storage in a post-subsidy world, the evolving economics of standalone BESS and de-risking solar and storage supply chains.

All are encouraged to respond to an anonymous survey on the US solar and storage sector, that will shape discussions at the summit. Tickets for the event are available on the official website.