Rising demand, falling costs, and limited alternatives suggest renewables can stand on their own.
The renewable energy sector has faced a major adjustment: long-standing subsidies for wind and solar are being phased out. For decades, these tax credits fueled industry growth, but their removal does not necessarily spell trouble. In fact, the market fundamentals now suggest wind and solar are resilient enough to compete without them.
From Subsidized to Cost-Competitive
Stocks of renewable developers such as NextEra Energy and AES have underperformed the S&P 500 so far this year, and their valuations, based on expected earnings multiples, are cheaper than their 10-year average. By contrast, nuclear- and gas-heavy power producers such as Constellation Energy and Vistra are trading at steep premiums to historical averages and are up roughly 40% year to date. This valuation gap highlights how renewables may offer investors an attractive entry point at a time when fundamentals remain strong.
The production and investment tax credits for wind and solar, introduced in the 1990s and 2000s, were extended multiple times. They supported rapid buildout but also created dependence on complex financing structures. With their phaseout, developers will need to rely more on project efficiency and cost competitiveness.
Fortunately, renewable technologies are no longer in their infancy. According to Lazard, utility-scale solar is 84% cheaper than in 2009, while onshore wind costs have fallen 56%. Even when paired with battery storage, both are competitive with combined-cycle natural gas generation.
To see how renewables are expanding on the ground, you can read more about solar grazing scaling up across the U.S.
Atin Jain, analyst at BloombergNEF, noted that tax credits were so generous that they reduced pressure on developers to cut costs. With subsidies disappearing, companies are likely to pursue savings in areas such as labor and permitting, where costs have remained sticky.
Simplifying the Investment Landscape
Tax-credit structures have made renewable financing complex. Only a limited pool of investors with the tax appetite and expertise could participate, leading to expensive project finance and restrictive terms.
Without subsidies, projects become easier to evaluate and finance. As a BloombergNEF report highlighted, no other major solar or wind market depends on mechanisms as complicated as U.S. tax credits. Their removal could broaden the investor base and create simpler, more transparent deal structures.
Ray Spitzley of Morgan Stanley added that removing the uncertainty of recurring extensions and expirations could also reduce the industry’s cycle of booms and busts. Developers rushed projects in 2012 and again in 2020 to beat phaseout deadlines, only to see installation volumes crash the following year. Stability without political deadlines could be a long-term benefit.
Near-Term Pressures, Long-Term Growth
In the short term, developers are expected to rush projects to qualify for remaining credits, potentially creating a buyer’s market. BloombergNEF estimates that without subsidies, 23% fewer wind, solar, and storage installations will be built through 2030.
But longer term, the picture is brighter. Electricity demand is rising again in the U.S. after years of flat consumption. Growth is being driven by:
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Artificial intelligence and data centers requiring vast new power capacity.
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Electrification of transport and heating, adding new loads to the grid.
This rising demand is expected to create a seller’s market for reliable, low-cost capacity.
For more on how renewables are reshaping the U.S. energy mix, explore this piece on wind and solar surpassing coal for the first time
Challenges Facing Alternatives
Competing energy sources face significant barriers:
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Nuclear projects are expensive and take over a decade to build.
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Natural gas plants now cost nearly twice as much to construct as five years ago, according to Wood Mackenzie. Skilled labor shortages add to the challenge.
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Commodity prices could rise further if the U.S. expands gas export capacity, making domestic gas-fired generation more costly.
By contrast, utility-scale solar can be completed in 12–18 months, and wind projects in about two years—much faster than gas plants, which often take 3–4 years.
At the community level, see how six U.S. cities are leading with clean energy innovation.
A Turning Point
Subsidies can distort markets and create uncertainty. For wind and solar, their removal comes at a time when demand growth, cost competitiveness, and project speed give renewables a strong foundation.
The next chapter for the industry will be defined not by subsidies, but by efficiency, scale, and the ability to meet the rising appetite for electricity in an increasingly digital, electrified economy.
Now may be the time for renewables to prove they can thrive on their own.
