Quarterly Considerations Q2 2026

Project Finance Trends

A Market is Forming for 48E and 45Y Tax Credits

The July 4, 2026 beginning-of-construction deadline has passed, and attention is shifting from safe harboring projects to financing and monetizing the tax credits that eligible projects will generate — the technology-neutral Section 48E ITC and Section 45Y PTC, which apply to facilities that began construction after December 31, 2024. A market for these credits is beginning to emerge ahead of comprehensive Treasury guidance. CG/ CRC-IB has closed transactions involving technology-neutral credits, as some market participants begin to transact within areas where the rules are sufficiently settled.

That said, buyers can afford to be patient. With a significant volume of credits seeking buyers, including several mega-projects seeking to monetize $1B+ of credits, demand is concentrating on the most straightforward, highest-quality opportunities, with legacy Section 48 and Section 45 credits at the front of the line. Because the material-assistance FEOC restrictions apply only to projects that begin construction on or after January 1, 2026, projects that began construction in 2025 generate technology-neutral credits that are effectively grandfathered from the most burdensome supply chain tracing, and that cleaner pool is where most technology-neutral transactions are occurring today.

Complete Treasury guidance is not expected imminently, and many market participants believe full clarity may not arrive until after the midterm elections. In the interim, transaction documents are being drafted around aspects of the FEOC rules that reach further than many participants expect. For example, technology licensed from a prohibited foreign entity can constitute “effective control” and jeopardize credit eligibility, as can borrowing from such an entity in excess of 15% of a project’s total debt. Until final regulations arrive, sponsors should expect conservative underwriting assumptions and extensive diligence from investors.

Tax Equity, Transfers, and the Insurance Bottleneck

Increasingly, the binding constraint is insurance — and behind it, the question of who ultimately bears FEOC risk. Several transactions involving technology-neutral credits have hinged on where coverage lands. Demand for tax insurance has outpaced supply, even as the number of carriers has grown from a small handful to more than 30 and the scope of insured risk has widened from discrete basis or structural issues to encompass basis, structure, recapture, and transfer risk. Pricing has risen accordingly. Because a best-efforts credit sale – one with no committed buyer – results in lower advance rates, the market is also drifting back toward developer indemnities and sponsor credit support to facilitate transfers, a notable reversal from recent practice.

Hybrid structures have become a preferred approach for many sponsors, allowing tax equity partners to deploy finite tax capacity more efficiently while still monetizing basis step-ups. At the same time, transfer market friction is pulling some capital back toward traditional tax equity, with assumed transfer pricing included in investor sizing parameters. Credit buyers are harder to find, and large banks and established tax equity investors may be better positioned to underwrite and hold FEOC risk than the broader transfer universe. Preferred and structured equity, by contrast, remains readily available – able to close quickly and flexible in structure. As a result, the constraint sponsors face is rarely a lack of capital but rather the challenge of efficiently monetizing credits through the transfer market. Even sponsors returning to tax equity are finding that terms have changed, with investors increasingly pushing FEOC risks back onto sponsors. The result is less a return to traditional tax equity than a renegotiation of where risk sits within the capital structure.

The Capital Stack Evolves Across the Lifecycle

The financing toolkit has broadened at every stage of the project lifecycle, and development-stage capital has changed the most. Where developers once posted a modest PPA letter of credit and reached notice-to-proceed within months, sponsors are now raising development capital earlier and in larger amounts to fund development activities and procurement. Development facilities, construction warehouses, and equipment supply loans have become essential rather than optional.

At scale, these structures allow large sponsors to avoid arranging bespoke construction financing for dozens of projects each year, and lenders have expanded the range of development risk they are willing to underwrite accordingly. Some lenders are also shifting toward fully underwritten, programmatic construction facilities rather than deal-by-deal, asset-specific financings – a meaningful change in how portfolio and balance-sheet risk is assessed. A wave of high-profile developer distress has not materially changed structures or pricing, but it has sharpened underwriting toward sponsor strength and balance-sheet wherewithal, and bankruptcy provisions are now heavily negotiated. Equipment financing, meanwhile, has become a distinct discipline. Supply-chain pressure has made deposit requirements materially more expensive, and both lenders and sponsors increasingly treat equipment financing separately from other project debt given its unique collateral profile and the timing demands of securing key components.

On the takeout side, the clearest theme is a shift toward private, bilateral capital over broad syndication. Capital providers have grown noticeably more selective about participating in broadly syndicated transactions, with demand increasingly favoring differentiated, bilateral opportunities. Long-term takeout and back-leverage financings are gaining traction in parallel, as sponsors historically reliant on bank debt increasingly turn to insurance companies and other institutional capital providers for permanent financing. Securitization is often cited as the next frontier, but the market remains in its early stages, with only a handful of sponsors operating genuinely repeatable programs. For most, a bilateral or club structure that captures much of a private placement’s benefit is the more practical path. CG/ CRC-IB expects demand for private, insurance-sourced, and bilateral capital to continue shaping takeout and construction financing through the balance of 2026.

M&A Trends

A Market for Execution-Ready Assets

The renewable energy M&A market remains bifurcated: operating and construction-stage assets continue to draw intense competition, while development-stage assets and pipelines struggle to transact. The environment remains constructive and capital is abundant, but buyer sentiment has shifted from fear of missing out to fear of overpaying. Diligence is more exhaustive, deal volume under review far exceeds what ultimately closes, and transaction timelines have lengthened as buyers prioritize conviction over speed.

Buyer behavior is shifting in another respect as well. CG/ CRC-IB is seeing more sponsor-to-sponsor transactions, with successful buyers distinguishing themselves through the conviction to execute and a credible value-creation plan, whether through recontracting, repowering, co-locating load, or repositioning an asset within a larger platform. Price discovery remains strong for the highest-quality assets, while the broader market continues to wait for the bid-ask spread to converge.

Powered Land and the Interconnection Premium

The scarcest input in renewable energy M&A today is a deliverable connection to the grid. Sites with secured interconnection and known energization schedules are clearing at a premium, while interconnection and network-upgrade delays continue to lengthen. The impact is being felt across the development cycle. Projects already in the queue are seeing upgrade scopes revised and key milestones pushed out, increasing development costs and making schedule certainty an increasingly valuable differentiator.

Platform transactions also remain selective, with buyers favoring businesses that offer differentiated capabilities, scalable development platforms, or clear opportunities to create value beyond the underlying asset base. While capital remains available, buyers are increasingly distinguishing between platforms that offer strategic advantages and those that do not.

CG/ CRC-IB’s Recently Completed Transactions

References

1. Announcements tracked via Infralogic (part of Ion Analytics), PeakLoad, and available press releases through June 2026