Generating Results for Renewable Energy Projects with Tax Incentives

Generating Results for Renewable Energy Projects with Tax Incentives
December 4, 2025 3 mins

Generating Results for Renewable Energy Projects with Tax Incentives

Generating Results for Renewable Energy Projects with Tax Incentives

As the U.S. renewable energy market accelerates, tax insurance is becoming critical to unlock investment, manage uncertainty, and protect returns as evolving legislation reshapes tax credits that underpin project viability.

Why Tax Incentives Matter

Tax incentives are the financial engine behind many renewable energy projects. They enhance profitability, improve marketability and are often essential to securing financing. But with complexity comes risk—especially when tax positions are challenged by authorities.

The Inflation Reduction Act and the One Big Beautiful Bill Act (July 2025) have expanded and extended credits for solar, wind, battery storage, carbon capture and clean fuels. Yet, navigating these incentives requires precision.

Key incentives span across generation, storage and carbon mitigation — each with unique eligibility and timelines. Generally speaking, they include:

  • Investment Tax Credit (ITC): Provides a credit for a percentage of eligible costs for most solar projects until the end of 2027, and other renewable installations, like standalone battery storage, until 2032.
  • Production Tax Credit (PTC): Offers a per-kilowatt-hour tax credit for electricity generated by qualified renewable energy sources, with variation based on when projects begin construction or are placed in service.
  • Section 45Q (Carbon Oxide Sequestration): Offers a volume-based credit for carbon capture processes, including utilization and enhanced oil recovery.
  • Section 45Z (Clean Fuel Production Credit): The credit for production of sustainable transportation fuels was extended through 2029.
  • Bonus Depreciation: Allows the rapid depreciation of renewable energy assets through 100% bonus depreciation, reducing taxable income in early years.
  • State and Local Incentives: Many states and municipalities offer their own tax credits, rebates, and exemptions.

Market Momentum Meets Tax Risk

Despite regulatory shifts, market appetite for renewables remains strong. Developers and investors are pressing ahead — but are keenly aware of the risks.

While these incentives offer substantial upside, they also introduce complexity — and with complexity comes risk. If a tax authority successfully challenges a project’s tax position, the financial consequences can be significant — potentially resulting in the loss of expected tax benefits, interest, penalties and even litigation costs.

Tax insurance offers a way to manage those risks, providing protection against the financial consequences of adverse tax determinations.

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Our professionals are recognized for their experience in developing innovative, cost-effective tax insurance solutions that can reduce or eliminate tax risk.

Corey Lewis
Managing Director, Co-Head North American Tax Insurance Practice, Tax Credit Insurance Practice Leader

Four Ways Tax Insurance Adds Value

1. Financing Confidence:

Lenders and investors gain confidence that key tax benefits will be realised — supporting deal execution and capital deployment.

2. Balance Sheet Protection:

Insurance shields insured parties from unexpected losses, reducing volatility and preserving financial strength.

3. Deal Enablement:

In M&A, tax insurance can bridge gaps between buyers and sellers, smoothing negotiations and accelerating timelines.

4. Enhanced Marketability:

Projects with tax insurance in place are often more attractive to a broader pool of investors.

To unlock the full potential of your next renewable energy deal, speak with your broker about tailored tax insurance solutions.

Aon’s Thought Leaders
  • Corey Lewis
    Managing Director, Co-Head North American Tax Insurance Practice, Tax Credit Insurance Practice Leader

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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