Does onsite solar still pencil out without the federal tax credit? Yes, but the reasoning has to shift.
The federal solar investment tax credit is winding down, and a lot of businesses that were weighing an onsite energy project are asking the same question. What is the business case for solar without the investment tax credit? Or rather is there even one?
The answer is yes, but the reasoning has to shift. The tax credit was never the whole business case; it was one input among several, and the other inputs, rising electricity costs chief among them, haven’t gone anywhere.
What’s actually driving your utility bill
Electricity prices were flat for decades. A utility bill a year ago looked a lot like a utility bill twenty years ago, adjusted for inflation. But that changed around 2020, and it’s not reverting.
The Energy Information Administration’s March 2026 data shows commercial electricity costs up 5.8% year over year, with some markets running well into double digits. Two forces are driving the increase: solar and battery costs have fallen enough to make onsite generation genuinely competitive, for the first time in an industry where most assets are 50 to 100 years old. At the same time, demand, largely from data centers, has ramped up hard enough to strain a grid that wasn’t built for it.
The Edison Electric Institute expects utilities to invest $1.4 trillion into grid capacity and hardening between 2026 and 2030, up from $204 billion in capex in 2025 alone. That cost gets passed straight to ratepayers, and none of it depends on who holds federal office or which tax credits survive the next budget cycle.
What’s actually changing in the policy environment
Under the One Big Beautiful Bill Act, the solar investment tax credit is expiring. Projects need to be safe-harbored (construction started, or a qualifying cost locked in under current rules) by July 4, 2026, or placed into service by December 31, 2027, to qualify. The battery investment tax credit is a different story as it holds through 2033 before it starts stepping down, and 100% bonus depreciation remains available for both technologies.
States are stepping into the gap and offering their own solar and battery storage incentives. Illinois, New Jersey, and Maryland all have legislation that keeps a good business case good, or turns a borderline one into a clear yes. Tracking that landscape state by state is genuinely hard without a dedicated energy team, but it’s increasingly where the near-term value sits.
Building a strategy that survives the shift
The mistake VECKTA sees most often is prioritizing projects based on what incentives happen to be available right now, rather than starting from a full portfolio view. Look at every site, every technology option, and every source of capital first, then stack rank by net present value (NPV) and internal rate of return (IRR). Only then does it make sense to run a tight, competitive procurement process. Our CEO, Gareth Evans, walks through competitive procurement for onsite energy in this article.
If you skip that sequencing, you end up chasing whatever incentive is about to expire, or building the wrong asset because a proposal request was too loose to compare across suppliers. Both mistakes are more expensive than losing a tax credit.
Internal stakeholder alignment, not policy, is usually the real blocker. Large projects need five to ten people to say yes, and one no can stall the whole thing. Starting from transparent, portfolio-wide data instead of a single site’s numbers gives everyone the same picture from day one, which is what actually gets projects approved.
What losing the ITC actually costs, in real numbers
VECKTA modeled the same solar and battery project at three supermarket sites, in California, North Carolina, and Massachusetts, with and without the solar ITC. In North Carolina, a project that pencils out at a 5.3-year payback and 17% IRR today drops to a sub-12% IRR and almost a 9-year payback without the credit, enough to change whether it gets approved at all. California sees its NPV and IRR fall about 23%, a meaningful hit but not a fatal one. Massachusetts and North Carolina’s system sizing didn’t actually change at all when the credit was removed from the model.
Layer in demand response programs and REC (renewable energy certificate) monetization, both easy to overlook, and a post-ITC project can look considerably better than the base case suggests.
The practical takeaway
Losing a federal tax credit changes the math on a project, but it doesn’t always change the answer, especially once you’re looking at a full portfolio rather than a single site. The businesses that get this right start with their own data, sequence their projects by real economic priority, and run a genuinely competitive process once they know what they’re building.
