OBBBA Casts Shadow on the Solar ABS Industry

The U.S. solar asset-backed securities (ABS) market has generally experienced growth over the past three years, marked by a notable shift from solar loan to solar lease and power purchase agreement (PPA) issuance. However, the recently passed One Big Beautiful Bill Act (OBBBA) is creating uncertainty across the industry. OBBBA rolls back several clean energy incentives introduced under the Inflation Reduction Act (IRA)—a key catalyst for industry expansion. The impact is expected to be more immediate and significant for the solar loan segment, as investment tax credits (ITC) will be eliminated by year-end. In contrast, solar lease/PPA originators are actively pursuing “safe harbor” strategies to preserve ITC eligibility through at least 2027 and potentially until 2030. Consequently, solar loan ABS issuance is expected to decline significantly, whereas issuance backed by leases and PPAs may remain relatively steady. The OBBBA does not affect ITCs for existing ABS transactions, as those…