The expanding list of challenges facing renewable energy developers

However, the spring 2025 congressional budget bill proposed an abrupt halt to Federal renewable energy tax credits — rather than the slower ramp-down that the industry was expecting. While this suggested policy change infused a great deal of uncertainty into the industry, the underlying fundamentals, investor interest, and financing availability are expected to remain intact.

According to Andy Redinger, Managing Director, Group Head of NA Utility, Power and Renewables Energy practice at KeyBanc Capital Markets, the renewable energy sector maintained its resiliency through most of the first half of 2025. Redinger spoke on a panel at the New Project Media (NPM) U.S. Development & Finance Forum in late April 2025 where he highlighted the current state of the lending market for renewable energy projects.

Appetite for loans healthy, lenders preparing for a less subsidized future

While the abruptness of the tax credit cutoff was a surprise, lenders were already preparing for capital stacks without as much government support. Redinger, who also spoke on this topic on the NPM Interconnections Podcast, emphasized that the lending market for renewable energy is on solid footing despite precarity in other parts of the economy. “I would characterize the markets as pretty healthy. Banks are still well capitalized. We're open for business,” he told the audience at NPM’s event.

One factor: banks need to show loan growth to Wall Street, and renewable energy can help them do that. Wall Street and industry analysts are increasingly valuing banks according to loan growth, and banks are prioritizing it accordingly. Redinger noted that due to this demand for overall loan growth, loan pricing for renewable energy projects has come down slightly.

In addition, Redinger indicated that there is ample opportunity for renewable energy project financing from institutional debt providers that have yet to fully engage in the marketplace. And while financing from institutional sources currently comes with a higher price tag, it represents a deep reserve of capital for the select projects that meet institutional investors’ criteria.

“We’re seeing a little bit more activity in private placements for developers looking to get a little bit more tenor in their project debt,” explained Redinger. “But on the horizon, even with all the noise, I see this space being healthy because without much of an increase in pricing, you could draw in a massive amount of investment from the institutional space.” While this interest from institutional capital may be tempered somewhat by the newly announced policy changes, the interest was never grounded in a foundation of subsidized loans.

Navigating heightened costs and unexpected policy changes

While banks are eager to lend to renewable energy projects, the sector is not without challenges. Like many other businesses, renewable energy developers are contending with heightened risk due to fluctuating trade policy. Tariff impacts on the supply chain for solar panels are of particular concern.

Tariffs (and inflation) aren’t the only factors driving up costs for renewable energy developers. Redinger pointed out that, perhaps counterintuitively, tax credits for renewable energy projects established by the Inflation Reduction Act (IRA) have contributed to high prices for renewable energy equipment and components. He noted that even after accounting for a potential spike in tariffs, it’s still much less expensive to buy solar panels in Spain and import them than to purchase them in the U.S.

In April, the industry was expecting an orderly transition from financing structures that rely on the current tax credits to those that don’t. While current legislation would cut off tax credit funding abruptly rather than gradually, the outcome is the same: a future without federal tax credit-dependent financing structures.

According to Redinger, “We were hoping for a more orderly transition, but the interest from banks and institutional investors is built on the underlying fundamentals of the industry, not on any one public sector program.”

In addition to tariffs and changes to tax structures, renewable energy developers and investors are closely monitoring policy developments and government actions that create uncertainty of execution for some projects. For example, in April, the Trump administration ordered a halt to the construction of the Empire Wind project in New York. Despite the project being fully permitted, the administration paused work to review the permits with claims that the previous administration had rushed approvals. Roughly a month later, the administration notified the project’s developer that it had lifted the stop-work order and construction could resume. Furthermore, shortly after this panel, the introduction of the One Big, Beautiful Bill (now with the Senate) proposed abrupt tax credit rollbacks and restricted rules. Redinger said it’s the unpredictable policy changes, like tariffs, the Empire Winds decision, and the bill currently at the Senate, that are keeping developers and investors in the renewable energy sector up at night.

“The capital is there. It’s just the question around tariff risk: who’s taking that hot potato? And if you can figure that out, you’ll get your project financed,” said Redinger.

Uncertainty is a common theme across the U.S. economy in 2025. Yet between a healthy lending market, an attractive value proposition for institutional investors, and a cost-effective long-term solution for the country’s energy needs, the renewable energy industry remains resilient and poised for growth.

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For strategies to navigate utilities, power, and renewable energy solutions, contact one of our professionals or visit key.com/energy.