Renewable energy financing: navigating a surge in deal activity

 
All dollar amounts in this article are US$.

Data centers, AI, and battery storage fuel long-term financing demand

The explosive growth of data center power demand, driven by AI computing, has fueled an increase in capital investment and the need for financing, causing a transformational shift for renewable energy finance. Hyperscalers spent over $443 billion on data center capital expenditures in 2025, with projections for 2026 approaching $700 billion². US data center power demand is forecast to climb from 31 GW in 2025 to 41 GW in 2026, and potentially 66 GW in 2027³. Large data center developers accounted for 72% of corporate clean power procurement via PPAs in 2025⁴. For lenders and investors, 10- to 20-year PPAs with investment-grade hyperscalers provide cash flow profiles comparable to traditional infrastructure finance, and represent highly attractive credit opportunities.

Battery storage is emerging as a core asset class within this financing landscape. Global energy storage installations jumped 43% in 2025 to a total installed capacity of 106 GW⁵, with US installations reaching approximately 58 GWh: a 30% year-over-year increase⁶. In contrast to wind and solar (discussed further below), battery and other storage projects retain full tax credit eligibility through 2033, with phaseouts beginning in 2034. This extended runway, combined with the critical role storage plays in grid reliability and data center power delivery, is driving increases in investment and financing needs in the storage sector.

Tax credit phaseouts drive increased financing activity in the short-term

The One Big Beautiful Bill Act (OBBBA) accelerated federal tax credit phaseouts for wind and solar projects. Under the OBBBA, wind and solar facilities beginning significant construction after July 4, 2026 are ineligible for the clean electricity Investment Tax Credit (ITC) unless placed into service by December 31, 2027. Projects that start construction by July 4, 2026 retain access to the existing safe harbor and generally have until the end of 2030 to commence operation. These compressed timelines have generated a wave of financing activity as sponsors, lenders, and tax equity investors work to close transactions ahead of the deadline.

Tariff-driven cost increases have compounded the financing needs. The 25% duties on steel and aluminum, broad “Liberation Day” tariffs, and antidumping and countervailing duties on Southeast Asian solar imports have substantially increased equipment costs. The OBBBA also raised the minimum percentage of domestically manufactured products required for bonus credits from 40% to 50% for 2026 and 55% thereafter⁷. For lenders and tax equity investors, these dynamics have required new layers of diligence around equipment sourcing, cost overruns, and construction timeline risk.

Post-surge outlook

While some uncertainty exists regarding the pace of deal activity once the current deadline-driven surge subsides, most market participants remain bullish on the medium-to-long-term outlook for renewable energy financing. Global energy transition investment reached a record $2.3 trillion in 2025, and renewables are projected to supply approximately half of all additional electricity demand from data centers through 2030⁸. With over 90 GW of additional US storage capacity projected between 2025 and 2030⁹, and hundreds of billions in hyperscaler capital expenditures committed annually, renewable energy project investment and demand for financing is expected to remain robust well beyond the current credit windows.

Even in a year of record volumes, demand for funded loans continued to outstrip supply in the secondary market. For lenders and investors positioned in the renewables space, the combination of hyperscaler investment and grid-level demand has created an environment of sustained opportunity.

Conclusion

Approaching tax credit deadlines are accelerating current deal flow, while sustained growth of AI-driven electricity demand and battery storage investment are establishing a long-term foundation for continued investment. Lenders, tax equity investors, and project sponsors are deploying capital efficiently in the current window while positioning themselves for continued investment in the growing renewables space. Investors who can navigate the complexities of tariff exposure, compressed construction timelines, and evolving regulatory frameworks will be best positioned to capture value in what is shaping up to be a generational opportunity in US renewable energy infrastructure finance.