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Public agencies across the country woke up on July 5 to a dramatically altered energy landscape. President Trump’s signature on the One Big Beautiful Bill Act (OBBBA) the day before didn’t just reshape federal spending; it shortened years of energy planning into months of urgent decision-making.

For the thousands of public agencies that have been methodically planning solar installations, fleet electrification, HVAC modernizations and building efficiency upgrades, the question is no longer “when should we move forward?” but “can we move fast enough to capture federal incentives before they disappear?”

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1. What the One Big Beautiful Bill Act Actually Does: Different Deadlines for Different Technologies with an Emphasis on Domestic Suppliers

The legislation dramatically alters the timeline for federal energy incentives established under the 2022 Inflation Reduction Act (IRA). Technologies that previously had support through 2032-2033, or in some cases permanently, now face much tighter deadlines.

Solar, wind, electric vehicle and energy efficiency incentives that were originally available through 2032-2033 now face deadlines as early as 2025-2027, effectively accelerating their phase-out by five to seven years. Meanwhile, energy storage, geothermal, nuclear and hydropower projects retain their original timelines through 2033-2034.

Even if the timelines can be met, strict “Foreign Entity of Concern” (FEOC) rules are also in play. Partial use of components from those entities may disqualify projects unless domestic content thresholds are met.

• Solar and Wind Projects (Section 48E): Projects must begin construction by July 4, 2026, to maintain a four-year completion window. If that deadline is missed, projects must be placed in service by December 31, 2027. In this case, “beginning construction” doesn't mean board approval or permits; it requires either physical work of a significant nature at the job site, such as installing racks or structures to support solar panels or paying for at least 5% of the project’s total cost. Any solar or wind project that begins construction after December 31, 2025, must also comply with the FEOC rules.
• Commercial Electric Vehicles (Section 45W): Agencies now have until September 30, 2025, to purchase qualifying vehicles to receive tax credits.
• EV Charging Infrastructure (Section 30C): Projects must be placed in service by June 30, 2026.
• Energy-Efficient Buildings (Section 179D): Construction must begin by June 30, 2026, to maintain deductions that were previously permanent in the tax code.
• Energy Storage, Geothermal, Nuclear, Hydropower: These technologies retain their original federal support timelines through 2034.

Adding to the urgency, President Trump signed an executive order on July 7 directing the Treasury Secretary to tighten construction requirements within 45 days. The new guidance will require “substantial progress” rather than simply beginning work, potentially making it even harder for projects to qualify.

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2. Impact on Public Agencies: Every Month Matters

Major energy infrastructure investments are already driven by practical necessities rather than federal incentives alone. Aging infrastructure means higher utility bills and decreased quality of air, temperature control and comfort for students, staff and residents. Federal incentives are valuable, but the One Big Beautiful Bill is a reminder that hedging against utility cost increases that have risen 2-3 times faster than inflation will still deliver net savings even without federal support.

If support is what they’re after, public agencies with aging facilities must expedite their critical infrastructure improvements to leverage federal incentives. These agencies must now accelerate HVAC, lighting and building efficiency projects that lose their federal Section 179D support after June 30, 2026. Water districts operating energy-intensive treatment plants with specialized pumps and aeration systems, community college campuses with multiple buildings requiring coordinated upgrades, and cities with numerous fire stations, libraries and administrative buildings all previously relied on permanent federal deductions for energy-efficient improvements.

The shortened timeline from “permanent” federal support to a June 2026 deadline creates urgency for public agencies to accelerate project timelines. With California commercial and residential IOU customers spending an average 90% more on their utility bills than in 2013, agencies that can successfully navigate these new deadlines will capture significant savings, while those that delay face higher project costs and continued exposure to rising energy expenses.

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3. Strategic Silver Linings: Opportunities Within the Chaos

Despite the challenges, forward-thinking agencies are identifying opportunities within the new framework. Energy storage projects retain full federal support through 2034, making battery installations increasingly attractive for agencies seeking long-term budget relief. Unlike solar projects, storage systems can still access federal incentives with reasonable planning horizons. Geothermal Projects also maintain their full 30% credit through 2034, offering another pathway for agencies with suitable geography and long-term energy planning.

Municipal Bond Expansion represents a lesser-known but significant win in the legislation. The bill expands tax-exempt private activity bonds for energy efficiency, school retrofits and resiliency projects, raising caps on bond insurance and expanding eligibility. This gives agencies additional financing tools to bridge federal funding gaps.

Accelerated Depreciation remains permanently at 100%, supporting projects like energy storage, fuel cells, linear generators and some energy efficiency improvements. This provision allows agencies working with private sector partners to deduct the full cost of eligible technologies in the first year, providing additional tax benefits.

State and Utility Programs continue offering substantial incentives that can help offset reduced federal support. The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA), California Energy Commission (CEC) and California Public Utilities Commission (CPUC) programs, along with utility rebates, provide alternative funding pathways for strategic agencies.

Further, as agencies delay projects due to the policy changes, fast-moving agencies may benefit from reduced competition, and in-turn gain better access to contractors, equipment and permitting resources.

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4.The Path Forward: Act Now or Pay More Later

Successful agencies will rapidly assess their exposure, prioritize high-impact projects and accelerate timelines without sacrificing quality.

Immediate Steps:

• Inventory all energy projects and their federal incentive dependencies
• Assess which projects can meet new deadlines and financial exposure if funding disappears
• Evaluate shifts to energy storage or other qualifying technologies that retain federal funding support
• Determine how foreign content sourcing affects eligibility and whether project financing can still move forward under the new rules

Medium-Term Steps:

• Fast-track approvals, permitting and contractor selections for priority projects
• Consider bundling multiple projects for economies of scale
• Explore alternative financing through municipal bonds and state programs

Ongoing Strategy:

• Develop contingency budgets for projects that may lose federal support
• Build relationships with state agencies managing alternative incentive programs
• Partner with experienced energy service providers who can navigate timeline challenges and optimize available incentives
• Smartly identify other funding sources from the State, utilities, private funding, etc.

The bottom line is that federal timelines are significantly shortened, while the fundamental drivers for energy infrastructure investments remain strong. Aging systems create inefficient operations and higher utility costs, plus poor comfort conditions for occupants, making modernization essential regardless of federal policy. Agencies that act decisively can still capture federal incentives while securing long-term protection against escalating utility costs. The clock is ticking, but the strategic incentive and motivation to modernize energy infrastructure — with or without federal incentives — has never been clearer.

Authored By:
Thomas Jackson
Corporate Vice President
Major Projects — Climatec Energy
A Robert BOSCH Company

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“Based on my years of experience supporting and working in education, it is clear to me that proper lighting, ventilation, heating and air conditioning in the classroom contributes greatly to a student’s ability to focus, learn and grow during their educational journey,” said Jack O’Connell, former two-term California State Superintendent of Public Instruction and current partner at Capitol Advisors Group.

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California school districts continue to face severe budget pressures as both utility and construction costs soar, making it increasingly difficult to maintain quality education while managing school infrastructure. Electricity rates are climbing at nearly twice the inflation rate with alarming projections:

• PG&E: 49% increase through 2027 (12.4% annually)
• SCE: 20% increase through 2026 (5.1% annually)
• SDG&E: 22% increase through 2026 (5.5% annually)

These rising costs disproportionately impact schools with aging facilities — over 30% of California schools are more than 50 years old — forcing districts to divert funds from educational programs to cover operational expenses, such as HVAC breakdowns, rising utilities expenses and labor costs.

Construction costs have also seen double-digit increases year-over-year since 2020, with supply chain delays extending equipment delivery to 6-12 months and sometimes even longer. Districts postponing infrastructure projects often face 1.5-3 times higher construction costs than original estimates. The recent devastating fires in Southern California will likely make costs rise even further, due to scarcity of skilled labor, equipment and other essential construction resources.

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These fiscal challenges are potentially exacerbated by AB 218, which extends the statute of limitations for filing claims of childhood sexual assault, leading to significant increases in insurance liabilities for districts across California. With rising budgetary pressures, districts must complete their master plans and find savings within their own budgets to maintain fiscal stability while ensuring safe, modern and energy efficient learning environments.

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Proposition 2: A Strategic Solution for K-12 Schools

Proposition 2, California’s landmark $10 billion school facility bond, with $8.5 billion specifically for K-12 facilities, offers help to mitigate these budget challenges. The bond includes several key funding mechanisms:

• Energy Efficiency Funding: Provides up to 5% additional funding for projects exceeding Title 24 energy standards, with grants calculated based on the percentage improvement achieved.
• 75-Year-Old Building Replacement: Offers supplemental funding to replace aging buildings when a cost-benefit analysis justifies replacement over modernization.

Additional provisions include Career Technical Education Grants, Small Project Funding, Financial Hardship Assistance and Water Conservation Requirements.

By implementing modernization projects and strategically leveraging Proposition 2 funding, districts can address their ever-growing list of deferred maintenance and aging infrastructure, lower long-term operational costs and provide needed relief to their general fund budgets.

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Success Stories: How Schools Can Invest in Comprehensive Solutions

School districts across California are already demonstrating how strategic energy infrastructure investments can deliver substantial returns.

For example, Rowland Unified School District implemented a seven-phase Energy Infrastructure Modernization Program across their 23 facilities, combining various funding sources including state grants, federal stimulus funds and utility incentives. Their investment in HVAC upgrades, LED lighting, building automation systems and renewable energy is projected to generate over $43 million in savings.

Meanwhile, Lakeside Union School District, facing some of the oldest infrastructure in California including century-old energy systems, launched a comprehensive $17.5 million modernization program using Elementary and Secondary School Emergency Relief (ESSER) federal stimulus, private sector funding and local bond funds. By adding renewables and upgrading antiquated HVAC, lighting and roofing systems, the district will realize over $41 million in savings!

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Why Proposition 2 Matters: Equitable Funding and Long-Term Support

Proposition 2 establishes a sustainable funding framework through 2033, requiring districts to develop and submit a five-year facilities master plan. The program addresses historical funding inequities by providing greater support to small and disadvantaged districts:

• Base funding: 50% for new construction and 60% for modernization projects
• Additional funding: Districts with high percentages of low-income students or low property values can qualify for increased funding shares up to 100%.
• Small district support: Schools with under 2,500 students receive significant additional support, including reserved funds and project management grants.
• Matching share points system: A point system is applied that can adjust how much the state contributes to the funding of these projects from 60% to 65%, requiring the district to only contribute 35% of the funds needed.

As Proposition 2’s implementation is being finalized, districts should begin taking steps to find cost-saving opportunities.

“California school districts are at a crossroads. The combination of rising energy costs, aging infrastructure and increased insurance liabilities puts a real strain on our ability to prioritize student learning,” said San Bernardino City Unified School District Director of Facilities Planning and Development & California Coalition for Adequate School Housing (CASH) Chair Thomas Pace. “Proposition 2 offers a lifeline — but districts need to act decisively. By investing in smart infrastructure now, we not only reduce long-term operational costs, but we ensure our schools remain safe, healthy and sustainable environments for students and staff alike.”

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Steps for Districts to Take Now

With a three-year processing timeline and limited funding, districts must act quickly to capitalize on this transformative opportunity. Proposition 2 funds can be directed toward modernization projects in facilities that are at least 25 years old or where enrollment growth exceeds current capacity. Key steps include:

1. Evaluate your master plan and facilities to identify high return-on-investment infrastructure modernization projects, such as HVAC improvements.
2. Partner with an energy service provider to implement modernization projects and expedite your planning and execution process to avoid rising costs.
3. Identify opportunities for state and federal financial support, like Proposition 2
   

By investing in energy-efficient solutions now, districts can ensure that more resources remain available for what matters most: educating the next generation.

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Co-Authored by:

• Jack O’Connell – Former State Superintendent of Public Instruction, California State Senate Member of the 18th district, California State Assemblymember of the 35th district and Santa Barbara County School Board member
• Thomas R. Jackson – Corporate Vice President Sales & Major Projects, Climatec Energy – A BOSCH Company