The Trump administration’s new clean energy tax guidance deals a fresh blow to many wind and solar companies already reeling from enactment of the Republican megalaw, raising new questions about the trajectory of renewables.
The Treasury Department plan, released Friday and mandated by an executive order on July 7, rewrites decades-old standards for how wind and solar projects can qualify for lucrative credits. The revisions no longer allow projects that incur 5 percent of their costs to be considered under construction — a move that could make it difficult for many developers to receive federal support and move forward. The guidance also requires companies to meet the new standards within two weeks, angering industry advocates.
The move “is part of an unprecedented side deal the administration made with anti-clean energy ideologues to undermine Congress,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association. She predicted the guidance would threaten thousands of small businesses.
But considering Trump’s rhetoric against renewables, Treasury’s plan is not as bad for the industry as some expected. It will allow many projects to receive credits through the end of the decade and is not retroactive as some had feared.
The guidance “is less restrictive than the rumors that were circulating around K Street,” said Tim Urban, head of the tax policy practice at the law firm Bracewell.
Under the One Big Beautiful Act, wind and solar projects can qualify for incentives if they are placed in service by the end of 2027 or begin construction before July 4 of next year. The phase-out of credits has spurred predictions of a steep drop off in wind and solar projects after 2027.
Yet until the new guidance, it was unclear how far the Trump administration might go to curtail renewables beyond the megalaw’s provisions. Conservative Republicans have pressured the administration to crack down further on wind and solar subsidies, while moderate lawmakers pushed back. Sen. Chuck Grassley (R-Iowa), who considers himself the “father” of the wind energy tax credit, put a hold on Trump’s Treasury nominees over the issue.
The Treasury plan won praise from Grassley, who said it “seems to offer a viable path forward for the wind and solar industries to continue to meet increased energy demand.”
Treasury is eliminating the 5 percent standard to receive credits after Sept. 2. The guidance largely leaves intact another standard where companies prove they commenced construction by doing “physical work of a significant nature” on projects.
Once a project is under construction, it also will still have four years to come online while receiving credits — a lifeline that could allow many developers to receive federal incentives through the end of the decade.
“I appreciate the work Secretary [Scott] Bessent and his team put in to issue guidance that reflects some of the concerns Congress and industry leaders have raised,” Grassley said.
The House Freedom Caucus, chaired by Rep. Andy Harris (R-Md.), also cheered the guidance, even while taking a dig at Grassley for holding up Treasury nominees. Freedom Caucus members, including Reps. Chip Roy (R-Texas) and Ralph Norman (R-S.C.), had led the charge to quickly terminate tax credits for wind and solar as part of the megalaw.
“This action — along with subsequent measures by the Departments of Treasury and Interior — executes a key part of the negotiations between Members of the House Freedom Caucus to build on the successful repeal of the Green New Scam in the One Big Beautiful Bill Act, fulfilling a core promise of the 2024 campaign,” the caucus wrote on X.
Congressional Democrats and environmental groups warned that the policy could increase electricity bills by making it harder to build the new energy needed to meet rising demand.
“The bottom line is that Trump is creating a national energy crisis that Americans are already seeing in their utility bills and is bound to get even worse, and Republicans voted for it,” Sen. Ron Wyden of Oregon), the top Democrat on the Senate Finance Committee, said in a statement. “Trump is destroying America’s clean energy industry, and Chinese firms are going to prosper at our expense.”
Sara Chieffo, vice president of government affairs at the League of Conservation Voters, said the guidance is an “extreme assault on affordable clean energy, in order to do the bidding of Big Polluters.”
States need to take “urgent action” to counteract the Trump administration, said Heather O’Neill, president and CEO of Advanced Energy United, a trade group.
“With energy demands set to soar and jobs at risk, states across the country should take executive action to speed up project procurement, siting, and permitting approvals while longer-term reforms are made,” she said.
Lawsuits, costs and a solar rally
Treasury’s guidance is part of a wider effort by the Trump administration to eliminate climate regulations and cut incentives for wind and solar.
The Interior Department has proposed new restrictions on renewable projects planned on federal land. EPA has proposed rolling back regulations on climate pollution from cars and power plants, as well as undoing the scientific finding that underpins the agency’s legal obligation to regulate carbon dioxide.
BloombergNEF, a consulting firm, projects 23 percent fewer wind, solar and storage installations over the next decade as a result of Trump’s moves.
“The industry is going to have to adapt to survive and grow,” said Derrick Flakoll, a senior policy analyst at BNEF.
David Burton, a partner at the Norton Rose Fulbright law firm, predicted there likely would be lawsuits on the guidance. “Somebody will probably sue,” he said.
In the weeks leading up to Treasury’s plan, many industry players worried the administration would raise the threshold for a project to claim credits from 5 percent of costs incurred to 20 percent or more. The industry also worried that Treasury might dramatically shorten the period a project could qualify for credits after starting production.
Many of those fears ultimately did not come to pass.
A provision that allows developers to qualify through the fabrication of major project components provides some flexibility, Flakoll said. The rule also preserves the 5 percent start of construction test for solar projects smaller than 1.5 megawatts, a boost to the rooftop solar industry, he said.
As a result, rooftop solar stocks rallied Friday. Rooftop leader Sunrun, for example, saw its stock jump more than 30 percent.
“It could have been worse for wind and solar developers,” Flakoll said.
Many companies have already moved away from the 5 percent cost threshold in recent years because it was an expensive way for projects to qualify for tax credits under IRS rules, said Keith Martin, a lawyer specializing in renewable energy tax policy at Norton Rose Fulbright. Instead, many have relied on buying expensive components like transformers to qualify.
Treasury’s new guidance seemingly wants developers to go further in proving they are under construction, but exactly how far remains to be seen, he said.
“The rubber meets the road when these projects go out to get financing,” Martin said. “The financiers have to decide what they feel comfortable with.”
‘That’s outrageous’
The guidance did not detail new provisions for “foreign entities of concern” (FEOC) language, although the executive order directed Treasury to weigh the issue.
Under the megalaw, industries are required to verify that a percentage of components in their products are not tied to U.S. adversaries like China, North Korea, Russia and Iran. For wind and solar, projects beginning construction next year must use 40 percent of their content from non-FEOC countries like the U.S., an amount that ramps up to 60 percent by 2029.
Treasury said Friday it was drafting additional guidance “as is necessary and appropriate” on FEOC restrictions.
In the meantime, some solar supporters say the timelines in the guidance will be problematic for companies.
“You can’t run a business if the federal government is going to change the rules on you and give you two weeks to comply. That’s outrageous,” said one industry representative who was granted anonymity to speak freely.
The plan also could be challenging for small solar projects that are larger than 1.5 megawatts, according to analysts.
Companies are “not going to dig foundations into the roof” to be able to count for commencing construction, said Burton.
This story also appears in Climatewire.
