President Donald Trump wants to quickly ax renewable tax credits. But his One Big Beautiful Bill Act could take years to unwind some Biden-era incentives.
The legislation, signed into law by Trump last week, creates a complicated system for phasing out the investment tax credit and production tax credit available to wind and solar projects. Many projects could still see financing for years to come — though confusion reigns over which ones will qualify.
Projects already under construction are effectively able to claim the credits if they enter operation through 2030. That threshold is met by roughly a third of onshore wind development projects and more than a quarter of solar projects, according to U.S. Energy Information Administration figures.
Projects on the cusp of construction will also be able to claim credits. Those that start work before July 4, 2026, can avoid a new congressional requirement that projects be placed in service by the end of 2027 to get federal money.
Trump injected uncertainty into those qualifications with an executive order Monday, titled “Ending Market distorting Subsidies for Unreliable, Foreign Controlled Energy Sources.” The order directed the Treasury Department to tighten the definition for what qualifies as the start of construction.
But some renewable developers predict that their projects will weather the changes.
“As long as there’s demand for power and not enough supply, we’ll have customers to buy our power,” said Nick Cohen, president and CEO of Doral Renewables. “And, you know, right now the customer market is paying double what it did five years ago, and that’s because it needs the power. So our business is actually in a very good position because there’s so little supply out there and such strong demand.”
Still, the stakes for who qualifies are potentially massive for the country’s renewable energy industry and the climate.
About two-thirds of wind projects and nearly three quarters of solar projects that plan to come online by 2030 haven’t begun construction, according to EIA’s figures. The agency’s numbers represent a rough estimate of the status of projects as of May.
Most energy modelers are forecasting a big drop-off in renewable installations as a result of the GOP megabill. Wood Mackenzie, a consultancy, predicts wind and solar installations will decrease by 20 percent and 17 percent, respectively, over the next decade. Greenhouse gas emissions could be 7 percent higher in 2035, according to modeling done by a research group led by Jesse Jenkins, a Princeton University professor and outspoken climate hawk. That analysis also factors in rollbacks for other clean energy incentives, like tax credits for electric vehicles.
And while Trump has long prioritized axing renewable tax credits — which he refers to as part of the “Green New Scam” — his order Monday shocked renewable developers.
Under the order, Treasury will reconsider how it determines whether a project is under construction.
Historically, companies that spend 5 percent of a project’s total cost or have begun significant construction activities are safe-harbored under federal tax law, making them eligible to receive subsidies. But Republican lawmakers belonging to the ultra conservative House Freedom Caucus maintain the current rules make it too easy for developers to claim they have started construction and receive the money. The Treasury Department has 45 days to issue a report on the topic.
Keith Martin, a lawyer specializing in renewable project finance at the firm Norton Rose Fulbright, said he has been inundated with calls this week about how the order could impact project financing.
The big fear among developers: Banks won’t be willing to lend if companies can’t meet Treasury’s new guidelines.
Renewable developers traditionally have not had enough tax liability to fully claim the value of the federal tax credits. So many have partnered with big banks, who can claim the full value of the credits thanks to their massive balance sheets.
So far, it’s been business as usual. Martin said he saw one new term sheet signed earlier this week and expected to close on another Thursday. He predicted projects already under construction are likely to continue to receive financing under the tax equity model, as are ones close to the start of construction.
“And then after that, we’ll see what Treasury does,” he said. Any change in the rules proposed by the department are likely to be forward looking and only apply to projects yet to enter construction, Martin added. “The big tax equity investors have told us they are talking internally about what to do.”
‘A tough change’
Cohen of Doral Renewables said the company plans to forge ahead with the projects it is planning. It will simply raise the power price it is seeking from potential customers if Treasury’s new guidance makes it too onerous to pursue the federal tax credits.
A large project underway in Wisconsin illustrates how Doral is adjusting to changes in the legislative landscape. The Philadelphia-based renewable developer is waiting on Treasury’s new guidance before signing a long-term contract to sell the power generated by Vista Sands, one of the largest planned solar developments in the country.
At 1.3 gigawatts, Vista Sands will be able to produce enough electricity to power 230,000 homes. The project was approved earlier this year by Wisconsin utility regulators. It is slated to start construction in the spring of 2026 and come online in 2027.
Right now, the project falls within the requirements for receiving federal tax benefits, Cohen said. That would lower Vista Sands’ financing costs and make it cheaper to build.
But if Treasury’s new guidance is too difficult to meet, the company will simply pursue traditional financing to build the project. The big change: It will charge prospective customers more for the power.
Whether other developers could do the same is hard to gauge.
Five large renewable developers contacted by POLITICO’s E&E News declined to comment publicly on the law’s impact, with some citing fear that their comments might incite further actions from the Trump administration to curtail the industry. American Clean Power, a major trade association, declined to comment on the record. The Solar Energy Industries Association did not respond to a request for comment.
Some developers said they were not impacted by the changes.
Power Co. of Wyoming said its plans to build a 3.5-GW wind farm in the state were not affected by the law, even though the project is slated to come online in stages in 2029 and 2030. Chokecherry and Sierra Madre, as the project is known, has been safe harbored under existing Internal Revenue Service rules since it began construction on roads and turbine pads in 2016. Foundation installation is slated to begin next year, according to a project spokesperson.
In Oregon, one of the country’s largest planned solar projects, the 1.2-GW Sunstone Solar development, is going to be built in stages. A spokesperson for Pine Gate Renewables, the project’s developer, anticipates that the early phases of the project will qualify for the federal tax credits. She did not disclose what percentage of the project that entailed.
Solar projects on firm financial ground are more likely to get built regardless of the tax credit situation, said Andrew LaScaleia, an analyst at Capstone, a consulting firm. But the picture is more complicated for projects on the financial margins, which likely need the federal credits to proceed, he said.
LaScaleia has been fielding calls from clients asking if Democrats might extend the tax credits if they emerge victorious from next year’s midterm elections. There’s precedent for such an action. The tax credits have been repeatedly extended by Congress since being enacted in 1978, in the case of the investment tax credit, and 1992, in the case of the production tax credit.
“Obviously, that hinges on Democrats winning a chamber and it hinges on them prioritizing this in a tax extenders package, and then you need the president to actually sign that,” he said. “But, yeah, it’s a tough change and is definitely bad for the industry.”
This story also appears in Energywire.
