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State leaders and clean energy groups across the country are pushing to build more wind and solar projects before the window to claim federal tax credits slams shut.
The new GOP megalaw rapidly phases out incentives for clean energy, years before the Biden-era tax credits were set to lapse. The shortened timeline is expected to slow the construction of wind and solar projects at a moment when states are grappling with soaring power demand that is raising both utility bills and greenhouse gas emissions.
Many local lawmakers and utility regulators were already working to modernize their grids and streamline energy permitting before President Donald Trump signed the budget bill last month. Recently, decision-makers in a handful of places have taken steps to expedite those efforts so that more large-scale renewables projects can qualify for the tax credits before they expire.
Under the megalaw, wind and solar farms must either start construction by July 4, 2026, or be placed in service by Dec. 31, 2027, to qualify for the full production or investment tax credits. The 2022 Inflation Reduction Act previously allowed developers to access credits if they began construction either by 2033, or by the time the U.S. power sector cut emissions by 75% compared with 2022 — whichever came later.
For states, “The question then becomes, what can they do to try to maximize the benefits they’ll get from those [clean] technologies between now and then — the jobs, clean air, and power?” said Nathanael Greene, director of renewable energy policy for the Natural Resources Defense Council (NRDC).
In Maine, state utility regulators have responded by fast-tracking plans to procure nearly 1,600 gigawatt-hours of renewable energy, so that projects can get started before tax credits phase out. Residential and community solar developers in California’s Orange County and Minnesota say they’re focused on installing as many solar arrays as they can, including by tapping into state and municipal incentives that still remain.
Meanwhile, New York Gov. Kathy Hochul (D) has directed state energy regulators to conduct “a high-level review” of the budget law and its “specific impacts to New Yorkers.” However, clean energy developers in the state are calling for more specific actions to expedite wind and solar development, such as speeding up the yearslong process for issuing construction permits and improving coordination among state agencies.
For now, Colorado Gov. Jared Polis (D) is the only state leader to issue an executive action to prioritize deployment of clean electricity projects in response to Trump’s budget law.
Earlier this month, Polis penned a letter that directs state agencies to “move quickly and secure success” for large-scale wind, solar, and battery storage resources, as well as community solar projects. The letter calls for eliminating “administrative barriers and bottlenecks” and “prioritizing expeditious review of projects as they come into the queue for state consultation and permitting.” It also raises the idea of invoking the Public Utilities Commission’s authority to override local permit denials.
“When we look at the new generation that is being built in Colorado, the vast majority of it is wind and solar,” Will Toor, executive director of the Colorado Energy Office, told Canary Media. “Getting as many projects as possible able to move forward on a timeline that allows them to receive those [tax] credits is very much in the interest of the state — not only for clean energy goals, but very much for reducing costs to ratepayers.”
Alana Miller, who leads NRDC’s climate and clean energy policy team in Colorado, said the governor’s letter “is a key first step and provides a lot of urgency at this specific moment.” Still, “There’s a lot to be seen how it plays out and how agencies actually implement it,” she said, noting that state legislative action could follow next year.
In Colorado and beyond, officials are largely waiting to outline more concrete plans until the Treasury Department issues its new tax-credit guidance, which is expected to tighten the rules on which projects can claim incentives. Policy experts say they’re watching closely to see how the leaders of other major energy-producing states, including Pennsylvania and California, step in to support renewables in their backyards.
In June, Pennsylvania Gov. Josh Shapiro (D) warned legislators that the House’s version of the budget bill — which proposed even deeper cuts to clean energy incentives than the final version — would undermine more than $3 billion in direct investment in Pennsylvania energy projects. The impact would be most severe on the “nearest-term energy sources,” namely wind, solar, and batteries, that are coming online to meet surging demand in the state, his letter said.
Shapiro has made building “next-generation power” a key priority as power-hungry data centers strain the state’s grid and drive up electricity costs. His sweeping six-part energy strategy released in January includes policy proposals to increase the amount of electricity that comes from renewable sources in the state, and to establish a “cap-and-invest” program that reduces carbon emissions while also lowering electricity bills.
In California, a leader on clean energy deployment, the industry is urging Gov. Gavin Newsom (D) to help blunt the megalaw’s impact on utility-scale wind, solar, and energy storage developments.
Five trade groups sent a letter last month asking Newsom’s office and state legislative leaders to create a “coordinated action plan” to address the shortened tax-credit timelines, as well as the Treasury Department’s forthcoming guidance. The groups proposed steps such as streamlining environmental reviews and making it easier to build projects on agricultural land.
Another measure that California officials could immediately take is to enable wind, solar, and batteries to access “surplus interconnection” at existing gas-fired power plant sites — a concept that state legislators are currently considering.
Gas power plants in California are running less often as the state works to slash its planet-warming emissions, Mike O’Boyle, director of electricity policy at Energy Innovation, explained in a recent opinion piece in the Los Angeles Times. That leaves gas plants’ transmission wires mostly unused. Wind and solar projects could use this existing surplus to immediately connect to the grid, rather than wait years for system upgrades.
A working paper by researchers at the University of California, Berkeley, estimates that this pathway could allow California to cost-effectively integrate 24 gigawatts of renewable energy capacity by 2030. For context, the state currently has nearly 90 GW of total generation capacity.
Clean energy developers in every state will need all the bureaucratic fixes and outside-the-box solutions they can get in order to maintain momentum for the energy transition. Early estimates found that Trump’s megalaw could shrink new clean capacity additions to the grid by up to 62% over the next decade compared to the baseline scenario. By 2035, national average household energy bills could be $78 to $192 higher than if Biden-era policies remained in place, according to Rhodium Group.
“We still anticipate that clean energy will be built and will likely still be able to compete [with fossil fuels] despite the headwinds,” said Miller of NRDC. But the cost of electricity will be higher without the tax incentives.
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