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The Trump administration has set up yet another roadblock for wind and solar power in the U.S. — one that will make it harder for clean-energy developers to qualify for federal tax credits before they expire next summer.
Treasury Department guidance released Friday puts new restrictions on the “safe-harboring” rules that have for decades guided whether solar and wind developers are considered to have “commenced construction,” a key milestone required to secure tax-credit eligibility.
The rules, which will go into effect on September 2, are likely to further slow the rollout of wind and solar power — two of the fastest-growing sources of energy in the country, both of which have been under siege by President Donald Trump since January.
Clean-energy industry advocates attacked the guidance as an improper use of executive authority that will make it harder for the U.S. to meet growing electricity demand and will further drive up electricity bills. But industry analysts noted that the new rules, though restrictive, could have turned out even worse.
Under the big new tax and spending law passed by Republicans last month, solar and wind projects must commence construction by early July 2026 to access tax credits.
For projects larger than 1.5 megawatts in size, Treasury’s new guidance eliminates one way for developers to prove they’ve started work: spending at least 5% of the total cost of the project by the deadline. That new restriction won’t apply to residential and commercial solar installations, so companies in that space such as Sunrun, Freedom Forever, SolarEdge, and Enphase, saw their share prices rise on Friday.
But it will apply to most other clean-energy developments, from community solar farms to massive utility-scale solar and wind projects. Starting in just a few weeks, projects larger than 1.5 megawatts will have only one option for proving they’re under construction: They must demonstrate that they are undertaking “physical work of a significant nature” on a continuous basis.
The test is not new, and project developers have relied on it in the past. But it is less straightforward than the 5% safe-harbor rules, creating uncertainty that could make it harder or more expensive for developers to lock down financing for a project.
“Unless you’re pretty far along, you’re not going to go build some roads and install racking overnight,”said Andy Moon, CEO and cofounder of Reunion Infrastructure, a company that manages clean-energy tax-credit transfers. “It’s not so easy to change your plans and accelerate something that fast.”
Clean-energy industry groups declined to speculate about how the changes would impact the hundreds of gigawatts of solar and wind projects now under development across the country. But these industries are already reeling under the much-shortened timeline for securing tax credits under last month’s One Big Beautiful Bill Act; previously, under the Inflation Reduction Act, developers had until at least 2032 to commence construction and thereby secure tax credits. Analysts have said the drastically shortened tax-credit window will cut clean-energy growth by more than half over the coming decade.
That’s a problem for a country facing rising demand for power for data centers, factories, and broader economic growth. Solar, batteries, and wind made up 96% of new capacity added to U.S. grids last year and will remain the primary option for new power in the next few years, given that there are five- to seven-year wait times for new gas turbines and even longer construction timelines for nuclear and geothermal power plants.
“This is yet another act of energy subtraction from the Trump administration that will further delay the buildout of affordable, reliable power,” Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, said in a Friday statement.
Since Trump signed the megalaw in July, his administration has taken a host of anti-wind and anti-solar actions, including subjecting projects to byzantine Interior Department reviews, setting “capacity density” restrictions for projects on federal lands, and potentially halting already permitted wind farms both onshore and offshore.
Shortly after the law passed in July, Trump ordered the Treasury Department to review the safe-harbor rules. The directive came after pressure from the ultraconservative Freedom Caucus members in the House of Representatives, who were upset that the law preserved tax credits for wind and solar projects at all. In that same executive order, Trump also told Treasury to develop rules governing “foreign entity of concern” restrictions; those rules, which are still in development, could be even more disruptive to the industry.
“The Treasury Department’s decision to accelerate the phaseout of clean energy tax credits undermines the integrity of our energy grid and our legislative process,” Jason Grumet, CEO of the American Clean Power Association trade group, said in a Friday statement. “Congress explicitly chose to provide energy companies with one year to phase out tax credits to keep energy prices low while meeting growing power demand.”
Friday’s guidance came despite entreaties from Senate Republicans Chuck Grassley of Iowa and John Curtis of Utah, who negotiated the tax-credit amendment to the final bill. Though both senators voted for the One Big Beautiful Bill Act, which cleared the Senate by just one vote, earlier this month they placed holds on three of Trump’s Treasury Department nominees in an attempt to force the administration to negotiate a less harmful change to the safe-harbor rules.
Grassley’s office did not immediately respond to a request for comment on Friday afternoon.
“Frankly, I think the intervention worked,” said Pavel Molchanov, a Raymond James analyst covering cleantech companies. “Treasury could have gone really far in the direction of making life difficult.”
Molchanov cited rules left unchanged in Friday’s guidance, such as the four-year window for projects that commence construction by July 2026 to complete their work to secure their tax-credit eligibility. “Imagine if they had said, ‘Oh, did we say four years? It’s actually two.’”
Similarly, the “physical work” requirements listed in Friday’s guidance are not outside the bounds of what a large-scale solar or wind project developer can reasonably take on over the next year, he said. Exemptions for extreme weather, permitting delays, and other obstacles to continuing work should shield developers from risks of being declared out of compliance with those requirements, he said.
“The good news is that it’s still almost 11 months until July 2026, so developers have plenty of room to make adjustments before starting construction,” Molchanov said. “From my perspective, it’s actually better than expected. But maybe my expectations were just so low to begin with.”
Jeff Cramer, CEO of the Coalition for Community Solar Access, a trade group that represents companies building smaller-scale solar and battery projects, decried the new guidance as a violation of the deal Republicans made in crafting the megalaw. But he also said that simply knowing the rules of the game is a help.
“I think the only good news is that there may now be less uncertainty,” he said. “The onus is now on the states to ensure that any projects that can meet that July 2026 deadline can do that.”
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