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Or, why developers may be loading up on solar panels and transformers.
As the Senate gets to work on the budget reconciliation bill, renewables developers are staring down the extremely real possibility that the tax credits they’ve planned around may disappear sooner than expected. In the version of the bill that passed the House, most renewables projects would have to begin construction within 60 days of the bill’s passage and be “placed in service” — i.e. be up and running — by the end of 2028 to qualify for investment and production tax credits.
But that’s tax law language. The reconciliation bill will almost certainly mean grim tidings for the renewable industry, but it will be Christmas for the tax attorneys tasked with figuring out what it all means. They may be the only ones involved in the energy transition to come out ahead, David Burton, a partner at Norton Rose Fulbright — “other than the lobbyists, of course,” he added with a laugh.
If the timeline restrictions on the investment and production tax credits make it to the final law, within 60 days after it’s enacted, developers will likely have to demonstrate that they’ve done some kind of physical work on a project — or spent a serious amount of money to advance it — in order to qualify for the tax credits.
The IRS has a couple of existing tests and guidelines: the 5% safe harbor and the physical work test.
The 5% harbor rule is the most common way to demonstrate a construction start, Burton told me. But it’s not cheap. That 5% refers to the total cost of a project, meaning that a company would have to shell out a lot of money very quickly to keep hold on those tax credits. For example, a 100-megawatt solar project that costs $1.25 per watt — about the average cost for a utility-scale project according to the National Renewable Energy Laboratory — would cost a developer $6.25 million in initial outlays just to prove they’ve started construction to the satisfaction of the IRS.
There are any number of things to spend that money on. “For solar, the most common thing is modules. But it could be inverters, it could be racking,” Burton said.
Right now there’s a particular rush to get transformers, the electrical equipment used to step up voltage for the transmission of electricity from a generator, Burton added. That’s because transformers also fall under the second construction guideline, the “physical work test.” Developers can say they’ve started construction “when physical work of a significant nature begins, provided that the taxpayer maintains a continuous program of construction,” according to the law firm Leo Berwick.
This “significant physical work” can be split into onsite and offsite work. The former is what one might logically think of as “construction” — something along the lines of pouring foundations for wind turbines or building a road to bring in equipment.
Then there’s offsite. Ordering equipment qualifies as offsite work, Burton explained. But it has to be something that’s not held in inventory — this is why modules for a solar project don’t qualify, Burton said — the equipment must be built to order. Transformers are custom designed for the specific project, and can run into the millions of dollars.
“The guidance says expressly that step-up transformers qualify for this,” Burton told me. “It’s the only thing that guidance expressly states qualifies.”
This all adds up to a likely rush for transformer orders, adding more pressure onto a sector that’s been chronically under-supplied.
“The transformer manufacturers’ phones are ringing off the hook,” Burton said. “If I were the CFO of a transformer manufacturer, I would be raising my prices.”
While these tax rules may seem bewildering to anyone not a lawyer, they’re hardly obscure to the industry, which is well aware of how developers might react and is positioning itself to take advantage of this likely rush to start projects.
PV Hardware, which makes a type of solar equipment called a tracker that allows solar panels to track the movement of the sun, sent out a press release last week letting the world know that “it has the capacity to immediately Safe Harbor 5GW of tracker product, offering solar developers a critical opportunity to preserve eligibility for current clean energy tax credits amid legislative uncertainty.” Its trackers, the release said, would help developers meet the “thresholds quickly, mitigating risk and preserving the long-term viability of their project.”
The prospect of tariffs has also been an impetus to get construction work started quickly, Mike Hall, chief executive of the solar and storage data company Anza, told Heatmap. “There’s a slug of projects that would get accelerated, and in fact just having this bill come out of the House is already going to accelerate a number of projects,” Hall said.
But for projects that haven’t started, complying with the rules may be more tricky.
“For projects that are less far along in the pipeline and haven’t had any outlays or expenditures yet, those developers right now are scrambling,” Heather Cooper, a tax attorney at McDermott Will and Emery, told Heatmap. “I’ve gotten probably about 100 emails from my clients today asking me questions about what they can do to establish construction has begun on their project.”
And while developers of larger projects will literally have to do — or spend — more to qualify for tax credits under the new rule, they may still have an advantage.
“It’s increasingly clear to us that large-scale developers with the balance sheet and a pre-existing safe harbor program in place,” Jefferies analyst Julien Dumoulin-Smith wrote to clients last week, “are easily best positioned to keep playing the game.”
Additional reporting by Jael Holzman
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New York City may very well be the epicenter of this particular fight.
It’s official: the Moss Landing battery fire has galvanized a gigantic pipeline of opposition to energy storage systems across the country.
As I’ve chronicled extensively throughout this year, Moss Landing was a technological outlier that used outdated battery technology. But the January incident played into existing fears and anxieties across the U.S. about the dangers of large battery fires generally, latent from years of e-scooters and cellphones ablaze from faulty lithium-ion tech. Concerned residents fighting projects in their backyards have successfully seized upon the fact that there’s no known way to quickly extinguish big fires at energy storage sites, and are winning particularly in wildfire-prone areas.
How successful was Moss Landing at enlivening opponents of energy storage? Since the California disaster six months ago, more than 6 gigawatts of BESS has received opposition from activists explicitly tying their campaigns to the incident, Heatmap Pro® researcher Charlie Clynes told me in an interview earlier this month.
Matt Eisenson of Columbia University’s Sabin Center for Climate Law agreed that there’s been a spike in opposition, telling me that we are currently seeing “more instances of opposition to battery storage than we have in past years.” And while Eisenson said he couldn’t speak to the impacts of the fire specifically on that rise, he acknowledged that the disaster set “a harmful precedent” at the same time “battery storage is becoming much more present.”
“The type of fire that occurred there is unlikely to occur with modern technology, but the Moss Landing example [now] tends to come up across the country,” Eisenson said.
Some of the fresh opposition is in rural agricultural communities such as Grundy County, Illinois, which just banned energy storage systems indefinitely “until the science is settled.” But the most crucial place to watch seems to be New York City, for two reasons: One, it’s where a lot of energy storage is being developed all at once; and two, it has a hyper-saturated media market where criticism can receive more national media attention than it would in other parts of the country.
Someone who’s felt this pressure firsthand is Nick Lombardi, senior vice president of project development for battery storage company NineDot Energy. NineDot and other battery storage developers had spent years laying the groundwork in New York City to build out the energy storage necessary for the city to meet its net-zero climate goals. More recently they’ve faced crowds of protestors against a battery storage facility in Queens, and in Staten Island endured hecklers at public meetings.
“We’ve been developing projects in New York City for a few years now, and for a long time we didn’t run into opposition to our projects or really any sort of meaningful negative coverage in the press. All of that really changed about six months ago,” Lombardi said.
The battery storage developer insists that opposition to the technology is not popular and represents a fringe group. Lombardi told me that the company has more than 50 battery storage sites in development across New York City, and only faced “durable opposition” at “three or four sites.” The company also told me it has yet to receive the kind of email complaint flood that would demonstrate widespread opposition.
This is visible in the politicians who’ve picked up the anti-BESS mantle: GOP mayoral candidate Curtis Sliwa’s become a champion for the cause, but mayor Eric Adams’ “City of Yes” campaign itself would provide for the construction of these facilities. (While Democratic mayoral nominee Zohran Mamdani has not focused on BESS, it’s quite unlikely the climate hawkish democratic socialist would try to derail these projects.)
Lombardi told me he now views Moss Landing as a “catalyst” for opposition in the NYC metro area. “Suddenly there’s national headlines about what’s happening,” he told me. “There were incidents in the past that were in the news, but Moss Landing was headline news for a while, and that combined with the fact people knew it was happening in their city combined to create a new level of awareness.”
He added that six months after the blaze, it feels like developers in the city have a better handle on the situation. “We’ve spent a lot of time in reaction to that to make sure we’re organized and making sure we’re in contact with elected officials, community officials, [and] coordinated with utilities,” Lombardi said.
And more on the biggest conflicts around renewable energy projects in Kentucky, Ohio, and Maryland.
1. St. Croix County, Wisconsin - Solar opponents in this county see themselves as the front line in the fight over Trump’s “Big Beautiful” law and its repeal of Inflation Reduction Act tax credits.
2. Barren County, Kentucky - How much wood could a Wood Duck solar farm chuck if it didn’t get approved in the first place? We may be about to find out.
3. Iberia Parish, Louisiana - Another potential proxy battle over IRA tax credits is going down in Louisiana, where residents are calling to extend a solar moratorium that is about to expire so projects can’t start construction.
4. Baltimore County, Maryland – The fight over a transmission line in Maryland could have lasting impacts for renewable energy across the country.
5. Worcester County, Maryland – Elsewhere in Maryland, the MarWin offshore wind project appears to have landed in the crosshairs of Trump’s Environmental Protection Agency.
6. Clark County, Ohio - Consider me wishing Invenergy good luck getting a new solar farm permitted in Ohio.
7. Searcy County, Arkansas - An anti-wind state legislator has gone and posted a slide deck that RWE provided to county officials, ginning up fresh uproar against potential wind development.
Talking local development moratoria with Heatmap’s own Charlie Clynes.
This week’s conversation is special: I chatted with Charlie Clynes, Heatmap Pro®’s very own in-house researcher. Charlie just released a herculean project tracking all of the nation’s county-level moratoria and restrictive ordinances attacking renewable energy. The conclusion? Essentially a fifth of the country is now either closed off to solar and wind entirely or much harder to build. I decided to chat with him about the work so you could hear about why it’s an important report you should most definitely read.
The following chat was lightly edited for clarity. Let’s dive in.
Tell me about the project you embarked on here.
Heatmap’s research team set out last June to call every county in the United States that had zoning authority, and we asked them if they’ve passed ordinances to restrict renewable energy, or if they have renewable energy projects in their communities that have been opposed. There’s specific criteria we’ve used to determine if an ordinance is restrictive, but by and large, it’s pretty easy to tell once a county sends you an ordinance if it is going to restrict development or not.
The vast majority of counties responded, and this has been a process that’s allowed us to gather an extraordinary amount of data about whether counties have been restricting wind, solar and other renewables. The topline conclusion is that restrictions are much worse than previously accounted for. I mean, 605 counties now have some type of restriction on renewable energy — setbacks that make it really hard to build wind or solar, moratoriums that outright ban wind and solar. Then there’s 182 municipality laws where counties don’t have zoning jurisdiction.
We’re seeing this pretty much everywhere throughout the country. No place is safe except for states who put in laws preventing jurisdictions from passing restrictions — and even then, renewable energy companies are facing uphill battles in getting to a point in the process where the state will step in and overrule a county restriction. It’s bad.
Getting into the nitty-gritty, what has changed in the past few years? We’ve known these numbers were increasing, but what do you think accounts for the status we’re in now?
One is we’re seeing a high number of renewables coming into communities. But I think attitudes started changing too, especially in places that have been fairly saturated with renewable energy like Virginia, where solar’s been a presence for more than a decade now. There have been enough projects where people have bad experiences that color their opinion of the industry as a whole.
There’s also a few narratives that have taken shape. One is this idea solar is eating up prime farmland, or that it’ll erode the rural character of that area. Another big one is the environment, especially with wind on bird deaths, even though the number of birds killed by wind sounds big until you compare it to other sources.
There are so many developers and so many projects in so many places of the world that there are examples where either something goes wrong with a project or a developer doesn’t follow best practices. I think those have a lot more staying power in the public perception of renewable energy than the many successful projects that go without a hiccup and don’t bother people.
Are people saying no outright to renewable energy? Or is this saying yes with some form of reasonable restrictions?
It depends on where you look and how much solar there is in a community.
One thing I’ve seen in Virginia, for example, is counties setting caps on the total acreage solar can occupy, and those will be only 20 acres above the solar already built, so it’s effectively blocking solar. In places that are more sparsely populated, you tend to see restrictive setbacks that have the effect of outright banning wind — mile-long setbacks are often insurmountable for developers. Or there’ll be regulations to constrict the scale of a project quite a bit but don’t ban the technologies outright.
What in your research gives you hope?
States that have administrations determined to build out renewables have started to override these local restrictions: Michigan, Illinois, Washington, California, a few others. This is almost certainly going to have an impact.
I think the other thing is there are places in red states that have had very good experiences with renewable energy by and large. Texas, despite having the most wind generation in the nation, has not seen nearly as much opposition to wind, solar, and battery storage. It’s owing to the fact people in Texas generally are inclined to support energy projects in general and have seen wind and solar bring money into these small communities that otherwise wouldn’t get a lot of attention.