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A loophole created by the House Ways and Means text disappeared in the final bill.

Early this morning, the House of Representatives launched a full-frontal assault on the residential solar business model. The new language in the budget reconciliation bill to extend the Tax Cuts and Jobs Act passed Thursday included even tighter restrictions on the tech-neutral investment tax credits claimed by businesses like Sunrun when they lease solar systems to residential buyers.
While the earlier language from the Ways and Means committee eliminated the 25D tax credit for those who purchased home solar systems after the end of this year (it was originally supposed to run through 2034), the new language says that no credit “shall be allowed under this section for any investment during the taxable year” (emphasis mine) if the entity claiming the tax credit “rents or leases such property to a third party during such taxable year” and “the lessee would qualify for a credit under section 25D with respect to such property if the lessee owned such property.”
This is how you kill a business model in legislative text.
“Expect shares of solar companies to take a significant step back,” Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients Thursday morning, calling the exclusion “scathing.” Investors are “losing the now false sense of security that we had 'seen the worst' of it with the initial House draft.”
Joseph Osha, an analyst for Guggenheim, agrees. “Considering the fact that ~70% of the residential solar industry is now supported by third-party (e.g. lease or PPA) financing arrangements, the new language is disastrous for the residential solar industry,” he wrote in a note to clients. “We believe the near-term implications are very negative for Sunrun, Enphase, and SolarEdge.”
Shares of Sunrun are down 37.5% in mid-day trading, wiping off almost $1 billion worth of value for its shareholders. The company did not respond to a request for comment. Shares of fellow residential solar inverter and systems Enphase are down 20%, while residential solar technology company SolarEdge’s shares are down 24.5%.
“Families will lose the freedom to control their energy costs,” Abigail Ross Hopper, chief executive of the Solar Energy Industries Association, said in a statement, in reference to the last-minute alteration to the investment tax credit.
When the House Ways and Means Committee released the initial language getting rid of 25D by the end of this year but keeping a limited version of the investment tax credit, analysts noted that Sunrun was an unexpected winner from the bill. It typically markets its solar products as leases or power purchase agreements, not outright sales of the system.
The reversal, Dumoulin-Smith wrote, “comes as a surprise especially considering how favorable the initial markup was” to the Sunrun business model.
“Our core solar service offerings are provided through our lease and power purchase agreements,” the company said in its 2024 annual report. “While customers have the option to purchase a solar energy system outright from us, most of our customers choose to buy solar as a service from us through our Customer Agreements without the significant upfront investment of purchasing a solar energy system.”
The new bill, Dumoulin-Smith writes is “‘leveling the playing field’ by targeting all future residential solar originations, whether leased or owned.” The bill is “negative to Sunrun with intentional targeting of the sector.
Last year, Sunrun generated over $700 million from transferring investment tax credits from its solar and storage projects. The company said that it had $117 million of “incentives revenue” in 2024, which includes the tax credits, out of around $1.4 billion in total revenue.
But the tax credits play a far larger role in the business than just how they’re recognized on the company’s earnings statements. The company raises investment funds to help finance the projects, where investors get payments from customers as well as monetized tax credits. Fund investors “can receive attractive after-tax returns from our investment funds due to their ability to utilize Commercial ITCs,” the company said in its report. Conversely, the financing “enables us to offer attractive pricing to our customers for the energy generated by the solar energy system on their homes.”
Morgan Stanley analyst Andrew Perocco wrote to clients that “this is a noteworthy change for the residential solar industry, and Sunrun in particular, which dominates the residential solar [third-party owned] market and has recognized ITC credits under 48E.”
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An exclusive interview with Senator Martin Heinrich on SunZia, the largest renewables project in U.S. history, which is now — finally — fully operational.
The largest renewable electricity project in American history is open for business.
After almost exactly 20 years of development, permitting, and construction, the SunZia Wind and Transmission Project became officially operational on Thursday afternoon, according to its developer, Pattern Energy.
The project, which built an enormous 3.6-gigawatt wind farm in New Mexico and a 550-mile high-voltage power line that crosses into Arizona, is capable of generating and delivering more electricity than the Hoover Dam. Its lengthy development and approval process made it an emblem of the country’s struggle to build new, large-scale power lines and virtually every other type of zero-carbon energy infrastructure.
“We proved that America can still build big things, and I think that’s really important,” Senator Martin Heinrich, a Democrat from New Mexico, told me on Thursday.
SunZia is now the seventh largest power plant in the United States. At peak capacity, it will power more than a million homes, according to Pattern’s estimates. The facility will fund more than $1.3 billion in direct payments to local governments, schools, and landowners over the next few decades, the developer said in a statement. More than half of the project’s electricity will be delivered to and used by southern California. (Analysts realized SunZia was nearing completion when gigawatts of wind power started appearing in the state’s energy data in May.)
So what took so long to get it done? The closer you look at SunZia, the more it seems to tell you about the promise — and pitfalls — of building more clean energy in America. The project began in 2006, when a group of utilities, developers, and governments across the Southwest realized that Arizona’s booming cities could draw cheap renewable power from New Mexico’s arid plains. The project applied for federal permits in 2008, and planned to start construction in 2013.

Yet due to a lengthy permitting and siting battle, construction did not begin until 2023. Two years ago, I detailed that saga in a feature for Heatmap, where I drove out to the remote Arizona valley where the line proved most contentious. That reporting also revealed how important Heinrich, the Democratic senator, had been to getting the power line built. When local environmentalists feared the transmission line’s towers would hurt sandhill cranes in a rare high-desert habitat in New Mexico, Heinrich intervened and brokered a new route. He also helped negotiate new technological improvements to the line to avoid the birds.
I later wrote up my three takeaways from the SunZia investigation. Among them: A better relationship between conservationists and clean energy developers is possible — but someone has to facilitate it. SunZia only ran through the tape because Heinrich had credibility with environmentalists and clean energy developers.
Heinrich is now important to an even bigger energy endeavor. As the Democratic ranking member on the Senate Energy and Natural Resources Committee, he is conducting negotiations with Republicans over a permitting reform package that could change how the federal government studies and approves new large-scale infrastructure. To commemorate the official opening of SunZia, I caught up with the senator by phone on Thursday to discuss the project’s long history, what he learned, and what it all means for permitting reform.
Our interview has been edited for length and clarity.
SunZia opens today. It’s very exciting. It’s been in the works for a long time. What are you reflecting on at this moment, and what did you feel like you learned from the process?
I think we proved America can still build big things, and I think that’s really important. But we also learned a lot of lessons along the way for how to do that. Those are going to be really important to bake into permitting reform, and they’re going to be important as best practices for other developers who want to take on these big infrastructure projects.
What are some of those lessons?
Well, for one, start by listening and engaging with the community very early in the process. Don’t come with some completely baked idea and expect people to, you know, welcome you with open arms. Go out into the community and listen — there’s just no substitute for it. And if you can do it, the earlier you can do that in the process, the better your prospects for getting to a good outcome.
I do think you need political leadership that’s willing to make hard decisions. You can’t build things without with zero level of conflict, but you can — with leadership — build big things and put them in the right places. There was an unwillingness, when I first started working on this project, for people to expend any amount of political capital to get it done, and I didn’t feel that was acceptable. There was just too much upside to having 3.5 gigawatts of clean generation, and all of the jobs and investment, $20 billion worth, that come with that.
One interesting aspect of this case is what happened with Audubon Southwest and the Pentagon with the river crossing, where the initial plan that [SunZia’s developer] put forward wasn’t acceptable. And ultimately you helped broker a deal. One lesson I took away from that was that, boy, it’s helpful to have someone with credibility in the local community or politics to help put a deal together, but that’s obviously not the case everywhere. There’s not a Martin Heinrich to negotiate every power line. What do you think are the lessons from this experience that scale — because while community leadership is very important, you’re not always going to be able to find a political leader who can broker an agreement everyone will find acceptable?
No, and I take your point very well, but I do think there ought to be a leader in the White House who has a dashboard of big, nationally important infrastructure projects, who understands the issues in those projects, and can make sure that the federal family of agencies are working constructively to get to the right outcome. You can have these situations where literally one staff person in one agency can bring down an entire project. And so to the extent that you can institutionalize clear federal agency leadership, with support from the administration — I mean, I worked this thing through multiple administrations, but towards the end, with folks like [Biden-era national climate adviser] Ali Zaidi in the White House, to just make sure that the federal agencies were not lowering the bar for their standards, but that they were also working constructively.
You’re now negotiating permitting reform on the Energy and Natural Resources committee. Transmission is obviously a huge part of what an ideal package would look like. What do you think SunZia’s lessons are for a broader permitting reform effort?
To the extent that you can make sure that there are benefits across the entirety of linear infrastructure and transmission lines — that those benefits are not relegated to just where the generation is and and where the consumption is — that’s an important lesson. There are a lot of counties along the way, and there are a lot of private landowners who, if it’s in their interest, actually become cheerleaders for the project. Also, going back to early engagement, you don’t want to learn that there’s some fatal flaw in your route five years into a project. You want to figure out where the trip wires are early, and that’s why you have to engage conservation groups and historical preservation officers and those sorts of interests. Because if you’re doing your job right, you’re avoiding the kind of impacts that can stall a project.
What’s your assessment of how likely there is to be a permitting reform deal this year? We’ve heard, I think, mixed signals from Congress, but I also think that there’s some sense that if it were ever to happen, it would need to happen during this term, and probably come together over the next few months and solidify in the lame duck.
We’re still very much at the table, and so I’m not going to say it’s going to be easy, but we’re working hard to try and get to yes.
What is essential to getting a deal done?
The recipe for success in the Senate is to have a balanced bipartisan proposal. There are going to be things that are important to Republicans, in order to get to certainty for projects that are important to them. For me, transmission is an incredibly important piece of these negotiations. We have to make sure that it’s an effectively balanced package — that’s how you get to 65, 70 votes.
With SunZia out of the way, are there any other transmission projects or big projects you’d like to see come online?
We’re constantly engaged in the transmission conversation in New Mexico because there are both smaller regional lines that we’ve worked through and have gotten some things built, and then there are also additional interregional lines that are being explored. If you can get to a place like we did on SunZia — it wasn’t always this way, but today the breadth of community and political support for Sun Zia is very broad.
That’s been striking to me about SunZia. I’m in New York, and we just opened a big new transmission line down the Hudson. It’s great. It’s going to supply New York with 20% hydro power. And it’s funny because SunZia and the Champlain Hudson Power Express were contested projects when they were getting built, but now that they’re open, people are very supportive of them. What do you think is the lesson there for other lines?
It’s part process. When you do a good job on the process, you build more and more support over time, as people start to see the actual economic benefits in particular. So for a landowner in central New Mexico who has two or three turbines on their family ranch, the lease fees can be the difference between profitability and unprofitability. The [union] jobs of actually putting up the towers, and the generation and construction jobs — when those benefits become real, and the scary idea you might have had doesn’t necessarily manifest itself, it changes the equation. And so over time, if you’re doing this well, more and more accrues on the positive side of the ledger and less and less on the negative side.
But there’s still plenty of room for regional grid operators to set their own rules.
Almost eight months have passed since the Federal Energy Regulatory Commission was tasked by the Trump administration with conjuring up with new rules to help speed up interconnection of large loads without increasing retail electricity costs. On Thursday, FERC finally responded with “major reforms,” in the words of Chair Laura Swett, putting the onus on America’s restructured electricity markets — PJM Interconnection, Midcontinent Independent System Operator, Southwest Power Pool, California Independent System Operator, ISO New England, and New York Independent System Operator — to figure out how to implement their suggested solutions.
Using what’s known as “show cause” orders, FERC presented those in charge of these electricity markets, known as regional transmission organizations and independent system operators, with what was essentially a menu of ideas that have been percolating in electricity policy circles since the rise of data-center-driven load growth has started putting pressure on the existing grid and told them to get to work. Secretary of Energy Chris Wright’s original “advance notice of proposed rulemaking,” published in late October, was more proscriptive and specific, whereas FERC essentially said to regional electricity markets, “do whatever you have to, just make it work.”
In a brief email, former FERC chair Neil Chatterjee described this as “a very FERC-y approach!” Or as Gretchen Kershaw, the chief operating officer of Grid Strategies and a former FERC legal advisor, explained to me that “it’s much faster to act on a region-specific basis instead of going through a full notice and comment rulemaking process.”
The commission’s proposed reforms fall into five categories:
1. The markets need “clear transmission service application and study rules” for large load customers seeking to connect to the grid, Swett said in her remarks. The commissioners specifically called out the use of “grid-enhancing technologies” to expand the capacity of America’s existing electricity infrastructure — things like reconductoring, which adds transmission capacity along existing wires, and dynamic line rating, which adjusts capacity based on local weather and conditions. “The cheapest transmission line is the one that already exists,” Commissioner David Rosner said, speaking after Swett at Thursday’s meeting.
2. The RTOs and ISOs will also have to show that they have “adequate safeguards against cost-shifting or take steps to create them,” Swett said. This will require “cost recovery agreements,” Rosner added, “which are designed to ensure that large loads pay their fair share of the costs incurred to serve them, regardless of whether the large load comes online as planned.” In other words, “If new infrastructure is built to accommodate a data center, and that data center doesn’t show up, residential customers are not left on the hook to pay the costs,” he said.
3. The third area that the electricity markets will have to address is co-location and behind-the-meter power, specifically coming up with rules that facilitate purpose-built generation facilities to support new large loads. This would allow data centers and big power users to be less of a burden on the grid, thus requiring less in the way of grid upgrades and additional costs that would be borne by all ratepayers.
4. The orders tells markets “to prove or develop new transmission services to reflect large load flexibility,” Swett said. Load flexibility is another idea designed to lower the system cost of data centers. Grids have to be built out to accommodate the peak demand of the system, but with flexibility, data centers could shave off how much power they demand during, say, a hot summer day, thus lowering that demand peak. To get there, however, they need to be properly incentivized. FERC is telling the RTOs and ISOs to come up with rules that would allow large loads to come online without necessarily requiring vast new buildouts of grid infrastructure and generation. “Legalizing flexible transmission service options for more large load customers can speed interconnection, avoid constructing unnecessary transmission upgrades, reduce strain on the grid, and make power bills cheaper for everyone,” Rosner said.
5. Finally, the orders will require the markets to come up with rules and procedures for generation that’s “proximate” to new load. This will encourage “bring your own new generation,” Rosner said. That stands in contrast to proposals requiring or encouraging new large sources of demand to place generation on their own premises. “Literal co-location is not the only way to facilitate faster, more efficient, and more cost-effective connections to the grid,” Rosner said.
The markets will have to come back in a month to explain how they “intend to ensure that adequate generation will be available to serve existing and new large loads,” a FERC staffer explained at Thursday’s meeting, then again a month later to explain either how their existing rules conform to the new requirements or how they plan to charge their rules to do so.
The commission’s decision is not a formal rulemaking. Instead, the commissioners argued that tasking each RTO and ISO with specific orders would result in a more tailored set of reforms. “Today we’re engaging those to act with more speed, more durability, and more precision than we would get with our proposed rulemaking,” Commissioner David LaCerte said.
The action was strikingly bipartisan, with Democratic and Republican commissioners approving it in a 5-0 vote. It also won plaudits from clean energy and environmental groups. The Sierra Club said in a statement the action was “responsive to Sierra Club’s requests on several fronts,” while the clean energy trade group Advanced Energy United lauded the orders as “potentially creating much-welcome regulatory certainty and transparency, as well as some safeguards to ensure that co-location won’t negatively impact the electric rates and system reliability of all other customers.”
Federal energy regulators have been mulling these reforms as the Trump administration and state and local government officials have grown increasingly restless with rising electricity prices, utilities, and data center developers. Swett herself has scolded America’s largest electricity market, PJM Interconnection, for its inability to meet its own preferred level of excess capacity to ensure it can maintain continuous service, as well as continual high capacity costs, which have translated into tens of billions of dollars of added costs for electricity customers in the mid-Atlantic. Swett has even gone so far to suggest that PJM “ simply has grown too big to function,” leading some market observers to speculate that a forced breakup may be nigh.
Electricity prices nationwide have risen 5.3% in the last year, according to the Bureau of Labor Statistics, while overall prices were up 4.2% — a number that includes gasoline price increases stemming from the war in Iran. In PJM territories like New Jersey, average bills have increased from about $91 to $140 over the past five years, while prices are up some 52%, according to the Heatmap-MIT Electricity Price Hub.
The existing rules, Swett said, are “unjust and unreasonable because they do not adequately address how to integrate large and co-located loads onto the transmission system.”
“Free-riding on other customers is not an option,” she added.
Senior executives at EDP, Apex, Pattern, and other large renewables companies did something remarkable in a recent court filing: They publicly criticized the administration.
Major energy developers are going all in against the Trump administration in court, in what appears to be the first time many are publicly challenging the president in spite of any potential risk of retaliation.
As I chronicled, Trump is now effectively blocking any new wind projects in the U.S., utilizing federal authority over American aerospace to stop what was once a run-of-the-mill approval process for the height of turbines through the Federal Aviation Administration. They’ve done this by using the Defense Department to gum up the interagency review process, with the Pentagon holding up bureaucratic machinations citing vague, alleged national security concerns. Earlier this month, regional renewable energy trade groups filed a lawsuit against the Pentagon and FAA seeking a judicial order akin to what they’ve already won against the Interior Department’s anti-renewables permitting freeze. The case argues Trump can’t hold these routine processes up because, well, they’re mandated by law to ultimately clear things if they meet basic specifications. It arrives as the Trump administration appeals a separate lawsuit against the Interior Department’s de facto permitting freeze, which was formally filed today.
Last week, the renewables trades filed a motion to immediately end this de facto national freeze. Attached to this motion: a murderer’s row of on-the-record statements from senior executives for large U.S. energy developers seeking to build their wind projects. I’ve honestly never seen anything like it – declarations railing against the Pentagon from top personnel for Pattern Energy, Apex Clean Energy, EDP Renewables, Triple Oak Power, Bordas Renewable Energy, Nova Clean Energy and Palmer Capital.
The declarations describe each company’s individual experiences struggling to get these routine height clearances. Adam Clark of Pattern Energy said the Pentagon’s inaction has “jeopardized committed capital, threatened project viability” and “delayed or blocked local and state permitting.” Thomas LoTuro at EDP Renewables said the military’s behavior “effectively halted” a “substantial portion of [EDP] North America’s project portfolio,” stalling some proposals for so long that it risks violating existing local road agreements for construction.
Some of these executives – such as those for Invenergy, Bordas, and Triple Oak – only describe themselves as representatives of the subsidiaries or LLCs developing individual wind projects affected by the freeze. Those filings do not make any reference by name to their parent companies. But quick background checks revealed each of these individuals holds broader development or management roles at the parent companies and I understand from conversations with individuals involved in this litigation that their statements were a significant step not taken likely.
“You are very observant,” one senior renewable energy industry insider told me when I asked about the executives’ statements.
This insider – who has firsthand knowledge about the litigation – told me the companies going on the record are largely doing so because of the extent they’re at risk. Often the height clearance for turbines is one of the final procedural steps before starting construction, and the incoming sunset of tax credits under the Inflation Reduction Act has made construction start dates key to projects’ budgets. Wind development has been drastically undermined by Trump’s permitting freezes. American Clean Power has said turbine orders halved in the first half of 2025, reaching their lowest levels since the COVID-19 pandemic lockdowns.
There’s also the sheer magnitude of the freeze. Before the Pentagon ruined the lives of wind developers, the Trump renewable permitting freeze was an obstacle companies could design around by avoiding wetlands, species habitat, and federal lands. It should’ve been a relief, for example, that the Trump administration dropped its legal defense of the president’s Day 1 executive order going after wind permitting. But the military’s hold on approvals had nothing to do with that and its scope reaches further than just the federal government, as height clearances are often needed for state, county, and municipal permits too.
Ultimately the Pentagon wind freeze represents an existential threat to renewable energy developers’ businesses and reputations in the investment community. Sean Stocker, head of development for Apex Clean Energy, stated in a declaration submitted in the Pentagon wind litigation that more than $133 million in project costs incurred were at risk of being lost, including over projects that had already been determined “do not pose an unacceptable risk to national security.” This has resulted in “impacts and losses” that are “not fully recoverable” even if the companies win in the litigation because of the damage to wind energy’s reputation.
“If Apex is forced to cancel projects as a result of DoD inaction, the resulting economic, reputational, and business losses could irreparably harm the company,” Stocker stated.
Since the start of Trump 2.0, wind energy developers have been skittish to publicly challenge the president in any way for fear of retribution. Trump could hypothetically make wind energy life hell in fresh new ways. Like for example, targeting energy companies critical of the administration in an ongoing crackdown on bird deaths at operational wind farms. A reasonable fear! “Companies are still risk averse and they’re afraid. The knock-on business impacts could hypothetically be worse than the loss on the wind project itself,” said the industry insider, who requested anonymity because they did not have permission to speak on the record about the litigation.
Based on the statements submitted in court, it appears energy companies are now emboldened after winning myriad legal battles against the administration via trade group campaigns and lawsuits filed by supportive Democratic attorneys general. Time will tell whether putting all their chips onto the table will work out in the end.
A representative for the groups involved in the litigation did not respond to a request for comment.