The Trump administration issued new rules for the wind and solar tax credits on Friday, closing the loop on a question that has been giving developers anxiety since the One Big Beautiful Bill Act passed in early July.
For decades, developers have been able to lock in tax credit eligibility by establishing that they have officially started construction on a project in one of two ways. They could complete “physical work of a significant nature,” such as excavating the project site or installing foundational equipment, or they could simply spend 5% of the total project budget, for instance by purchasing key components and putting them in a warehouse. After that, they had at least four years to start shipping power to the grid before stricter work requirements kicked in.
Shortly after signing the OBBBA, however, Trump issued an executive order directing the Treasury Department to revise its definition of the “beginning of construction” of a wind or solar project. Under the new law, this definition can make or break a project. OBBBA established new deadlines for wind and solar development, allowing projects that start construction before the end of this year to qualify for the tax credits as they currently stand. But projects that start construction between January 1 and July 4 of 2026 will have to follow stringent new rules limiting the use of materials with ties to China in order to qualify.
The start construction date also affects how long a developer has to complete a project and still qualify for credits. Projects that start before July 4 of next year have at least four years, while those that start after must meet an impossibly short timeline of being up and running in just a year and a half, by the end of 2027.
Some worried the new guidance would narrow that four year timeframe or affect project eligibility retroactively. Neither happened. The only major change the Treasury department made to the existing guidance was to get rid of the 5% safe harbor provision. While this is not nothing, and will certainly disqualify some projects that might otherwise have been able to claim the credits, it is nowhere near as calamitous for renewables as it could have been.
Projects can still establish they have started construction by completing “physical work of a significant nature,” and the definition of physical work still includes off-site work, such as the manufacturing of equipment. That means it’s still possible for a company to simply place an order for a custom piece of equipment, like a transformer, to establish their start date — as long as they have a binding contract in place and can demonstrate that the physical production of the equipment is underway.
The new guidance also contains a carve-out that allows solar projects that are less than 1.5 megawatts to use the 5% rule, which will help rooftop solar and smaller community-scale installations.
Trump’s executive order came after a reported deal he made with House Freedom Caucus Republicans who wanted to axe the tax credits altogether. The order directed the Treasury to prevent “the artificial acceleration or manipulation of eligibility” and restrict “the use of broad safe harbors unless a substantial portion of a subject facility has been built.”
Treasury’s relative restraint, then, comes as something of a relief. “It’s not good, it’s not helpful, but from my perspective, the guidance could have been a lot worse,” David Burton, a partner at Norton Rose Fulbright who specializes in energy tax credits, told me. “Utility-scale solar and wind developers should be able to plan around this and not be that harmed.”
That doesn’t mean clean energy groups are happy about the changes, though. “At a time when we need energy abundance, these rules create new federal red tape,” Heather O’Neill, president and CEO of the industry group Advanced Energy United, said in a statement. “These rules will make it more difficult and expensive to build and finance critical energy projects in the U.S.”
The changes don’t go into effect until September 2, so for the next two weeks, all projects can still utilize the 5% safe harbor.
Even though the rules are not the death-blow for projects that some anticipated, there’s still one big unknown that could squeeze development further: The Treasury department has yet to put out guidance related to the new foreign sourcing rules created by the OBBB. One of the big fears there is that companies will have to prove their lack of ties to China so far up their supply chains that compliance becomes impossible.
We probably won’t be left wondering for long, though. Trump’s executive order asked for those rules within 45 days, putting the due date on Monday.
