The Trump administration has once again targeted the U.S. renewable energy industry, with the Treasury Department issuing new guidance that tightens the rules for claiming federal tax credits for wind and solar projects. Announced on August 15, the move is the latest in a series of actions by the Trump administration to dismantle existing rules supporting renewable energy, following the Republican-led tax law passed in July.
The new guidance effectively ends the “safe harbor” provision, which allowed projects to qualify for tax credits by incurring 5% of a project’s total cost or starting construction. Now, projects must demonstrate physical construction to qualify, except for small solar projects under 1.5 MW. This shift has sparked criticism from clean energy developers and tax law attorneys, who argue that the guidance is potentially illegal and unprecedented.
Sarp Ozkan, director of Energy Analysis at Enverus Market Intelligence, told POWER that while the new rules create uncertainty, they might not be as devastating as they seem. “Does it change a whole lot? I don’t think it does, not really,” Ozkan said. He noted that the 5% rule was primarily used by early-stage projects, which were already long shots given the current state of the supply chain. However, Ozkan emphasized the importance of certainty for power generators and investors to make informed decisions about energy projects.
The new rules could slow down the development of renewable energy projects, which are crucial for meeting growing energy demands and supporting new industries like data centers. Ozkan pointed out that even if the administration favors thermal generation, those projects have longer timelines to build, even with efforts to fast-track them.
Republican Sen. Charles Grassley of Iowa, a vocal critic of Trump’s actions on renewable energy, has vowed to object to Treasury nominee considerations until he is assured that the rules adhere to the law and congressional intent. Meanwhile, industry groups like the Solar Energy Manufacturers for America (SEMA) Coalition and Advanced Energy United have expressed concerns about the new rules, with Heather O’Neill, president and CEO of Advanced Energy United, stating that the rules will make it “more difficult and expensive to build and finance critical energy projects in the U.S.”
Jason Grumet, CEO of the American Clean Power Association (ACP), criticized the Treasury Department’s decision, arguing that it undermines the integrity of the energy grid and the legislative process. Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA), went further, calling the guidance part of an “unprecedented side deal” to harm America’s solar industry.
The Trump administration’s latest move is likely to shape the development of the renewable energy sector in several ways. First, it may lead to a slowdown in the development of new wind and solar projects, as developers grapple with the new rules and the uncertainty they create. This could have ripple effects on jobs and economic growth in states with significant renewable energy industries.
Second, the new rules may accelerate the shift towards other forms of energy generation, including natural gas and nuclear power. However, as Ozkan noted, these projects have longer timelines and may not be able to meet growing energy demands as quickly as renewable projects.
Finally, the Trump administration’s actions may spur state and local governments to take a more active role in supporting renewable energy development. As O’Neill suggested, governors and state leaders may need to take executive action to speed up project procurement, siting, and permitting approvals to ensure that low-cost, ready-to-build clean energy projects can come online quickly.
In the short term, the new rules are likely to create uncertainty and slow down the development of renewable energy projects. However, in the long term, they may accelerate the shift towards other forms of energy generation and spur state and local governments to take a more active role in supporting renewable energy development. The Trump administration’s actions are a clear signal that the renewable energy industry must be prepared to navigate a complex and rapidly changing policy landscape.