On July 4, the budget reconciliation bill was signed into law by President Trump. Key renewable energy incentives were cut. The Investment Tax Credit (ITC) and Production Tax Credit (PTC) will be effectively eliminated for any wind and solar projects that have not begun construction by July 4, 2026. This gives organizations considering on-site solar projects a condensed timeline to execute contracts before subsidies offsetting the development cost of these projects decreases by up to 30%. This increase in project cost could materially increase the price that developers must receive for energy generated by such projects.
Key Energy Provisions:
Previous versions of this bill included a 60-day timeline to begin construction, a slower phase out of the ITC and PTC over 3 years, and an excise tax on wind and solar projects. These provisions have been removed. The law includes a deadline for wind and solar projects to be “placed in service” by the end of 2027, but projects that begin construction within the next year are exempt from that placed in service deadline. As of today, the “beginning of construction” standard is much easier for developers to meet than the placed in service deadline, which is highly influenced by utility interconnection timelines. Current Treasury department rules allow a project that has procured 5% of the project’s capital cost to qualify as having had “begun construction”. However, on July 7th President Trump issued an executive order that directed the Treasury department to issue new and revised guidance on what constitutes “beginning of construction”. It is quite likely that any new guidance from the Treasury department will make it more difficult for wind and solar projects to qualify as having “begun construction.”
Key Takeaways for Businesses:
5 will be monitoring energy markets closely and discussing energy supply cost implications with clients on an individual basis.
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