After securing President Trump’s signature last weekend, the One Big Beautiful Bill is now law. But there’s still substantial uncertainty for clean energy developers — particularly for wind and solar — about whether and how they’ll be able to qualify for Inflation Reduction Act tax credits.
The law gives wind and solar projects until July 4, 2026, to “commence construction” and thereby lock in an additional four years to build and come online. (Other technologies, like storage, maintained the previous, longer timeline.)
Today’s uncertainty largely stems from how the federal government will determine whether a project has commenced construction in time, clean energy policy expert Jason Clark explained at a Latitude Media event this week.
Developers today have generally relied on a well-understood Treasury Department framework for proving that construction has started on a particular project: Either by spending at least 5% of project costs, or by beginning physical work. Meeting either threshold secures a “safe harbor” period, currently four years, for the developer to complete the project and place it in service.
But the executive order Trump issued at the beginning of this week, which focused specifically on wind and solar, is likely to upend that framework. The order instructs the Treasury to issue “new and revised guidance” including “restricting the use of broad safe harbors.”
In other words, it may become significantly harder — or even impossible — for many projects to qualify for safe harbor. The EO gives Treasury 45 days to issue that guidance, and those types of regulations generally come with a 60-day buffer before implementation, explained Clark, who is the CEO and founder of Power Brief.
The big question now, he added, is how much the Treasury changes that guidance, and in what way.
What exactly could Treasury change?
There are essentially three different ways that the updated guidance could impact safe harbor provisions, Clark told the webinar audience on Thursday.
First, and perhaps most consequentially, the administration could shorten the duration of the safe harbor. It’s usually four years, but during the first Trump administration it was actually extended to accommodate delays during COVID-19. Now, Clark explained, Treasury could instead give wind and solar projects less time to get online.
Second, Treasury could create stricter definitions of commencing construction. That might mean increasing the amount of money a project needs to spend to qualify, up from the current rate of 5% of project costs. It could also mean making it more difficult for a project to meet the “physical work test.”
Finally, the new guidance could change the additional continuity requirements to show that work on a project is ongoing, or what Treasury calls “continuous efforts” to get the project built. There’s a variety of ways to meet this particular threshold, including obtaining permits, entering contracts, and paying certain additional costs. This is where the rules are already the most specific, Clark said: “I don’t know how they could be much more specific there, but that’s something folks will have to adjust to.”
It’s hard to know exactly which of those levers Treasury will pull on and by how much, Clark added. “What’s got people concerned is, what if it’s all three?” he said.
The worst-case scenario, according to Clark, would involve a higher bar for project costs — maybe 15% or 20% instead of 5% — as well as some additional points to define that active work on a project is ongoing, and a shortened safe harbor window from four years down to three. Clark clarified that he doesn’t think this is the most likely way for things to shake out, though.
Who will be most impacted by the changes?
If Treasury makes the “commence construction” tests harder, projects and companies that have access to capital will likely still be able to meet the new threshold, Clark said.
“If they said you need more than 5% — you need 20%, [for example] — you’re going to need the cash to go buy more stuff,” he explained. That dynamic will of course favor very large companies, or those with financing partners already lined up.
But regardless of how much cash a developer has on hand, if the administration decides to shorten the four year safe harbor period, it will be much harder to meet the deadlines for projects to be placed in service.
That type of change, Clark said, would basically recreate the significantly stricter requirements laid out in the first version of the bill passed by the House, which required projects to be placed in service by the end of 2028 to qualify for the credits.
“That seems like the hardest for people to deal with,” he said. “There’s all kinds of reasons that four years makes sense when you’re building major infrastructure projects…it’s not something you can just plop out in a field and say it’s up and running now.”
Clark is optimistic that this is one place where GOP senators who voted for the bill but otherwise are supportive of energy could make a big difference. Cutting that timeline “effectively violates the negotiation and compromises that they struck,” he explained.
What if a project misses the safe harbor deadline?
If a project misses the safe harbor deadline — which for wind and solar is next Fourth of July — there’s still a small window of opportunity for them to claim the credits: They’d have to start construction and come online within 18 months. (Again this is only for wind and solar.)
“Very few projects meet that definition,” Clark explained, adding that it’s really only likely to apply to community solar projects, or even some residential projects.
“Projects just have to be at a much smaller scale in order to do such a quick start to finish,” he added.
