Released August 19, 2025 | SUGAR LAND
en
Written by Jesse Broehl for Industrial Info Resources (Sugar Land, Texas)--On Friday, August 15, the U.S. Internal Revenue Service (IRS) released new and more restrictive terms for wind and solar projects to use tax credits. While the terms represent a significant tightening, the terms are not as challenging as many worst-case scenarios envisioned by renewables proponents.
Projects will need to start construction by July 4, 2026, and then will have a four-year window between construction and commissioning to begin monetizing the tax credits. The IRS retained some latitude on what work and spending, both on- and off-site, counts as being under construction.
The expectation is that many projects will accelerate into construction by July 2026, resulting in a flood of projects coming online by 2030, which will monetize the 10-year tax credits from plant commissioning dates (some credits monetize quicker).
Huge Potential Solar and Wind Pipeline Could Be Built There is an enormous amount of solar and wind capacity with the potential to be brought online through this window of tax credit availability. Industrial Info is tracking 118 gigawatts (GW) of solar and 33 GW of wind in various stages of either construction or in advanced development that could enter construction by July 2026.
Click on the image at right for charts showing U.S. solar and wind units that are scheduled to begin construction before July 2026.
The 47 GW of projects currently under construction are on track to be commissioned before 2030. Some percentage of the additional 15 GW of engineered projects and 90 GW of planned projects could succeed in beginning construction by July 2026. Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can click here for a list of the wind and solar units expected to kick off construction before July 2026.
New Rules Follow July Tax Credit Phase Out The tax credits were placed into a phase-out path by the One Big Beautiful Bill Act (OBBBA) legislation signed into law on July 4. The July phase-out of the credits included an allowance that projects in advanced stages of development that begin construction by July 2026 would be allowed via so-called "safe harbor" guidelines to still receive the tax credits. Effectively, this is a last open window to qualify.
Trump Admin Stated its IRS Guideline Changes Would End Tax Credits As a follow-up to the law, the Trump administration said in July via an executive order that it intended to put out by August 18 new terms of how the IRS would consider projects as having started construction for the final year window.
The executive order said the new IRS terms it planned in August would supports its policies to "rapidly eliminate the market distortions and costs imposed on taxpayers by so-called 'green' energy subsidies."
The wind and solar industries, therefore, braced for the new August IRS terms to be potentially ruinous to the industries, but initial review of the changes suggests a workable path.
New IRS Terms for Under-Construction Status of Wind and Solar Appear Workable The new terms for safe harbor and start construction were released August 15. These are the key takeaways:
Projects will need to start construction by July 4, 2026, and then will have a four-year window between construction and commissioning to begin monetizing the tax credits. The IRS retained some latitude on what work and spending, both on- and off-site, counts as being under construction.
The expectation is that many projects will accelerate into construction by July 2026, resulting in a flood of projects coming online by 2030, which will monetize the 10-year tax credits from plant commissioning dates (some credits monetize quicker).
Huge Potential Solar and Wind Pipeline Could Be Built There is an enormous amount of solar and wind capacity with the potential to be brought online through this window of tax credit availability. Industrial Info is tracking 118 gigawatts (GW) of solar and 33 GW of wind in various stages of either construction or in advanced development that could enter construction by July 2026.
The 47 GW of projects currently under construction are on track to be commissioned before 2030. Some percentage of the additional 15 GW of engineered projects and 90 GW of planned projects could succeed in beginning construction by July 2026. Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can click here for a list of the wind and solar units expected to kick off construction before July 2026.
New Rules Follow July Tax Credit Phase Out The tax credits were placed into a phase-out path by the One Big Beautiful Bill Act (OBBBA) legislation signed into law on July 4. The July phase-out of the credits included an allowance that projects in advanced stages of development that begin construction by July 2026 would be allowed via so-called "safe harbor" guidelines to still receive the tax credits. Effectively, this is a last open window to qualify.
Trump Admin Stated its IRS Guideline Changes Would End Tax Credits As a follow-up to the law, the Trump administration said in July via an executive order that it intended to put out by August 18 new terms of how the IRS would consider projects as having started construction for the final year window.
The executive order said the new IRS terms it planned in August would supports its policies to "rapidly eliminate the market distortions and costs imposed on taxpayers by so-called 'green' energy subsidies."
The wind and solar industries, therefore, braced for the new August IRS terms to be potentially ruinous to the industries, but initial review of the changes suggests a workable path.
New IRS Terms for Under-Construction Status of Wind and Solar Appear Workable The new terms for safe harbor and start construction were released August 15. These are the key takeaways:
- 5% Project Spending Eliminated: Previously, developers could qualify a project as having begun construction by spending 5% of project costs. This was a rather low bar for developers to achieve and was used widely to advance projects beyond tax credit expiration dates. This is now gone for utility-scale wind and solar projects.
- Physical Work Test is the Only Path: Without a 5%, or other percentage level spending rule, projects now have only one path to demonstrate construction has started by conducting work of a significant physical nature on or offsite. This must be work started with binding contracts and damages clauses (inventory does not count).
- Four-Year Construction Window is Retained: Approaching this IRS release date, there has been widespread concern throughout the wind and solar industries that what had previously been a four-year allowance of time from construction start to commissioning would be reduced to two years or less. That has not come to pass. The four-year construction window was retained, and work must be continuous and documented throughout that time. There is some flexibility in the terms of construction work that can occur on and offsite, including manufacturing of supply-chain packages.
