Solar stocks soared Friday afternoon after a leaked copy of the Treasury Department’s guidance for clean energy tax credits indicated the Trump administration planned to largely preserve solar and wind projects’ access to the funding.
At issue was how the Trump administration planned to define whether a project had sufficiently “started construction” to lock in tax credits before the phaseout next year. Under current rules, developers qualified for the projects after spending at least 5% of the planned cost by a certain deadline. After the One Big Beautiful Bill Act passed last month and dramatically shortened that deadline to next July 4, President Donald Trump issued an executive order directing the Internal Revenue Service to tighten the eligibility rules on wind and solar projects even further.
A leaked proposal, obtained by Latitude Media on Friday, eliminates the 5% spending level and requires that projects start physical construction. But the document shows that the new rules would allow the work to begin offsite, and maintain a four-year “safe harbor” period rather than slashing the window in which construction would need to be completed.
The OBBB’s restrictions on solar panels containing overseas materials still significantly limit developers’ access to cheaper, imported modules. But the law left the 45X tax credit for clean manufacturing largely untouched, signaling Republicans’ support for continuing to reshore solar manufacturing. On Friday, shares in manufacturers such as First Solar and Enphase surged by more than 13% each. Developers such as Sunrun, meanwhile, skyrocketed by more than 30%.
“If this is the final guidance, yes, I would consider this a positive for solar manufacturers,” an industry source, who spoke on condition of anonymity, told Latitude Media. “This should allow a substantial number of developers to continue to seed the domestic content incentive and should incentivize them to sign domestic content purchase contracts.” The source said overall they were “cautiously optimistic.”
A note from Citi analysts to investors confirmed that the bullish turn for solar stocks was driven by the Treasury document.
Industry pushback
Still, the proposal drew swift blowback from solar developers who said requiring projects to have started construction would upend “long-standing, bipartisan standards in a way never agreed to during the legislative process.”
“At a time when state leaders across the country — in red and blue states alike — are embracing an all-of-the-above energy strategy, fast-tracking infrastructure to meet record load growth, the White House is choosing a ‘some-of-the-above’ approach,” Jeff Cramer, chief executive of the Coalition for Community Solar Access, said in a statement. “We fail to see the logic in intentionally weakening our nation’s energy independence at the very moment we should be unleashing every proven technology to meet demand, enhance resilience, and keep costs down for the people we serve. We will keep up the fight.”
But Isaac Orr, the vice president of research at the conservative-leaning Always On Energy, said requirement to actually begin construction “almost certainly” aligns “with what the average American thinks of when they hear the phrase ‘start of construction.’”
“Let’s say you’re going to spend $2,500 remodeling your bathroom. Does anyone honestly think that spending $125 on a new vanity, whether it is installed or not, actually constitutes the ‘start of construction?’” Orr told Latitude. “The only way you can get a ‘yes’ from someone on that is if it is a justification to access someone else’s money.”
He added that the changes are “more lenient than the subsidy guidance” that the Obama administration originally replaced in 2013, when it established the buying of materials as a rule for qualifying for tax credits. According to the Congressional Research Service, projects needed to be placed in service prior to the expiration of tax credits, meaning the facility needed to be ready and available for use before the credit expired.
“Ultimately, I think the new guidance corrects some of the worst excesses of the Obama administration’s guidance,” Orr said. “Trump’s guidance was intended to limit the number of projects that would qualify for subsidies by ending their ability to game the system to elongate their eligibility window, and I think these changes achieve that.”
The guidance, which is due out on Monday, could still change over the weekend. Over the past few weeks, the Trump administration has enacted a sweeping series of policy changes disfavoring renewable energy. That included de-designating millions of acres of ocean for offshore wind development, canceling approvals for the Lava Ridge wind farm in Idaho, and launching a review at the Department of the Interior to weed out any policies that boost wind and solar.
Departing from precedent
In recent weeks, some sources speculated to Latitude Media that the upcoming Treasury guidance could follow a similar trajectory by, for example, requiring developers to spend 51% or more of the cost of the project upfront to qualify for tax credits. But the industry group Advanced Energy United criticized the leaked draft on Friday, saying the proposal would “eliminate long-standing precedent for how companies demonstrate they’ve begun project development.”
“At a time when we need energy abundance, these rules create new federal red tape,” Heather O’Neill, Advanced Energy United’s president and chief executive, said in a statement. “These rules will make it more difficult and expensive to build and finance critical energy projects in the U.S. that are needed to power homes, small businesses, and new manufacturing and industry dependent on reliable and affordable energy.”
Trump’s executive order to restrict access to the tax credits came in response to demands from hardline conservatives in the House of Representatives, who threatened to withhold votes on the OBBB unless the White House tightened the screws on wind and solar development.
But in recent days, top GOP Senate including Sens. John Curtis of Utah, Chuck Grassley of Iowa, and Lisa Murkowski of Alaska, kicked off a public lobbying campaign urging the president against enacting restrictions that would effectively kill most solar and wind projects at a moment when electricity demand is growing.
“Taking electrons off the grid is just as fundamentally misguided as keeping energy in the ground,” Murkowski wrote Thursday in a post on X. “We need it all, and our policies must reflect that.”
