High Level
Federal tax policy drove the week’s narrative. Treasury
narrowed the definition of when wind and solar projects may be treated as
having begun construction for the remaining tax credits under the One Big
Beautiful Bill Act, replacing the 5 percent safe harbor for most projects with
a requirement to show substantial and continuous physical work. Markets read
the guidance as softer than feared, but developers and financiers warned of new
uncertainty. In New Jersey, the Board of Public Utilities extended community
solar and CSI deadlines by nine months and required monthly publication of
interconnection queue data, while tightening maturity requirements at
registration.
Full View
Treasury narrows commence‑construction test; small
projects retain 5 percent safe harbor
• What happened: On Aug. 15, the U.S. Treasury Department issued
guidance that replaces the 5 percent cost safe harbor for projects larger than
1.5 MW with a “physical work of a significant nature” standard and a
requirement to maintain a “continuous program of construction.” Residential and
other ≤1.5 MW projects may still use the 5 percent test. Treasury preserved the
four‑year continuity window and listed excusable delays such as severe weather,
labor shortages, and specialized equipment constraints. Equity markets rallied
on relief that the rules were not retroactive and were less punitive than some
feared.
• Who did it: U.S. Department of the Treasury, led by Secretary Scott
Bessent, implementing President Trump’s executive order to strictly enforce the
wind and solar phaseout.
• Why they did it: The administration said it is closing “paper
compliance” pathways and ensuring only projects that are truly advancing
qualify, consistent with commitments made to conservative lawmakers during OBBB
negotiations.
• Stakeholder views:
• Chris Wright, Secretary of Energy, U.S. Department of Energy: “I
think it’s the right time to sunset them… they’ve been around for 33 years, and
I think you’ve seen a mature industry develop.”
• Abigail Ross Hopper, President and CEO, Solar Energy Industries
Association: “This is yet another act of energy subtraction… [that] will
further delay the buildout of affordable, reliable power.”
• Jason Grumet, CEO, American Clean Power Association: Treasury’s move
“undermines the integrity of our energy grid and our legislative process.”
• Vickie Patton, General Counsel, Environmental Defense Fund: The
guidance “will drive up electricity costs, make our energy grid less reliable,
harm our economy and lead to more deaths and disease from harmful air
pollution.”
• Phil Shen, Managing Director, Equity Research, Roth Capital Partners:
“This is much better than expected,” characterizing the changes as minimal
overall.
• Keith Martin, Partner, Norton Rose Fulbright: The new approach
discards a “bright‑line 5 percent test” for a “less clear facts‑and‑circumstances
approach,” leaving uncertainty for financiers and tax insurers.
• Robert Barnett, Analyst, Bloomberg Intelligence: The guidance is
“particularly favorable” to residential and small commercial solar companies.
• Rhone Resch, CEO, Advanced Energy Advisors: “It’s not the worst thing
in the world… [it will] reward sophisticated companies that have projects that
are further along.”
• Chuck Grassley, U.S. Senator, Iowa: The guidance “seems to offer a
viable path forward for the wind and solar industries to continue to meet
increased energy demand.”
• John Curtis, U.S. Senator, Utah: Praised Treasury for “balancing
various concerns and perspectives,” while continuing to review the changes.
• Jeff Cramer, CEO, Coalition for Community Solar Access: Criticized
the change as violating the legislative deal, but said the benefit is “there
may now be less uncertainty.”
• Adrian Deveny, Founder and President, Climate Vision: Warned the
guidance will “pull the rug out from under the entire pipeline of wind and
solar projects.”
• What happens next: The guidance applies to projects that begin
construction on or after Sept. 2, 2025. Projects that qualify must be placed in
service within four years. Treasury also signaled forthcoming rules on foreign‑entity‑of‑concern
restrictions, which could disqualify otherwise compliant projects.
Reuters/MSN, “Trump administration unveils stricter subsidy rules
for wind, solar projects,” Aug. 15, 2025
Energy Connects/Bloomberg, “Solar Shares Rise as Trump Hit to
Credits Softer Than Feared,” Aug. 15, 2025
Inside Climate News, “Treasury Tightens Rules for Wind and Solar
Tax Credits, But Offers Leeway,” Aug. 15, 2025
Politico, “Trump administration deepens crackdown on solar and
wind tax credits,” Aug. 15, 2025
The Hill, “Treasury Department sets limits on remaining wind and
solar tax credits,” Aug. 15, 2025
Canary Media, “Trump admin tightens vise on wind and solar with
new tax rules,” Aug. 15, 2025
Yahoo News/Iowa Capital Dispatch, “U.S. Energy Secretary Chris
Wright says cuts to wind, solar tax credits came at ‘right time,’” Aug. 16,
2025
New Jersey extends community solar and CSI deadlines and
mandates monthly interconnection queue reporting
• What happened: On Aug. 13, the New Jersey Board of Public Utilities
voted 3–0 to grant a nine‑month extension to all Community Solar Energy Program
and Competitive Solar Incentive projects. Community solar now has 27 months
from conditional registration to Permission to Operate, with 33 months for
contaminated sites and landfills. CSI projects now have 45 months to reach PTO.
• Who did it: New Jersey Board of Public Utilities by Decision and Order
in consolidated dockets QO22030153, QO21101186, and QO21010085.
• Why they did it: The Board found widespread interconnection‑related
and other unforeseen delays and concluded that a limited, uniform extension
would better advance program goals than continual one‑off extension requests.
• Stakeholder views:
• Board Order (official filing): “The Board HEREBY FINDS that it is in
the public interest to waive the SuSI Program rules at N.J.A.C. 14:8‑11.5(g)(3)
for all projects currently registered in the CSEP and the CSI Program and to
provide those projects a nine‑month extension to their SuSI Program
registration expiration date.”
• Board Order (official filing): “The Board HEREBY ORDERS community
solar projects to provide, upon registration, written authorization from the
EDC providing conditional approval to construct that indicates the completion
of a facilities study or equivalent feasibility or engineering study.”
• Board Order (official filing): “The Board HEREBY ORDERS the EDCs to
report to the Board and post on their websites a monthly inventory in Excel
format of the interconnection queue… beginning with reporting for October
2025.”
• What happens next: Projects may still request a single six‑month staff
extension upon a showing of extenuating circumstances, progress, and likelihood
of timely completion; subsequent extensions are not expressly authorized. The
publishing requirement for queues begins in October 2025, and staff will
initiate rulemaking to conform the regulations to the Order.
JD Supra/Greenbaum Rowe Smith & Davis LLP, “New Jersey BPU
Takes Action on Community Solar & Competitive Solar Incentive Programs:
Interesting Comments from the Bench,” Aug. 15, 2025
NJ BPU Order, “Successor Solar Incentive Program and Grid
Modernization,” Aug. 13, 2025
What’s the So What?
The Treasury guidance is now the center of gravity for
community solar developers. The change does not eliminate credits immediately,
but it converts a finance‑driven safe harbor into a construction‑driven test
for projects above 1.5 MW. That shift pulls decision‑making toward engineering,
scheduling, and documentation. Tax equity and insurers will rely less on
invoices and more on verifiable site progress. Markets responded positively
because the guidance preserved a four‑year completion window, was not retroactive,
and carved out small projects that can still use 5 percent. For community solar
sponsors, the combination of a narrower federal on‑ramp and New Jersey’s state‑level
moves points to a new operating model: do visible work early, prove continuity,
and de‑risk interconnection.
What developers should do now
- Prioritize
physical work: Advance clearly qualifying on‑site activities such as
foundations, racking, pad pours, or equivalent project‑specific physical
work.
- Prove
continuity: Keep contemporaneous logs showing week‑by‑week activity;
document any excusable interruptions like weather or labor shortages cited
by Treasury.
- Right‑size
when prudent: Where consistent with program rules and site realities,
consider ≤1.5 MW designs that can still use the 5 percent safe harbor.
Avoid artificial fragmentation.
- Align
financing early: Secure written positions from tax equity, lenders,
and insurers on what evidence will satisfy the facts‑and‑circumstances
test.
- Lock
interconnection maturity: Obtain completed facilities studies before
registration where required and build those milestones into your commence‑construction
record.
- Prepare
for FEOC rules: Map supply chains now and line up compliant
alternatives ahead of forthcoming Treasury guidance on foreign‑entity‑of‑concern
restrictions.
- Triage
the pipeline: Re‑sequence to pull forward projects that can credibly
complete qualifying physical work before the July 2026 deadline.
Bibliography
Reuters. “Trump administration unveils stricter subsidy
rules for wind, solar projects.” Aug. 15, 2025. https://www.msn.com/en-us/money/markets/trump-administration-unveils-stricter-subsidy-rules-for-wind-solar-projects/ar-AA1KBmzM
Bloomberg News. “Solar Shares Rise as Trump Hit to Credits Softer Than Feared.”
Aug. 15, 2025. https://www.energyconnects.com/news/renewables/2025/august/solar-shares-rise-as-trump-hit-to-credits-softer-than-feared/
Inside Climate News. “Treasury Tightens Rules for Wind and Solar Tax Credits,
But Offers Leeway.” Aug. 15, 2025. https://insideclimatenews.org/news/15082025/treasury-department-wind-solar-tax-credits/
Politico. “Trump administration deepens crackdown on solar and wind tax
credits.” Aug. 15, 2025. https://www.politico.com/news/2025/08/15/trump-solar-wind-tax-00512034
The Hill. “Treasury Department sets limits on remaining wind and solar tax
credits.” Aug. 15, 2025. https://thehill.com/policy/energy-environment/5455183-treasury-guidance-wind-solar-tax-credits/
Canary Media. “Trump admin tightens vise on wind and solar with new tax rules.”
Aug. 15, 2025. https://www.canarymedia.com/articles/policy-regulation/trump-admin-tightens-vise-on-wind-and-solar-with-new-tax-rules
Yahoo News/Iowa Capital Dispatch. “U.S. Energy Secretary Chris Wright says cuts
to wind, solar tax credits came at ‘right time.’” Aug. 16, 2025. https://www.yahoo.com/news/articles/u-energy-secretary-chris-wright-120355996.html
JD Supra (Greenbaum, Rowe, Smith & Davis LLP). “New Jersey BPU Takes Action
on Community Solar & Competitive Solar Incentive Programs: Interesting
Comments from the Bench.” Aug. 15, 2025. https://www.jdsupra.com/legalnews/new-jersey-bpu-takes-action-on-3101189/
New Jersey Board of Public Utilities. “Order: Successor Solar Incentive Program
and Grid Modernization.” Aug. 13, 2025. https://www.nj.gov/bpu/pdf/boardorders/2025/20250813/8C%20ORDER%20Successor%20Solar%20Incentive%20Program%20and%20Grid%20Modernization.pdf