The House Freedom Caucus’s slide into irrelevance, after caving on their every demand on the One Big Beautiful Bill Act, has been a small political solace during this dark time. But even that may be overstated, as the Trump administration has followed through on the HFC’s request to implement the bill in a way to make it impossible for most clean-energy projects to get into production.
The result will be higher electricity costs across the country. In the first four months of this year, solar and wind made up 95.7 percent of all new electrical generating capacity in the U.S., according to the Federal Energy Regulatory Commission. Utility-scale renewables were on track to be more plentiful on the grid than natural gas by 2029, based on current take-up rates.
But the stated Trump administration policy is now to make all future clean-energy projects as unprofitable as possible, at a time when energy demand is projected to soar. That will slow new generation of any kind to a trickle. You might as well call the new legislation the Blackout Law.
An executive order signed last week states that administration policy is to “strengthen” the repeal of wind and solar energy tax credits called for in the Blackout Law, and directs the Treasury Department to “strictly enforce” their termination. This is the result of a deal made for Freedom Caucus votes, offsetting the Senate’s weakening of the phaseout timelines for those tax credits.
Even the Senate’s changes, which eliminated a harmful tax on clean energy along with lengthening the timelines, were going to be a heavy lift for power generators. To qualify for the significant tax credits, projects would have to begin construction by next July 4 and be “placed in service,” meaning connected to the grid and delivering power, within four years of that construction start date.
The problem is that there’s simply no guarantee that new projects, even if they broke ground today, would be able to send power to the grid within four years. The backlogged “interconnection queue” often takes up to five years to get a power project hooked up to the grid. Investors may back out of projects where the tax credits are uncertain because of interconnection delays outside their control.
The Trump executive order attacks the “begin construction” part of the tax credit test. Usually, if a project spends 5 percent or more of its total cost, it can be said to have begun construction. But the order asks for renewed guidance “to ensure that policies concerning the ‘beginning of construction’ are not circumvented, including by preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built.”
There’s just no reason to believe that the Trump administration is going to be generous toward energy companies looking to legally access tax credits.
We will have more clarity on exactly what hoops these projects will have to jump through by August 21, the deadline for Treasury to write the new guidance. But it likely means that just spending a bunch of money on a facility won’t cut it. Treasury is likely to err on the side of requiring “substantial” physical construction before authorizing the tax credit. That means developers will have to sink a lot more manpower and money into the project, even with the unclear interconnection timeline at the end of it.
Some projects just can’t get into construction in that time frame, like several offshore wind efforts that now look all but dead. But even ones that could make it happen in theory won’t be able to in reality, because there’s going to be a land rush of companies fighting over the same equipment and personnel to get new projects into construction.
This is not the only way Treasury can manipulate the Blackout Law to restrict tax credits. Congress added a restriction on tax credits for projects that use materials from a “foreign entity of concern” (FEOC), which you can mostly read as China. The law requires projects to use fewer materials from FEOCs over time, using various specific formulas.
These restrictions not only hit solar and wind projects but also nuclear, geothermal, grid-scale battery, and more. The calculations of this could get very complex, as companies must figure out the origins of everything in their supply chain, and maybe the origins of everything in their suppliers’ supply chains.
Like the beginning of construction guidance, the executive order asks for the FEOC rules to be finalized by August 21. But the bill sets the deadline for rules at the end of 2026. The longer timeline, which is likelier because of staffing shortages and the complexity of the rules, would chill any new projects, as investors would not know whether they will qualify for the tax credits or not, which is critical to penciling out the financing. “There’s a risk that some projects get so burdened in compliance and red tape that projects and investments that should move forward will not be able to,” one former Biden Treasury official told Canary Media.
There’s definitely an argument that the U.S. shouldn’t be paying for projects that build China’s world-leading market share of things like battery materials or solar components. But the Trump administration also applies these FEOC rules to domestic manufacturers, while doing nothing to create a healthy ecosystem to build components and final assembly manufacturers in tandem. Plus, joint ventures like the Ford battery plant that licenses technology from a Chinese firm will probably lose tax credits due to these rules. We were already seeing battery plant construction slow down even before this bill; that is poised to continue.
There’s just no reason to believe that the Trump administration is going to be generous toward energy companies looking to legally access tax credits. Nor should we believe that the hassle will stop there. A long-delayed transmission line meant to link wind farms across the Midwest has finally been approved and is beginning construction, but it’s the wrong kind of energy, so senators like Josh Hawley (R-MO) are (apparently successfully) encouraging the administration to find a way to stop it. For those renewable projects that aren’t permitted, even if they can get past the thicket of local restrictions on permitting, the feds could throw up roadblocks.
This has always been the real barrier to progress and energy dominance: a political party that is so allied with fossil fuels and their lobbyists that they will strangle the vast majority of power projects being produced today. And you’re going to pay for it.
New clean energy isn’t going to go away because of the Blackout Law, but there will be a substantial reduction in financially viable projects. One estimate shows that solar and wind investment will drop by $141 billion between now and 2033, with a loss of 81 gigawatts in new projects. And natural gas is not positioned to make up the gap. It can take up to seven years to procure a new gas turbine.
Power plants that do get built, something that must happen to keep up with demand, will simply be more expensive. Large utility upgrades and expansions of power capacity will suddenly have higher capital needs, and they’ll stick ratepayers with those costs. Electricity retail prices will rise on average by 7.3 percent for households and 10.6 percent for businesses, according to the Clean Energy Buyers Association, but in the most heavily affected states, prices will go up by as much as 29 percent. An even grimmer analysis from Energy Innovation shows wholesale electricity prices increasing 74 percent by 2035.
And just as a side benefit, we’ll see seven billion metric tons more carbon spewed into the atmosphere in the next five years.
The Blackout Law, as written, was already going to give America unreliable power and more asthma. The side agreements with the Freedom Caucus will make things worse.