Entering 2026, the U.S. renewable energy industry is facing significant headwinds from the Trump administration's policies. Among the most impactful changes is the One Big Beautiful Bill Act (OBBBA), which sets a new July 4th start-of-construction deadline for wind and solar projects to qualify for the Inflation Reduction Act's (IRA) production and investment tax credits. The act also introduces strict Foreign Entity of Concern (FEOC) rules, for which the U.S. Treasury has not yet issued final guidance.

OBBBA is seen by the industry as "absolutely a bad outcome for the industry, worse than most expected," said Dan Smith, Vice President of Markets at DSD Renewables, a distributed renewable energy provider. "I think we all expected changes, but this is more stringent than we and most of our peers hoped for," he added.

"Now is the time to maintain discipline and focus, to realistically assess which projects can be completed under the ITC and which may not benefit."

Dan Smith, Vice President of Markets at DSD Renewables

Additionally, the Trump administration is delaying approval timelines for federal land and offshore projects. The Department of the Interior has issued stop-work orders and revoked permits for offshore wind projects, while canceling the environmental review for the 6.2 GW Esmeralda 7 solar project on federal land in Nevada, stating it will instead review the project's seven components separately.

Renewables Poised to Meet Growing Demand

Despite these setbacks, parts of the industry still see significant opportunities for U.S. renewables, as renewable generation often comes online faster and cheaper than fossil fuel plants. Analysts continue to predict staggering growth in electricity load over the next five years, while supply chain bottlenecks put the deployment timeline for new natural gas plants at an estimated five to eight years. The latest nuclear reactors took about 15 years to build.

In contrast, new utility-scale solar and wind projects can be deployed in as little as a year and currently account for the majority of new generating capacity. Solar alone made up 58% of new capacity additions in 2024 and 72% in the first ten months of 2025. According to the latest federal data, from January to October last year, wind and solar combined accounted for 87% of new capacity additions and 83% of "high-probability" additions over the next three years.

In total U.S. generating capacity, natural gas leads at 42%, with solar and wind each at nearly 12%.

"While certain parts of the industry, like the residential side, have been hit harder, interestingly for many of us in other areas, it's business as usual," said Robb Jetty, CEO of REC Solar, which develops onsite and community solar and storage. "Predictions about rising electricity prices and the availability of power solutions are coming true—the future outlook is actually as bright as ever. So it's not as pessimistic as many thought."

OBBBA ended the IRA's residential solar tax credit at the end of 2025; commercial projects that begin construction before July 4, 2026, can still be placed in service by December 31, 2030, to qualify for production and investment tax credits. Projects not started by July 4 can still claim credits if placed in service by December 31, 2027. Energy storage tax credits were largely preserved.

"We believe renewables, especially renewables plus storage, are truly critical in meeting these demands in the near term," said Keith Adams, U.S. Renewables Leader at Deloitte. "Because the reality is that solar-plus-storage or even wind-plus-storage projects are likely to be implemented before other technologies like natural gas and nuclear can truly serve load over the long term."

Adams noted that with the surge in data center deployments, storage can "serve 24x7 load—which is what many data centers truly need." However, pressure from federal policy shifts is affecting how developers approach load growth opportunities, he said.

"This affects how people prioritize their project portfolios," he said. "It affects project costs, component costs, and in some cases, new tariffs on components. It's reshaping technology choices and forcing people to make decisions to prioritize getting assets on the ground quickly."

With Trump's second term now a year old and OBBBA's cuts to the IRA six months in, Smith said the industry will "clearly" contract—especially with the restrictions on investment tax credits. "We're reviewing and focusing on the most actionable and profitable projects," Smith said. "Now is the time to maintain discipline and focus, to realistically assess which projects can be completed under the ITC and which may not benefit. Then we look forward to the post-ITC era and start planning what that will look like."

Harry Godfrey, Managing Director of Federal Priorities at Advanced Energy United, said the U.S. saw a "significant rush" of renewable energy projects in the third quarter of 2025. He expects fourth-quarter data to be similar but is less certain about 2026. "I'm very interested to see if this momentum can continue amid growing headwinds," he said. "Because we're entering a period where we need to fulfill FEOC compliance obligations, and at least for now, we don't know the specifics."

"Predictions about rising electricity prices and the availability of power solutions are coming true—the future outlook is actually as bright as ever. So it's not as pessimistic as many thought."

Robb Jetty, CEO of REC Solar

Jetty noted that the industry is accustomed to a degree of instability. "While this year has arguably been the most turbulent we've seen," he said, "if anything is constant, it's that federal policy and its impact on the industry are constantly changing."

New Strategies and New Horizons

Smith said the two major concerns are the lack of clarity on FEOC compliance and the Treasury's elimination of the 5% safe harbor test for start-of-construction determination for projects over 1.5 MW. He now categorizes projects into three groups: mature projects (confident of being placed in service by the end of 2027), less mature projects (confident of starting construction by July 4), and at-risk projects that may not meet either condition.

"We don't feel good about projects that don't fit these categories, which means these projects—we've canceled some, or reduced some to below 1.5 MW," Smith said. "But this is a decision everyone is facing... It's all part of facing reality and maintaining discipline to make the right choices."

DSD Renewables is watching whether states track ITC deadlines and "whether they will implement reforms to ensure utilities meet interconnection timelines, efficiently complete project interconnections, so we can meet the end-of-2027 deadline," Smith said. "There will be deadlines every December 31st for the next few years, even beyond 2027, so we need to be able to hold utilities accountable."

Godfrey said he is focused on how state leadership continues to address the complexities of current energy deployment. States should "do everything possible to accelerate and simplify the development, construction, and interconnection of advanced energy projects, which clearly includes renewables, but we should also focus on transmission and related aspects," Godfrey said.

As an example, he cited Illinois' Clean and Reliable Grid Affordability Act, passed in October, which expands the state's 2021 Climate and Equitable Jobs Act. CRGA directs Illinois utilities to install 3 GW of grid-scale storage by 2030, lifts the ban on new nuclear plants, and introduces an integrated resource planning process. It also strengthens the state's Renewable Energy Access Plan, one of whose goals is to reform transmission interconnection to unlock clean energy waiting in the queue. In the U.S., solar, wind, and battery projects account for up to 95% of interconnection queue capacity.

Kasparas Spokas, Power Sector Project Director at the Clean Air Task Force, said he expects both opportunities and challenges in accelerating renewable deployment at the state and regional levels. He pointed to "positive signs from unexpected places," such as the Texas Reliability Entity (ERCOT) recently approving major transmission upgrades, "which should at least enable the construction of some new wind projects."

Nicole Pavia, Director of Clean Energy Infrastructure at CATF, noted that California recently passed SB-254, creating a transmission investment accelerator that will promote public-private financing for California transmission. "So we're seeing increasing interest at the state level in adopting more creative financing approaches," Pavia said. She mentioned increased focus on solutions like grid-enhancing technologies, advanced transmission technologies, and reconductoring—"actions and technologies we can take to best utilize existing lines and, where possible, increase their capacity."

"How do you finance projects, how do you build them? How do you connect them to the transmission network? Then, how do you participate in the market—how do you get compensated, and how do you ensure the rules don't change once you're in?"

Sam Uyeno, Partner at West Monroe

Godfrey also noted that solutions maximizing existing resources will better match the speed of near-term demand growth. "If permits are in place and the interconnection queue moves forward, you can definitely get a solar plant online in 18 to 24 months," he said. "But you can start distributed energy resource (DER) projects in weeks or even months. Aggregated DER projects can start in months to a year. Reconductoring can be done in a year or less."

Financial and Other Headwinds

Due to new FEOC rules and new tariffs from the Trump administration, developers are "spending more time on the supply chain," Adams said, "truly focused on ensuring they understand both the source of capacity and can meet compliance requirements." Developers are also focusing on efficient operations to navigate tighter credit windows, Adams said. They seek "consistency in design and construction execution, and consistency in operations once assets are online, to ensure optimized runtime and optimize how they serve their power purchase agreements or the markets they're in."

Smith described the unease caused by the lack of final guidance on FEOC rules, which took effect on December 31, 2025. "The requirements exist, but there's a lack of full transparency or clarity on how to comply," he said. "So we have to take a conservative approach."

The lack of certainty or predictability has always been an issue for the renewable industry, said Sam Uyeno, Partner at West Monroe. Before the IRA, clean energy tax credits had much shorter durations. But the current environment is particularly difficult, he said, because changes are happening at both the federal and state levels. "How do you finance projects, how do you build them? How do you connect them to the transmission network? Then, how do you participate in the market—how do you get compensated, and how do you ensure the rules don't change once you're in?" Uyeno said.

There are bottlenecks at every stage of the value chain, he said. "We propose permitting strategies and different policies, and then the bottleneck suddenly shifts to another part of the value chain." Transmission and interconnection timelines for renewable projects are "very challenging," Uyeno said. The Federal Energy Regulatory Commission's (FERC) Order No. 2023, which requires a first-come, first-served, cluster study approach to interconnection, has begun implementation, but "how it's actually executed and the ability of parties to execute remains to be seen," he said. "We're starting to see some of it in California's PG&E territory because they're conducting more specific cluster studies for large data center interconnections."

Although courts continue to reject the Trump administration's various stop-work orders on five offshore wind projects under construction, these rulings often take days or weeks, during which developers lose millions of dollars. Overall, this creates enormous uncertainty for the entire industry, Pavia said. Dominion Energy, developing the 2.6 GW Coastal Virginia Offshore Wind (CVOW) project, said in its complaint against a December stop-work order that CVOW would "provide power to the world's largest concentration of data centers," that wind development is necessary to meet growing demand, and called the government's actions "systematic and unfounded hostility toward wind energy."

The U.S. offshore wind industry faces strong headwinds and a "bleak outlook," said Kevin Beicke, Vice President at Morningstar DBRS. "Not just in 2026, but for the next three years through 2028." "I think the Trump administration is trying to signal to the offshore wind industry that future development in the U.S. is no longer open," Beicke said. "Any other potential offshore wind developer would see this and think it's not favorable for them to develop potential projects under the Trump administration over the next three years."

The cumulative impact of these delays is noteworthy, Godfrey said, "not just for renewables overall, but for the entire energy industry. I suspect this will be part of the 2026 discussion—how uncertainty in one specific sector spreads and contaminates the whole industry." The investment community financing offshore wind and hydrogen pipelines is the same group considering investing in next-generation nuclear or new natural gas pipelines, Godfrey said. Therefore, stop-work orders could lead to a larger chilling effect if energy investments are seen as unstable, he added.

Spokas noted there is "a lot of uncertainty" in current load growth forecasts, and "managing that uncertainty is the core challenge because infrastructure planning and procurement require long lead times." Nevertheless, he said, "we should expect higher load growth to persist, driving various new types of electrified load in the process of decarbonizing the economy," which provides "opportunities to advance new solutions or ones not deployed in the past." "I think we all wish we had more ready-made options today, and we've commercialized some of them in the past," Spokas said. "So let's not repeat past mistakes."