Entering 2026, the U.S. renewable energy industry is facing significant headwinds from the Trump administration's policies. The most impactful change is that the One Big Beautiful Bill Act (OBBBA) has set new construction start deadlines for wind and solar projects—July 4, 2026—to qualify for the production tax credit and investment tax credit under the Inflation Reduction Act (IRA). Additionally, the bill introduces strict new rules regarding "foreign entities of concern" (FEOC), and the U.S. Treasury Department has not yet issued final implementation rules.

Dan Smith, Vice President of Markets at DSD Renewables, stated that OBBBA is "definitely a bad outcome for the industry, worse than most people expected." He added, "We anticipated changes, but this result is harsher than what we and most of our peers had hoped for."

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

Dan Smith, Vice President of Markets at DSD Renewables

Meanwhile, the federal government is also delaying the approval process for projects on federal lands and waters. The Department of the Interior has issued stop-work orders and revoked permits for several offshore wind projects, and canceled the environmental review for the 6.2 GW Esmeralda 7 solar project on federal land in Nevada, stating instead that it will review the project's seven components separately.

Renewables Poised to Meet Growing Demand

Despite these setbacks, some industry sectors still see significant opportunities for U.S. renewables, as renewable generation is often faster and cheaper to bring online than fossil fuel plants. Analysts continue to predict staggering electricity load growth over the next five years, while supply chain bottlenecks have extended the estimated deployment timeline for new natural gas plants to 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 one year, and they currently account for the majority of new generating capacity. Solar alone provided 58% of new capacity additions in 2024 and contributed 72% of new capacity in the first ten months of 2025. According to the latest federal data, from January to October 2025, 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%, while solar and wind each account for nearly 12%.

Robb Jetty, CEO of REC Solar, said, "While some parts of the industry, like the residential sector, have been hit hard, interestingly, for many of us, it's business as usual. The predictions about rising electricity prices and the availability of power solutions are coming true—the future outlook remains bright, not as pessimistic as many once imagined."

OBBBA terminated the IRA's residential solar tax credit at the end of 2025; however, commercial projects that begin construction before July 4, 2026, and are placed in service before December 31, 2030, can still receive production and investment tax credits. Projects that do not begin construction by July 4 can still claim the credits if they are placed in service by December 31, 2027. Tax credits related to energy storage remain largely unaffected.

Keith Adams, U.S. Renewables Leader at Deloitte, noted, "We believe renewables, especially the combination of renewables plus storage, can really meet these needs well in the near term. Because the reality is that solar-plus-storage or wind-plus-storage projects are likely to be built before other technologies like natural gas and nuclear can actually serve the load." Adams added that as data center deployments surge, storage can "meet 24/7 load—which is what many data centers truly need." However, pressure from federal policy changes is affecting how developers respond to load growth.

Solar power plant Amazon's Fort Powhatan solar farm in Disputanta, Virginia, on August 19, 2022. Data center electricity demand continues to drive the need for new power sources, including solar.

Adams said, "This affects how people prioritize their project portfolios, and it also affects project costs, component costs, and in some cases, additional tariffs. It is reshaping technology choices, forcing decisions to prioritize getting assets on the ground quickly."

With Trump's second term now a year old and six months since OBBBA's cuts to the IRA, Smith said the industry will "definitely" contract—especially with the cuts to the investment tax credit. "We are reviewing and focusing on the most viable 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 begin planning for the future."

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

"The predictions about rising electricity prices and the availability of power solutions are coming true—the future outlook remains bright, not as pessimistic as many once imagined."

Robb Jetty, CEO of REC Solar

Jetty noted that the industry has become accustomed to a certain level of instability. "While this year has arguably been the most turbulent we've seen," he said, "if there's one thing that's consistent, 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 Department's elimination of the 5% safe harbor test for the "beginning of construction" determination for projects larger than 1.5 MW. He now categorizes projects into three groups: mature projects (confident they will be placed in service by the end of 2027), less mature projects (confident they will begin 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 we've canceled some of them, or scaled some down 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 the 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 added, "There will be deadlines on December 31st every year for the next few years, even beyond 2027, so we need to be able to hold utilities accountable."

Godfrey, meanwhile, is focused on how state-level leadership responds to 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 obviously includes renewables, but we can also focus on transmission and related areas."

New Jersey Governor Mikie Sherrill New Jersey Governor Mikie Sherrill signed an executive order on her first day in office directing the state to accelerate solar deployment. Industry sources say states can play a significant role as the federal government reduces its support for renewables.

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

Kasparas Spokas, Power Sector Program Director at the Clean Air Task Force (CATF), expects both opportunities and challenges in accelerating renewable deployment at the state and regional levels. He pointed to "positive signals from unexpected places," such as the Electric Reliability Council of Texas (ERCOT) recently approving major transmission upgrades, "which should at least lead to the construction of some new wind projects." Nicole Pavia, CATF's Director of Clean Energy Infrastructure, mentioned that California recently passed SB-254, creating a transmission investment accelerator to promote public-private financing for transmission in the state. "We're seeing growing interest at the state level in more creative financing approaches," Pavia said. She noted that solutions such as grid-enhancing technologies, advanced transmission technologies, and reconductoring are receiving more attention—"we can use existing lines and increase their capacity as much as possible."

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

Sam Uyeno, Partner at West Monroe

Godfrey also noted that solutions maximizing existing resources will better match the pace of near-term demand growth. "If permits are in place and the interconnection queue is expedited, solar plants can indeed come online in 18 to 24 months," he said. "But distributed energy resource (DER) projects can start within weeks or even months; aggregated DER projects can be established in months to a year; reconductoring can be done in a year or less."

Financial and Other Headwinds

Due to the new FEOC rules and the Trump administration's tariffs, developers are "spending more time on the supply chain," Adams said, and they are "very focused on ensuring they both understand the source of capacity and can meet compliance requirements." Additionally, developers are focused on efficient operations to navigate tighter credit windows. They seek "consistency in design and construction execution, as well as consistency in operations after assets are placed in service, to ensure optimized uptime and optimized service to power purchase agreements or the market."

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

Sam Uyeno, Partner at West Monroe, said the lack of certainty or predictability has always been an issue for the renewable energy industry. Before the IRA, clean energy tax credits had much shorter durations. But the current environment is particularly challenging 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 grid? Then, how do you participate in the market—how do you get compensated, and how do you ensure the rules don't change after you enter?" Uyeno said. There are bottlenecks at every point in the value chain, "we propose permitting strategies and different policies, and then the bottleneck shifts to another part of the value chain."

Uyeno believes that transmission and interconnection timelines for renewable projects are "extremely challenging." FERC Order No. 2023, which requires a "first-ready, first-served" cluster study approach to interconnection, has begun to be implemented, but "the actual execution and the ability of all parties to execute remains to be seen." He said, "We've already seen some applications in PG&E's territory in California, as they are conducting more specific cluster studies for large data center interconnections."

President Trump signs the One Big Beautiful Bill Act President Trump signed the One Big Beautiful Bill Act on July 4, 2025. The law significantly reduces renewable energy incentives.

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

Kevin Beicke, Vice President at Morningstar DBRS, said the U.S. offshore wind industry faces strong headwinds and a "dim outlook," "not just in 2026, but for the next three years through 2028." He said, "I think the Trump administration is trying to send a signal to the offshore wind industry: future development in the U.S. is no longer open. Any potential offshore wind developer will see this and conclude it's not conducive to developing potential projects under the Trump administration over the next three years."

Godfrey noted that the cumulative impact of these delays is noteworthy, "not just for renewables overall, but for the entire energy industry. I suspect in 2026 we'll see how uncertainty in one sector spreads and contaminates the entire industry." The investment community investing in offshore wind and hydrogen pipelines is the same group considering investments in next-generation nuclear or new natural gas pipelines. Godfrey added that if energy investments are seen as unstable, stop-work orders could have an even greater chilling effect.

Spokas noted that there is "a lot of uncertainty" in current load growth forecasts, and "given the long lead times required for infrastructure planning and procurement, managing this uncertainty is a core challenge." Nevertheless, he said, "We should expect higher load growth to persist, fueling various types of new electrification loads in the process of decarbonizing the economy," which provides "an opportunity to advance new solutions or those not deployed in the past."

"I think we all wish we had more ready-made options today and wish we had commercialized some of them in the past," Spokas said. "So let's not make the same mistake again."