Solar Strategy in the Next Trump Era
Like many of you, I have been reflecting on the election, processing the disappointment, and getting my arms around the new uncertainty for our work in clean energy and the work of many of our community-serving partners. As an organization, Resonant Energy is dedicated to fighting climate change through a just clean energy transition and Donald Trump has given ample reason to believe that his administration will be sprinting in the opposite direction on many different fronts. A recent analysis indicates that his administration could dramatically increase U.S. emissions in the coming years at a critical time when we need to be taking unprecedented steps to mitigate the harm we are causing to the planet and to ourselves. Writing this on the warmest day in November in Boston in my lifetime with a dramatic drought underway makes this loss feel all the more poignant — and raises the stakes for our continued work together.
If you are looking for some answers and direction for what the new administration means for your solar project, you’ve come to the right place. This article is designed to equip you with the knowledge to make an informed assessment about the risks and opportunities for solar in the coming years. If you have further questions after reviewing, please don’t hesitate to reach out.
Sincerely,
Isaac Baker, Co-CEO
Resonant Energy
Executive Summary
What’s Potentially At Risk:
Federal tax credits and their associated transferability and elective pay (a.k.a. direct pay) rules are the only significant things at risk for solar.
We are especially concerned about the longevity of the low-income communities bonus credit program.
The only way to change this will be with congressional approval through a 2025 tax overhaul.
18 House Republicans have already come out in favor of protecting clean energy tax credits, like the baseline 30% tax credit for solar (August ‘24)
House Speaker Mike Johnson has said they will use a "scalpel and not a sledgehammer” when considering rolling back the Inflation Reduction Act (Sept ‘24).
What’s Generally Not At Risk:
Everything else that impacts your solar project’s economics – including high electricity costs, high state incentives with MA’s new SMART program, $27B in EPA Green House Gas Reduction Fund grant and loan programs, and the continued increase in state/local ordinances requiring onsite clean energy and/or overall green house gas reductions in buildings.
What To Do In Response:
Take Action Now for LI Bonus Credits: If you have a project that’s in a low-income census tract, on tribal lands, is a federally designated affordable multifamily development or plans to share power with low-income residents through community solar, the most important step you can take is starting your solar project with a Letter of Intent (LOI) by Jan 2025 and setting a goal to sign a contract by June 2025 so you can apply to lock in your bonus tax credit in Q2.
Key Notes:
once awarded, you have 4 years to build the project.
Even this Q2 timeline is potentially at risk and is not guaranteed
Tariff Related Cost Increases: Hold a contingency (5-10%) in your solar budget for some tariff related cost increases in the coming years.
The More Detailed Analysis
New Areas of Uncertainty
When it comes to assessing risk during Trump’s presidency, the main uncertainty for solar comes with anything that has federal jurisdiction. Within that, the questions are A) what can he do through executive action and B) what he can do only with congressional approval – and specifically what margins he’ll need to pass something. What we already know is both that Project 2025, a mile-long wishlist of Republican policy goals, calls for the full repeal of the Inflation Reduction Act (IRA), which would be devastating for our work if enacted; however, we also know that the IRA has many popular provisions that we believe are unlikely to be removed. House Speaker Mike Johnson has already said they will use a "scalpel and not a sledgehammer” when considering rolling back the IRA (Sept ‘24). We expect the tight margins in the House and targeted Republican support for solar to be our best protection against a larger repeal, which is likely to be considered as part of a tax reform bill in 2025.
Below we’ve provided our take on the risks to the key drivers for federal solar investment. Please note that we are providing this information to inform you in making an educated decision about your project and cannot provide a guarantee for any of this information. These conclusions represent our best expectation based on our research and that of the policy experts in our industry nationwide.
IRC Section 48 - Investment Tax Credit (ITC)
The ITC has been set for solar PV to a baseline of 30% for all non-residentially-owned solar projects – ranging from solar on a local food pantry all the way up through a seven-square mile utility scale solar farm. The incentive is set through 2032.
Resonant Assessment: Low Repeal Risk
Cannot be changed without congressional action, which at minimum would require a simple majority in the house and senate to pass through the budget reconciliation process. This process is how the Inflation Reduction Act (IRA) passed under Biden in 2022.
While Project 2025, a potential blueprint for the Trump administration’s actions, calls for the complete repeal of the IRA (Source, p.696), 18 House Republicans have already asked Speaker Johnson to protect clean energy tax credits specifically, which is driving significant clean energy investment and job growth in their districts.
Additionally, because this tax credit is used on large utility-scale projects in addition to the relatively smaller projects Resonant develops with aligned partners, there are billions of dollars of institutional investment at stake nationally relying on this credit. These larger projects are backed by banks and other large financial groups that will lobby hard to keep this credit in place — a lobbying source we see likely to be more successful with Republicans than claims from the industry.
One possible intermediate form of rollback would be the elimination of some or all of the transferability and elective pay rules, which have made it possible for organizations with little or no tax liability to still benefit from solar tax credits. These are policies that Resonant will be watching closely given their particular benefit to the nonprofits and public entities that we serve.
Lastly, it’s worth noting, as well, that there is a long precedent for a solar investment tax credit through the last 15 years of presidential administration. The Investment Tax Credit was active during Trump’s first administration, 2016-2020, and he even approved extending the tax credit at 26% for two years as a part of spending packages that went through at the very end of his presidency (source).
Low-Income Communities Bonus Credit Program
This program competitively offers 10-20% bonus tax credits for projects through 2032 that meet equity-oriented goals for solar deployment on top of the baseline 30% credit value. Eligible recipients include any project located in a low-income zip code (Category 1), projects on tribal lands (Category 2), federally designated affordable housing (Category 3), and low-income community solar (Category 3). The program allocates awards through an annual application process, expected in Q2 of each year. Resonant Energy has helped hundreds of multifamily buildings and nonprofits qualify for bonus credits in FY 2023 and 2024 with a 70%+ acceptance rate.
Resonant Assessment: Medium-High Repeal Risk
Cannot be changed without a congressional majority via budget reconciliation.
However, unlike the base 30% tax credit, these bonus credits are only available for smaller projects < 5 MW-AC. As such, they will have a smaller Wall Street constituency and have an explicit equity-oriented mandate that we think may make it an easier target for a Republican cut.
The policy’s only likely protection is that it applies to 1.8 gigawatts of solar projects each year, representing $4b - $5b in tax credit value, which groups invested in this value stream will advocate to protect.
This program offers a non-competitive 10% bonus tax credit for projects that meet 40-55% (ramping up from 2023-2027) domestic content thresholds for the “manufactured goods” included in a given solar project. This applies to the modules, inverters, electronics, and racking. This triggers prevailing wage over 1 MW-AC, but most projects we work on are below that size. Separately, all projects receiving federal funding, like Solar for All or Green House Gas Reduction Fund, will be required to comply with Build America Buy America (BABA), which requires 55% domestic content. This BABA requirement will make all federally funded projects e eligible for the Domestic Content bonus credit.
Resonant Assessment: Low Repeal Risk
Cannot be changed without a congressional majority via budget reconciliation.
Given the Trump campaign’s focus on American manufacturing, the billions of dollars that has been invested in new American manufacturing capacity (especially in red states like Georgia and Texas), we believe that this credit is unlikely to be removed.
Some companies like Sunnova (a residential solar financing company) are especially confident in the durability of this provision and have repositioned their business strategy around domestic content compliance.
Energy Community Tax Credit Bonus
This program offers a non-competitive 10% bonus tax credit value to projects that A) are located near retired fossil fuel generation or extraction locations, B) are located in census tracts with high rates of historic fossil-fuel related employment and current unemployment or C) are on land that is designated as a brownfield site for non-petroleum contamination.
Resonant Assessment: Low Repeal Risk
Cannot be changed without a congressional majority via budget reconciliation.
The drafting of this provision was heavily influenced by Joe Manchin and disproportionately benefits red states like West Virginia. Because of this, we believe it’s unlikely to be repealed.
Note: It rarely benefits projects in New England, but is occasionally relevant. You can check eligibility with our mapping tool here.
Tariffs on Clean Energy Equipment
Trump has set an intention to add 10-20% tariffs on all imports and 60% tariffs on imports from China (source). Solar cells / modules already have a 50% tariff as of 2024, which was doubled from the previously set level by the Biden administration (source).
Resonant Risk Assessment: Some Tariffs Likely, Lower Economic Impact
Tariffs to some degree can be implemented unilaterally by the President (source). However, tariffs on all goods from China and all other countries for that matter would likely be seen as so broad that it would require congressional approval. It remains to be seen how Trump will proceed and how whatever he does will stand up to a legal challenge.
Regardless of its success, the reality for smaller distributed scale solar projects on the ground is likely to be modest. Given the existing tariffs, all projects we’re working on currently expect to use panels from non-China sources in Southeast Asia (e.g. South Korea, Vietnam, etc) and we expect more domestically produced modules to become broadly available by 2026.
Panels typically represent ~20% of the cost of a project we work on. A 20% increase to this line item represents a 4% cost increase for the overall project.
While cost isn’t the biggest concern, we are monitoring supply chain availability for key components like transformers or meter sockets, which has been constrained due to the massive increase in demand in recent years. Tariffs can create short-term “hoarding” problems where larger companies buy up a lot of an item in advance of implementation, which can limit availability to others in the marketplace.
Areas Unlikely to be Impacted by a Trump Presidency
Greenhouse Gas Reduction Fund (GGRF) Grants & Loans: A massive portion of the funding to support solar for affordable housing and EJ communities is being delivered through grant funding that has already been committed to state governments and nonprofit coalitions. In anticipation of a potential Republican sweep, the EPA rushed to award $20 billion in funding through the NCIF and CCIA programs (focused on loans and market transformation) and $7 billion through the Solar for All program (focused on grants). Funding recipients have reason to believe this funding is secure and are setting about creating new grant and loan products available for equity-oriented clean energy projects, which we expect to launch in 2025 and run through 2029.
State Cash Incentives - MA SMART 3 Program: The SMART successor program (aka SMART 3) is the latest program from MA’s Department of Energy Resources (DOER) that will offer 10-20 years of monthly cash payments to solar system owners based on system size and will include equity and siting oriented “adders” that many of our clients will benefit from. This program promises to significantly increase the economic value of solar projects in MA starting in mid-2025 and has no risk associated with the Trump administration.
State and Local Solar Requirements - Whether it is the new MA Stretch Code, the Passive House (PHIUS) effective requirements for new affordable housing, the new emissions reductions standards in Boston or Cambridge for all commercial buildings, or the solar specific ordinances like we have in Watertown, we are seeing continued local leadership requiring on-site clean energy for both new and existing buildings. We believe we will continue to see continued adoption of these measures and ultimately expect further statewide rollout after sufficient piloting in progressive eastern MA cities and towns.
Electricity Savings: The most obvious benefit of solar is offsetting your electricity costs, which have risen dramatically in Massachusetts since the pandemic, landing it in the top 5 states for electricity costs in the U.S. (source). There are two primary factors that influence electricity costs – both of which we expect to continue to increase:
Energy Supply Costs: these costs vary and in New England are heavily influenced by the cost of Natural Gas, which supplies ⅔ of MA’s electricity generation (source). Coming out of the pandemic, costs have already dropped significantly. It’s possible that a highly pro-drilling Trump administration could unlock much greater domestic energy production, increasing supply. However, this administration is likely to reverse Biden’s course and approve additional liquified natural gas (LNG) export facilities, enabling producers to access more markets, increasing demand. How this will all play out remains to be seen and, as in the past, there will likely continue to be volatility in this market.
Takeaway: the current outlook does not offer clear evidence for anything other than continued volatility with many supply/demand factors influencing New England energy markets.Transmission & Distribution (T&D) Costs: These are the costs paid to the utility for maintaining the poles and wires. When you install solar on-site, you typically can offset most or all of these charges as well, depending on your utility rate class and overlap with demand charges. Utilities make money primarily by investing in new infrastructure and getting a guaranteed rate of return on the capital through these T&D charges (a recent Vox article offers a helpful breakdown). As society electrifies and experiences more extreme weather, utilities are taking on many new responsibilities and costs, which they are passing on to consumers via T&D charges that have been going up much faster than inflation.
Takeaway: we expect continued T&D cost increases at a pace faster than inflation for commercial customers in MA.Net Metering Policy: Net metering policy, allowing solar to get credit for offsetting some or all of the charges listed above, is set at the state level and will not be impacted by a Trump administration.
Resonant’s Solar Strategy Recommendations
Take Action Now for LI Bonus Credits: We are most concerned about the potential loss of the Low-Income Communities Bonus Tax Credit program, which could be eliminated through a budget reconciliation process in 2025 for FY2026 and beyond. As such, if you have a project that’s in a low-income census tract, on tribal lands, is a federally designated affordable multifamily development or plans to share power with low-income residents through community solar, the most important step you can take is starting your solar project by January 2025 and setting a goal to sign a contract by June 2025 so you can apply to lock in your bonus tax credit in Q2.
Key Notes:
once awarded, you have 4 years to build the project.
Even this Q2 timeline is potentially at risk and is not guaranteed
Tariff-Related Cost Increases: Hold a contingency (5-10%) in your solar budget for some possible tariff-related cost increases in the coming years (and likely do the same for many of your other construction line items).
Remember that Solar Is Resilient and Supported by Many Sources: The momentum moving behind solar is strong and the majority of the lifetime value for projects comes from local sources (state, municipal, utility) that Trump and his congressional colleagues will not have influence over.
Additional Resources:
Norton Rose Fulbright - Renewables Under Trump discussion transcript (Sept 2024)
Canary Media - How Trumps Second Administration Could Derail Clean Energy Transition (Nov 6, 2024)
Power Brief & Crux - Election Impact on Transferability Market (Nov 2024)