In January, President Trump issued an Executive Order titled “Unleashing American Energy,” which paused funding for the Inflation Reduction Act (IRA), raising concerns about the future of the solar industry. The IRA, enacted in 2022, provides funding for climate-related initiatives, including the Investment Tax Credit (ITC), which is a program that offers homeowners and businesses 30% off the total installed cost of a solar system in the form of a federal tax credit.
While the future of the ITC under the Trump administration remains uncertain, we’ll break down what we do know about the Executive Order and its potential impact on solar energy in the U.S.
Can Trump legally defund the ITC?
Under the Impoundment Control Act, a president cannot refuse to allocate funds to legislation that has already been approved by congress. However, a president can ask for funding to be rescinded by congress or paused, as he did. The process of rescinding funds would take time to complete if it were to happen so this would not be an immediate change. It is also important to note that a lot of congressional Republicans are in support of the ITC, so it is unlikely they would agree to overturn it.
If you’ve already signed an agreement with the government to receive funding as part of the IRA, you will still receive your funds regardless of any changes to the law.
What happens in 90 days?
Federal agencies have 90 days to review financial assistance programs and recommend changes based on the new Executive Orders. However, any significant policy changes would require additional time and congressional approval.
How likely is it that solar incentives will be changed under the new order?
While it is still possible the ITC goes away for all clean energy projects including solar, there was no mention of solar in the “Unleashing American Energy” order. The order specifically calls for changes to be made to EV and wind energy incentives. It is most likely that some clean energy projects will lose funding, but not all given the strong bipartisan support for the ITC.
Additionally, there are a lot of solar manufacturing job opportunities in the US right now. According to the Solar Energy Industries Association, $36 billion have been invested in American solar manufactures in the last two years which will lead to over 44,000 manufacturing jobs. With the opportunity to strengthen our nation’s employment rate, it’s unlikely the administration would want to disrupt the growing solar market.
What would be the impacts on the solar landscape in the US if the ITC was defunded?
If the Trump administration rescinds the funding for the ITC, it could have a detrimental impact on the green energy sector. The ITC makes it more affordable for homeowners and business owners to invest in clean energy technologies like solar, and the market may see a slowdown without this incentive. The lower demand could impact US based solar manufacturing companies’ bottom line, leading to layoffs and potentially higher prices for solar. However, the demand for solar is likely to remain buoyed by its strong environmental, long-term cost-saving, and energy independence benefits.
What can you do to prepare for the potential changes?
There is no certainty to if or when changes will occur, but given the lengthy process required to reallocate government funds, it is unlikely the ITC will be affected any time soon. The best way to prepare for potential changes is to get started on your solar energy project as soon as possible to secure your eligibility for the tax credit while it still exists.
To get started on your solar energy project now and ensure you can take advantage of the ITC, reach out to your local solar team at Green Mountain Solar today!
