In 2025, sweeping changes to clean energy policy are dramatically reshaping the construction landscape. From tax credit revisions to municipal electrification mandates and EPA oversight, these developments bring both disruption and opportunity.
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What Are the Clean Energy Regulatory Changes in 2025?
1. Tighter “Beginning of Construction” Rules for Wind and Solar
A pivotal shift came with the release of IRS Notice 202542, effective for projects beginning construction on or after September 2, 2025. Developers can no longer rely on the 5% safe harbor to qualify for federal tax credits after spending only 5% of project costs. After September 2nd, projects must meet a higher bar by demonstrating ongoing physical construction with visible, continuous work. Only small distributed solar projects under 1.5 MW AC will continue to be eligible for federal tax credits under the 5% safe harbor rule.
How Do the New Completion Windows Work?
Additionally, projects that begin construction before July 5, 2026, are eligible for a four-year completion window, meaning they must be placed in service by July 4, 2030, to still qualify for the applicable tax credits. If construction starts after July 4, 2026, the IRS shortens the completion window, requiring that projects be entirely placed in service by December 31, 2027, regardless of when construction started. This creates a “grace period” for larger, more complex projects. If they begin physical construction before the July 5, 2026, deadline, they benefit from more time to finish without losing their eligibility for federal tax credits. For current credit rules and examples that affect scheduling, see 2025 IRS Updates for Solar Tax Credits.
Implication for Construction: Firms must expedite onsite work. Construction schedules will need to be precise, well-documented, and continuous to secure financing tied to tax credits.
2. Phaseout of IRA-Era Tax Credits
The One Big Beautiful Bill Act (OBBBA), signed in July 2025, repeals many clean-energy incentives from the Inflation Reduction Act. For wind and solar, it creates a hard deadline: projects must start by mid-2026 or go online by December 2027 to claim credits. It also phases out EV credit programs and certain energy-efficient home improvement incentives.
Estimates suggest this will cut new clean-energy buildout by over half between 2025 and 2035, while increasing industrial energy spending by $7–11 billion by 2035. For homeowners and businesses alike, electricity bills are projected to rise, with residential properties expected to increase by up to $130 per household.
Implication for Construction: Developers and contractors must prioritize early-stage permitting and construction planning to meet the compressed timelines. Construction firms might face halted funding and project cancellation if deadlines slip.
3. Interior Department’s Elevated Review
A new directive mandates that all wind and solar projects on federal lands or waters receive personal approval from the Secretary of the Interior for each lease, permit, and assessment. This elevated review increases bureaucratic layers and can stall start dates, which is especially critical given the newly compressed tax-credit window.
Implication for Construction: Projects on federal lands must now account for extended timelines for approvals. Construction planning must integrate these delays, potentially adjusting sequencing and cash flows accordingly.
4. New York’s All-Electric Building Act
At the state level, New York is implementing the All-Electric Buildings Act, which mandates that all new single-family and low-rise buildings built from January 1, 2026, must eliminate fossil-fuel systems in favor of electric alternatives. The requirement broadens to more building types by 2029.
Implication for Construction: Contractors operating in New York face rising material costs and labor demand for electric HVAC systems, heat pumps, and associated electrical infrastructure. Project budgets and timelines must reflect the shift in system design, training, and supply chain needs.
What Bills Could Affect Projects Next?
While not yet enacted, two bills have the potential for future impacts:
- The Energy Permitting Reform Act of 2024 aims to streamline permitting for power and transmission projects, including offshore wind, shortening judicial reviews to 150 days and facilitating interagency coordination. The EPRA is past the committee stage but awaits floor action in the Senate.
- The Foreign Pollution Fee Act of 2025 proposes carbon–intensity–based tariffs on imported materials like cement, steel, and solar components. The FPFA is in the earliest stage—introduced and referred to the Senate Finance Committee, with no movement beyond that.
Implication for Construction: If passed, the former could benefit clean energy project timelines. The latter may raise costs for imported materials, prompting contractors to source domestically or invest in lower-carbon supply chains.
How Do Surety Bonds Help Contractors Navigate 2025’s Rule Changes?
As eligibility tightens, bonds keep projects financeable. Follow these steps below:
- Typical bonds: Bid, Performance, Payment, and, where required, Maintenance/Warranty.
- Before NTP: Prove “begin construction” with dated permits, NTP, mobilization records, physical-work photos, and continuous-work logs.
- Schedule risk: Build long-lead equipment (e.g., transformers, switchgear) and required federal/state approvals into the baseline and risk register to protect bond exposure.
- Contract tips: Add change-in-law and incentive-availability clauses and define acceptance based on commissioning tests and measurable performance, not policy milestones.
Conclusion
The regulatory landscape of 2025 raises the stakes for the construction industry. Compressed timelines, stricter qualification criteria, and elevated bureaucratic scrutiny significantly reshape project planning. At the state and local level, as seen in New York, mandates like all-electric buildings are transforming building systems and contracts.
Construction firms must be strategically agile: accelerating project starts, enhancing documentation rigor, diversifying supply chains, and building flexibility for evolving approvals requirements. However, successful firms may find new opportunities in specialization, especially in electrification and clean energy infrastructure. In essence, 2025’s policy shifts create pressure but also a chance for industry leaders to adapt and drive construction’s clean energy transition.
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Frequently Asked Questions
What counts as “beginning construction” now that the 5% safe harbor is limited?
Use dated permits, NTP, mobilization logs and photos, foundation and structural work, and continuous-work records. Keep documentation consistent from day one.
How do the new completion windows affect scheduling?
Starts by July 5, 2026, generally have up to four years; starts after July 4, 2026, must be in service by December 31, 2027. Build a float for approvals and long-lead equipment.
What contract language helps manage policy/timing risk?
Add change-in-law/incentive-availability clauses, schedule/price relief tied to approvals, and acceptance based on testable commissioning (not policy outcomes).
If federal incentives shift mid-project, what’s our best mitigation?
Document impacts, notify promptly, seek change orders under change-in-law provisions, and re-baseline the schedule with owner/surety alignment.
