USA – IOWA Trends and Developments Contributed by: Shannon M.H. Hasse, Dentons Davis Brown PC
thermore, for purposes of determining when a project has “begun construction”, the OBBBA shifted from a cost-based “Five Percent Safe Harbor” rule, to a strict “Physical Work Test” for most wind and solar projects which evaluates the significant nature of physical work performed, rather than simply the cost expended. This means that developers must satisfy the Physical Work Test by 4 July 2026 in order to establish that construc - tion has begun for purposes of determining tax credit eligibility, creating immense timeline pressure. Executive branch actions In addition to legislative obstacles, recent executive actions by the United States President have signalled a clear shift in federal energy policy priorities. The cur - rent administration has issued executive orders pro - moting fossil fuel development, directing agencies to expedite oil and gas permitting, reopening previously closed areas for oil and gas drilling, and ordering reviews of regulations affecting conventional (ie, non- renewable) energy production. While these execu - tive actions do not directly prohibit renewable energy development, they reflect a policy environment that is significantly less supportive of the industry. Federal agencies have adjusted their priorities in response, meaning that federal permitting timelines for renewable energy projects may lengthen as agen - cies shift resources towards fossil fuels and projects on federal lands face uncertainty. Renewable ener - gy developers and other industry participants must account for these realities when planning project time - lines and assessing overall project risk. Practical implications The cumulative effect of these federal policy shifts is significant. With limitations placed on tax incentives, financial viability of projects is threatened, project financing has become more difficult as lenders and investors grapple with underwriting fluid incentives, and development timelines have rapidly compressed as developers race to qualify for existing incentives. In response to shifting federal energy policy priorities, contingency planning for multiple incentive scenarios has become increasingly important for renewable energy stakeholders.
Industry participants should closely monitor legislative developments and consult with experienced advisers to assess incentive eligibility and optimise project tim - ing. In the short term, projects that can demonstrate they have “begun construction” under existing federal tax incentive guidance are better positioned to weath - er policy changes than those still in early negotiation and development. Tariffs and Supply Chain Disruptions Even as policy uncertainty clouds the incentive land - scape, renewable energy developers face another sig - nificant challenge: rising project costs driven by tariffs and supply chain constraints. At present, the United States renewable energy indus - try relies heavily on imports for various upstream pro - ject components. As a result, the industry is particu - larly sensitive to tariffs and supply chain disruptions that can delay or significantly affect project econom - ics. In April 2025, the US administration implemented sweeping tariffs on US imports, including a 50% tariff on steel, which is the primary material used in wind turbine construction. While the administration’s tariffs were declared unconstitutional by the United States Supreme Court in February 2026, the Supreme Court did not address potential refunds for already-collect - ed tariffs and certain sector-specific trade measures remained unchanged, thus affording little relief for the renewable energy industry. In addition, ongoing supply chain delays and new restrictions on certain renewable imports from “pro - hibited foreign entities”, such as China, have further constrained the supply chain, leading to longer equip - ment lead times and higher stakes sourcing diligence. This often forces developers to commit to equipment purchases earlier in the development process, tying up capital and increasing risk if a project encounters permitting delays or other obstacles. The cumulative impact of these tariffs and supply chain disruptions on wind and solar projects adds meaningful cost burdens that affect project feasi - bility and competitiveness. These costs compound across a project, potentially adding millions of dollars to development budgets and raising the stakes for
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