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Investing.com -- Solar and renewable energy stocks rallied sharply Friday after the U.S. Treasury Department and IRS released new guidance on clean energy project construction requirements for tax credit qualification.
First Solar (NASDAQ:FSLR) stock rose 13%, Sunrun (NASDAQ:RUN) jumped 39%, NextEra Energy (NYSE:NEE) gained 5%, Enphase Energy (NASDAQ:ENPH) climbed 12%, and Array Technologies (NASDAQ:ARRY) surged 27% following the release of Notice 2025-42, which clarifies construction requirements for projects seeking to qualify for clean energy tax credits.
The new guidance eliminates the previously available "safe harbor" option that allowed developers to qualify for tax credits by investing at least 5% of project costs while delaying physical construction. Under the updated rules, most wind and solar facilities must now meet the "physical work test" to qualify for credits before they expire.
However, as reported by Bloomberg Law, small solar facilities with maximum net output of 1.5 megawatts or less can still use the 5% safe harbor provision.
The Treasury’s action follows President Trump’s order to revise construction rules to prevent "artificial acceleration or manipulation of eligibility" for these credits. The directive came after negotiations with House conservatives who supported the GOP’s tax-and-spending legislation.
The timing of this guidance is critical for renewable energy developers, as wind and solar projects must either begin construction within a year or be placed in service by the end of 2027 to qualify for clean electricity investment and production credits before they expire.