Federal Tax Credit Rollbacks Are Reshaping Illinois’ Clean Energy Landscape
The passage of the One Big Beautiful Bill Act (H.R.1) has significantly shortened the timeline for federal renewable energy tax credits, creating widespread uncertainty for Illinois’ clean energy workforce and businesses.
These rollbacks affect the solar industry in particular, with credits for customer-owned residential solar ending in 2025 and an early phase out of renewable energy investment and production tax credits, beginning in 2026. Tariffs and new restrictions on Foreign Entities of Concern (FEOC) further complicate access to remaining incentives and create supply chain concerns.
Workers, unions, businesses, and communities are already feeling the ripple effects — delayed projects, unstable timelines, and layoffs — but the full picture isn’t clear.
The Climate Jobs Institute is conducting interviews, surveys, and listening sessions to understand how these changes are impacting workers, contractors, and companies across Illinois.
Early Findings
While a full report will be released in October, we have collected some early findings in a policy brief. These early findings show:
- Illinois communities still need and want renewable energy development, especially because electric load and electricity costs are rising.
- As tax credits end, project costs will increase, putting projects at risk, especially for low-income households, small businesses, and disadvantaged communities.
- Increased project costs may lead many businesses to downsize. Small businesses and Equity Eligible Contractors, who play a vital role in expanding access to clean energy and solar jobs, are among the most vulnerable.
- Layoffs are already underway, especially among small residential solar firms and Equity Eligible Contractors (EECs).
- Many companies are no longer accepting new residential projects for 2025 to focus on completing existing projects before credits expire.
- Larger-scale solar developers are racing against permitting and interconnection delays to meet construction deadlines.
- FEOC rules are creating confusion and administrative burdens, especially for smaller firms.
Emerging Risks for Equity Eligible Contractors
EECs are small, often locally owned businesses that help deliver solar to communities most impacted by climate change and pollution. They also provide pathways into clean energy careers for women, people of color, and workers from historically excluded communities.
But they face disproportionate risks:
- Layoffs and downsizing expected in early 2026
- Pressure to diversify into other services like roofing or weatherization
- Barriers to navigating permitting, FEOC rules, and grant applications
- Unequal access to capital and resilience compared to national firms
Policy Recommendations for Illinois
To protect workers and preserve momentum in the solar industry, Illinois can act now:
Streamline and Accelerate Processes
- Standardize permitting statewide
- Simplify CEJA and IPA applications
- Expedite interconnection procedures
- Provide technical support for FEOC compliance
Strengthen Incentives and Financing
- Increase REC values for small and EEC-led projects
- Offer grants, loans, and cash advances for at-risk projects
- Expand access to CEJA equity programs and financing tools
Support Workers and Contractors
- Provide technical assistance to help small firms adapt
- Align CEJA training with real hiring demand
- Focus training on transferable skills
- Invest in pre-apprenticeship programs
- Offer retraining and placement support for laid-off workers
Acknowledgements
Special thanks to the Illinois Department of Commerce and Economic Opportunity, Climate Jobs Illinois, and the Illinois Clean Jobs Coalition for their assistance with hosting the listening sessions.