Congress just passed a sweeping budget reconciliation bill that overhauls the energy tax credit system — and it’s being touted by some as a "Big Beautiful Deal" for American clean energy. But under the surface, the bill introduces new risks and increases costs for every single American.
The cost of living is critical issue for many Americans, but what this bill promises is just the opposite of what many people want: As written, this bill increases electricity costs and hinders fast deployment of electricity — which is absolutely necessary to meet rising demand.
There are a few provisions in the bill that may seem like wins for clean energy, but they come with significant limitations:
According to the enacted legislation, projects that begin construction before December 31, 2025, may still qualify for the full 30% federal Investment Tax Credit (ITC) under Section 48E [¹]. However, those projects must be placed in service within four years — a tight timeline, especially for larger utility-scale projects that face permitting and interconnection delays.
For projects starting construction in 2026 or later, the credit value remains at 30% until December 31, 2027, then disappears— a steep departure from the long-term certainty offered under the Inflation Reduction Act of 2022 (IRA) [²].
Energy storage systems (e.g., batteries) are exempt from the accelerated “placed in service” deadline and continue to qualify under the original IRA timeline: 30% through 2032, with a phase-out starting in 2033 [³]. That said, they still face complicated, ill-defined foreign entity restrictions and increasingly strict domestic content thresholds (see below).
The bill corrects a drafting error in the IRA and maintains the domestic content bonus credit under 48E and 45Y — a 10% boost for projects using U.S.-made components [⁴]. However, the required percentage of domestic content rises significantly over time, from 45% in 2025 to 60% by 2030 for solar projects [⁵].
Manufacturers, especially those producing critical products such as inverters, transformers, and wafers, may struggle to meet these content thresholds due to limited U.S. supply capacity. That puts the bonus out of reach for many developers unless domestic production scales quickly.
The 45X tax credits for manufacturing solar modules, battery components, and inverters in the U.S. are still in place. But credits for producing critical minerals — like lithium, nickel, and cobalt — begin phasing out in 2031 and vanish by 2034 [⁶]. This undermines long-term investment in domestic battery supply chains, just as global demand is set to soar.
While some short-term benefits remain, the bill introduces several major challenges for solar, storage, and clean energy manufacturing in the U.S.
Any solar project that is not placed in service by the end of 2027 will receive no tax credits. Many projects that cannot meet this accelerated timeline will be cancelled, leaving the US energy grid critically short of resources to meet significant increases in energy demand.
Reference: Congressional Research Service – Renewable Energy Tax Credits
The bill introduces strict prohibitions on receiving “material assistance” from “Prohibited Foreign Entities” (PFEs) — including many Chinese-owned or -influenced companies [⁷]. Projects that accept components, financing, or technology assistance from PFEs could be denied tax credits or face clawbacks of already-awarded credits.
These rules are meant to promote U.S. energy independence. But the definitions of PFEs and “effective control” are broad and subject to ongoing IRS interpretation, creating legal and financial uncertainty [⁸].
To qualify for tax credits, developers and manufacturers must now certify — under penalty of perjury — that their materials meet rising thresholds of non-PFE content. For example, a solar facility in 2027 must use at least 50% non-PFE components by cost [⁹]. Many developers will struggle to verify and document this up the supply chain.
This bill reshapes the energy transition in the U.S. — and introduces real risk for those counting on solar to lower costs, create jobs, provide local tax revenues, and clean up the grid.
Jobs at Risk: Uncertainty around credits and compliance could stall project development, especially in rural areas where solar jobs have been growing fastest.
Costs Could Rise: If fewer projects move forward, there will be less electricity on the grid — driving up costs for consumers.
Why are my electricity bills so high? »
Domestic Supply Chain May Fall Short: The bill sets aggressive targets for domestic manufacturing — but fails to provide adequate time, incentives, or market certainty to build up those industries before penalties kick in.
Community solar — a model that allows renters, low-income households, and those without rooftop access to subscribe to a shared solar farm — has been one of the fastest-growing segments of the clean energy market. These projects are local, often small-scale, and typically serve hundreds of families in a given area.
The new reconciliation bill poses serious challenges for this sector:
Community solar projects that begin construction before December 31, 2025, are likely safe — if they can be placed in service within four years. This includes projects already under construction or that are finalizing financing, land agreements, or interconnection.
But delays — especially in states like Minnesota, New York, and Illinois, where utility approvals can take 18–36 months — may jeopardize their eligibility if they aren’t completed by the end of 2029. Developers now face an urgent need to accelerate timelines or risk losing critical federal tax support [10].
Community solar is often driven by mission-focused or regional developers — not national corporations. These smaller firms may lack the resources to verify domestic content percentages or navigate the complex foreign entity restrictions in the new bill [11].
This creates a disproportionate burden on smaller operators, even though their projects directly benefit the communities most often excluded from clean energy access.
The Biden Administration’s Justice40 Initiative called for at least 40% of the benefits of clean energy investments to go to disadvantaged communities [12]. Community solar has been a key mechanism to deliver on that promise. This bill — by tightening tax credit access and complicating compliance — could slow new community solar development, especially in low-income areas.
Projects that are already underway may be able to move forward — but timelines are tight. The barriers for new community solar projects are higher, and the smaller developers who typically lead them are most at risk of being pushed out of the market.
If you care about clean energy, now is the time to act. While this federal bill is officially law, there have been many attacks at the state level on clean energy initiatives.
One recent example was an attempted dismantling of community solar in Minnesota. Senate Bill 2855 tried to terminate the State’s successful community solar program by 2028, but the language was removed from the final version. Crucially, droves of local Minnesotans showed up to testify at hearings, protest, and march in support of the program, helping stop the repeal. Contact Your Local Representatives
Ask them to:
If you’re a project developer, manufacturer, or worker impacted by this bill, your story matters. Call your representative, write a letter, or connect with a trade organization like SEIA to amplify your voice. Or even better yet, let us know your story and we'll share it.
This legislation is complex, but it will shape the future of U.S. energy. Take the time to understand it — and share what you learn with your community.
1. U.S. Code Section 48E – Clean Electricity Investment Credit
2. Inflation Reduction Act Summary – Congressional Research Service
3. DOE – Energy Storage Tax Credit Guidance
4. IRS Notice 2023-38 – Domestic Content Bonus Credit
5. [Senate Finance Committee Draft – Energy Provisions, June 2025 (Unofficial Summary)]
6. Section 45X – Advanced Manufacturing Production Credit Summary
7. Foreign Entity of Concern (FEOC) Definitions – U.S. Department of Energy
8. IRS Notice 2018-59 – Beginning of Construction Guidance
9. [Reconciliation Bill Text (Senate, July 2025)] – Available via congressional archives or upon request.
10. Coalition for Community Solar Access – Federal Policy
11. Department of Energy – Community Solar Basics
12. Justice40 Initiative Overview