The adoption of the inflation reduction law was the starting gun for the race to build up the domestic supply chain for the solar and storage industry. The advanced production production -credit (45x) offers incentives to American companies that make solar panels, inverters, energy storage systems, tracking components and more, and it causes a revival of production at home. Not only were more companies encouraged to make the product in their own country, but they could sell those credits for in advance cash to invest in their activities, something that many companies have benefited from.
Production on the Solar Panel -Assemblage site of Boviet Solar’s North Carolina. Credit: SPW
The One Big Beautiful Bill Act (HR1) changes many incentives that are available for the use of clean energy, but what about production? The 45X credits for solar and storage products are still the same as in the IRA, but credits that are available for some critical minerals and wind turbine components have been updated. The full credit amount, based on various calculations and tables that are not fully discussed here, is available for domestic solar and storage manufacturers until 2029. The credit amount drops to 75% for eligible components that will be sold in 2030; 50% in 2031; 25% in 2032; And the credit drops to 0% and is terminated after 2032. Transferability is still permitted under HR1.
The biggest update of the 45X credit will meet new Foreign entity of concern (FEOC) Rules that are still clarified by the Department of the Treasury. There are several “involved entity” lists that are available, but for the purpose of the solar and storage industry, this largely means China. The use of too many Chinese components in an American product can prevent the company from receiving 45X credits.
Solar Power World spoke against Kristina MoorePartner at Womble Bond Dickinson, for more information about upcoming changes in the landscape of solar and storage in the United States. This interview was edited for clarity.
SPW: Has something changed with 45x in HR1 that influences solar and storage components?
Moore: Foreign entity of concern (FEOC) was an important change. With FEOC you have the taxpayer and then you have the component. There are different limitations, depending on which one you are. The restrictions of the taxpayer are the specified restrictions of foreign entities based on the country, but it also becomes in the ownership structure of the company. If you are 51% Chinese ownership and you are not a double citizen of the United States, it will bring you to that specified bucket of the foreign entity. If you are, you will be cut off from 2026 by receiving the 45x tax credit.
Subsequently, this is for material assistance based on a few variables and it changes over time. For solar energy you cannot come more than 50% of your components parts from a FEOC in 2026, and they rattles. It goes from 50% to 85% after 2029. Battery components start at 60% in 2026 before it rises to 85% after 2029. It is complicated. What it comes down to is the possibility to have faith in knowing your supply chain and knowing your suppliers.
Do you think that the FEOC rules make it more difficult for products to be considered American? For example, if a solar panel uses a waffle with even a small Chinese component, does it deny the entire product?
I don’t think it’s that extreme. The home language was that scenario, but the Senate moved away. The reason they went to this comparison was to give American manufacturers extra flexibility. I don’t think there is an American manufacturer who doesn’t have something in their supply chain from China. Those were the conversations on Capitol Hill – FEOC is great to place in the bill, but we have to do it that we can actually meet, because there will be a widget that comes from China, and that applies to everyone.
You can imagine that the 45x tax credit can easily dry up. If it is impossible to meet the thresholds set by the government, then that would benefit the Chinese manufacturers. They already have a price advantage. This can therefore be counterproductive, depending on the implementation.
Has HR1 confirmed that manufacturers can ‘stack’ stacks? For example, if a solar panel company De Wafels and Cellen makes in the same facility, can that company get credits for both products?
Creditstacking is generally permitted as the primary qualifying component and the secondary component that are produced in the same facility, and if at least 65% of the direct costs of the secondary component come from primary components in the US. You can still stack, but there are extra qualifications.
With solar projects that lose the ITC earlier and the domestic content bonus credit that goes with it, do you see future solar projects less encouraged to use domestic product?
Treasury has the possibility to issue regulations in a workable way to reduce that scenario. There is a price point, but there are other reasons that you would buy American – perhaps national security. There are concerns about inverters on utility scale on utility scale that come from China with inappropriate equipment. If the price is close, a buyer might go with an American company.
A Chinese company currently has such a competitive advantage. They are only going to win on prize. But if 45x is still there, and as long as FEOC can be observed, American companies will be able to benefit and win on the basis of the prize, regardless of the domestic content cadder.
