One of the more contentious aspects of the proposal is the revision of the Foreign Entity of Concern (FEOC) rules, which aim to limit the involvement of organizations from adversarial countries in U.S. renewable energy projects. Introduced in 2021, the FEOC regulations have evolved as part of broader efforts to reduce reliance on foreign suppliers, especially those from geopolitical competitors, and to promote domestic clean energy manufacturing.
The proposal would tighten these restrictions, broadening the scope of FEOC-affiliated entities to include those partially owned or influenced by adversarial governments. This expansion could impact a wide range of U.S. solar industry businesses, from distributors and manufacturers to developers and investment funds, particularly those with links to Chinese entities. These changes would likely reduce available supply chains, complicating sourcing for U.S. solar companies, especially those under Chinese ownership.
The budget reconciliation proposal also includes additional stipulations for tax credit eligibility. Businesses receiving "material assistance" from FEOCs, such as components, designs, or intellectual property, would be disqualified from receiving tax credits. Furthermore, companies applying for these credits might be required to provide more detailed documentation of their supply sources and certify compliance with the FEOC restrictions under penalty of perjury. The bill proposes an expedited enforcement timeline for these new rules, moving faster than the phased approach originally laid out under the 2022 Inflation Reduction Act (IRA).
These proposed changes could sideline clean energy projects already under development, preventing them from qualifying for tax credits if they fail to meet the revised criteria. Industry experts and observers are concerned about the potential long-term impact of these changes, noting that much remains uncertain as the bill continues to be debated in Congress. While the proposal is still in draft form, the final version could be settled by Memorial Day.
Brian Lynch, director of policy at REC Solar, warned that the proposed FEOC provisions represent a significant shift in U.S. solar and energy storage policies. He emphasized the importance for industry players to stay informed and prepared for potential rule changes to minimize disruption.
Meanwhile, solar advocacy groups, including the Solar Energy Industries Association (SEIA), have strongly criticized the proposed cuts to clean energy tax credits. Michael Parr, executive director of The Ultra Low Carbon Alliance, expressed hope that the concerns raised during Congressional deliberations would lead to revisions of the proposal before it becomes law.
