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By disqualifying projects or companies that dont meet the new criteria, the House Ways and Means Committees budget proposal rules could prevent clean energy initiatives already underway from receiving credits. By Ben Santarris . Congresss proposal to strengthen and accelerate the criteria for granting tax credits to companies linked to domestic adversaries could reduce supply options for much of the U.S. solar industry. The accelerated phase-out of key renewable energy tax credits included in the U.S. House Ways and Means Committees latest budget is clear and evident enough to have sparked an immediate outcry from the solar industry. But obscure proposals to revise rules governing how organizations affiliated with U.S. adversaries are treated for the purposes of assessing renewable energy tax credits could also have consequences, industry sources say. Observers of U.S. solar industry policy developments are struggling to decipher the implications of proposed rules to expand and expedite the definition and treatment of foreign interest entity organizations (FEOCs) for purposes of federal tax incentives. The debate over the proposals is part of an ongoing evolution in the application of federal policies to trade with organizations affiliated with domestic adversaries—primarily China, Iran, North Korea, and Russia—since the rules were first enacted in 2021. In the case of the ongoing budget negotiations, the goal of strengthening FEOC regulations is to accelerate domestic clean energy manufacturing and offshoring processes, promoting domestic suppliers and reducing dependence on geopolitical competitors. Given the widespread presence of Chinese ties in the U.S. solar industry, the rules could affect all types of companies—distributors, importers, investment funds, developers, manufacturers—as well as Chinese-owned U.S. solar companies. The Commissions budget reconciliation proposal would expand the restrictions to also include those FEOCs that adversary governments partially own or influence. Thus, the rules would likely reduce the supply chains available to domestic producers. To calculate tax credits, the bill would also allow: Disqualify companies from receiving tax credits if they receive material assistance from FEOCs, including components, designs, or intellectual property. Require companies applying for tax credits to provide more definitive details of their sources of supply and certify compliance with FEOC restrictions under penalty of perjury. Accelerate implementation timelines, rather than phasing in FEOC requirements under the Inflation Relief Act (IRA) of 2022. By disqualifying projects or companies that dont meet the new criteria, the proposed rules could prevent clean energy initiatives already underway from receiving credits. Industry policy observers say as much is known as is unknown about how the revisions would alter the course of the industry. The committees bill is actually a draft that will be debated and amended in the larger legislative bodies of Congress, whose goal is to produce a final bill around Memorial Day, May 26. To shape the final details of the policies, as well as companies tactical preparations for any rule changes, the industry needs to get up to speed quickly on the proposals, several said. “The FEOC restrictions being added to solar policy represent a significant evolutionary shift for the U.S. solar and energy storage sectors,” Brian Lynch, director of policy at REC Solar, told pv magazine . “Understanding and preparing for these new rules, while not yet legal, will best position the ability of both upstream and downstream participants to deploy products and projects without being hindered by likely rule changes.” The FEOC provisions represent only a portion of the committees budget proposals that could curb the solar industrys boom. Prominent among them are provisions to cut and reduce the clean energy tax credits contained in the IRA. These would begin to phase out in 2029. Solar energy advocacy groups, such as the Solar Energy Industries Association (SEIA), sharply criticized the proposed changes to key industry incentives. Michael Parr, executive director of The Ultra Low Carbon Alliance, told pv magazine that he hopes the tacit acknowledgment that the proposed changes go too far will lead to improvements in the House and Senate deliberations. Carr, who leads the coalition to promote market adoption of ultra-low-carbon solar energy, said: There are several bites at the apple. |
