​Introduction

Where the Inflation Reduction Act (IRA) used federal policy to support the development of Wind, Solar, and Battery Energy Storage Systems (BESS) in the United States, the One Big Beautiful Bill for America (OBBBA) reduces its effect - it accelerates tax credit sunsets and tightens construction and supply-chain rules.

In the short term, successful developers will need to navigate these new challenges: stricter beginning of construction definitions and tougher procurement rules. However, in the medium and long term, proving that these technologies can succeed without government support will only strengthen the investment case. Furthermore, capital expenditure costs continue to decline, particularly for solar and storage. As a result, it is more feasible that projects utilizing these technologies can confidently be deemed viable, even without federal tax credits.

This article examines the implications of the changes imposed by the OBBBA. This includes all of the risks and opportunities, highlighting where timelines are the tightest when it comes to securing tax credits, how procurement choices impact project economics, and what high-performing peers are already doing.

​Executive Summary

• Solar and wind lose up to 8 years of tax credit runway. Credits now phase out fully after 2027, compared with 2035 under the IRA.
• BESS timelines remain unchanged. Storage projects can still access full ITC until 2033, phasing down in 2034–35.
• New construction rules eliminate the 5% Capital Deployment “Safe Harbor.” Previously, developers could qualify for credits by spending at least 5% of total project CapEx. Under the new rules, developers must show real, physical progress (such as on-site excavation or racking installation) to qualify.
• Foreign Entity of Concern (FEOC) restrictions tighten procurement. To qualify for the tax credits, developers must now ensure a minimum share of project costs comes from non‑Prohibited Foreign Entities (PFEs). These are suppliers linked to China, Russia, Iran, or North Korea. BESS projects must source at least 55% non‑PFE content from 2026, rising to 75% by 2030. Solar and wind projects face slightly lower thresholds but lose eligibility entirely after 2027.
• Successful developers in the short term will act swiftly to secure tax credits prior to the onset of credit sunsets or FEOC rules coming into effect. Developers without the ability to accelerate project timelines will need to carefully consider whether the value of securing tax credits offsets the cost premium of foreign sourcing before determining which supplier to utilize.
• Switching suppliers to retain the ITC makes sense when cost premiums are manageable. At 30% ITC, the total CapEx premium of using a non‑PFE supplier can be up to 42.9% higher before the value of the credit is exceeded by the additional cost incurred . With 50% ITC access, the breakeven threshold rises to 100%. In other words, switching to non‑PFE suppliers is more economical if the impact on CapEx is below these thresholds.

​Timelines: Battery tax credits remain unchanged, while Wind and Solar are brought forward to 2027

The most immediate impact of the OBBBA is on the schedule for the phasing out of federal tax credits for Wind and Solar projects.

​Wind and Solar projects will be unable to qualify for federal tax credits after December 2027. This effectively shortens the window for new-build projects by 6–8 years compared to the IRA. Developers with pipelines past this horizon will need to rethink project viability or secure alternative revenue streams.

BESS projects, by contrast, retain the IRA’s original schedule. They can continue to qualify for the full ITC until 2033, with the potential value of the credit falling to 75% in 2034 and 50% in 2035.

Beginning of Construction: New Treasury Guidance adds new requirements for Wind and Solar

On top of shorter timelines, solar and wind projects face new Beginning of Construction (BOC) requirements.

To be eligible for federal tax credits, a developer has to demonstrate that they have completed initial construction of their project beyond a threshold defined by the Federal Government.

The latest Treasury Guidance following the OBBBA tightens the definition of BOC.

What does this mean for developers? Solar and wind developers now face a race against the clock. Pipelines that once relied on early-stage spending to lock in tax credits must instead push toward visible construction progress.

• ​Before September 2nd 2025, the previous IRA requirements apply. This means that developers can demonstrate BOC through the 5% Capital Deployment Safe Harbor or the Physical Work Test requirements defined under the IRA. Essentially, the developer would need to have deployed 5% of allocated capital, or completed at least 5% of the physical site construction. Developers can also benefit from the four-year Continuity Safe Harbor that allows developers 4 calendar years to bring the project to service. For example, if construction started in May of 2025, the project would need to be in service by the end of 2029.
• After September 2nd 2025, the 5% Safe Harbor rule is no longer valid. Only clear, on-site physical progress of significant nature qualifies (e.g., foundation excavation, rack installation). Preliminary activities like planning, permitting, or generic procurement no longer count. Offsite work can qualify if it includes manufacturing or mounting of tailored-made equipment for the project. Projects continue benefiting from the four-year Continuity Safe Harbor.
• After July 5th 2026, projects must be in service by the end of 2027, removing the four-year buffer entirely.

FEOC Rules: Batteries must reach 75% non-PFE sourcing by 2030, while Wind and Solar 60%

The OBBBA also layers on new restrictions through the Foreign Entity of Concern (FEOC) rules, targeting suppliers linked to China, Russia, Iran, and North Korea. Entities from these countries are designated as Prohibited Foreign Entities(PFEs).

• ​BESS projects must source 55% of costs from non-PFE suppliers starting in 2026 to qualify for tax credits. This threshold rises by 5% each year until it reaches 75% in 2030.
• Solar and wind projects have slightly lower requirements starting at 40%, but since their credits expire in 2027, the long-term impact is muted.

Clear Treasury Guidance on calculation methods is still pending, but the commercial direction is obvious: reliance on Chinese supply chains risks disqualification from credits. Developers must act early to diversify procurement.

If you have any questions regarding the content of this article or the impact of the OBBBA on your project, reach out to the author at alex.dediego@modoenergy.com. Subscribers to Modo Energy’s ERCOT Research can read the full report.

​Balancing Cost and Tax Credits: When Switching Suppliers Pays Off

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Developers now face a critical economic trade-off: Should they absorb higher costs from non-PFE suppliers to secure ITC, or stick with cheaper PFE supply and lose the credit?