Well, what is it? This is a central issue for the solar power industry as it approaches the July 4 deadline to begin construction on projects or risk losing lucrative federal tax credits.
Solar power is under particular pressure because it is the largest source of new generation on the U.S. power grid. Still, the phasing out of tax credits as part of the Republican One Big Beautiful Bill Act, passed a year ago, has raised questions about how much growth utilities and rooftop installations can expect.
But many big developers are planning ahead, suggesting the looming deadline may not result in massive disruption.
“Solar PV will continue to dominate new power generation developments,” said John Miller, an analyst at TD Cowen, noting that the technology is cost-competitive with other power sources.
However, several challenges, such as federal permitting regulations, may shape the future of the industry.
As the deadline approaches, we answer five questions about where the solar industry is headed next.
Did the industry meet the July 4 deadline?
In most cases, yes. Michelle Davis, head of global solar at research firm Wood Mackenzie, said the majority of 200 gigawatts worth of utility-scale projects were securely stored by July 4.
This means that growth will stabilize at around 40 gigawatts per year until the end of the decade when the projects are deployed. Although this number is lower than what would have occurred if credits were in place, it could be enough to keep solar PV as the primary technology added to the power grid until 2031.
By then, solar’s share could fall to less than 45% of new additions, the company said, as more battery storage and new gas capacity come online. Projects that are secured before the deadline have four years before going live to earn credits. The same is true for wind power generation.
What happens to projects that miss their deadlines?
The big question is how much new solar power pipeline will be developed over the next five years, which is critical to the industry’s trajectory beyond 2030.
Demand is contributing to the rising costs of securing power purchase agreements. This could help offset the loss of tax credits, but it’s unclear how many projects will be able to close the financing gap due to higher prices. Analysts said there was a limit to further declines in equipment costs and that labor costs were rising.
“There are limits to what you can do to reduce costs,” Davis says.
Solar (and wind) projects that missed the July 4 deadline can also take advantage of tax credits if they are operational by the end of next year. This can be a difficult goal for companies to achieve.
Is the industry pushing for tax credit extensions?
In recent weeks, some renewable energy leaders have said they welcome the elimination of incentives, despite promises from Democrats to seek to extend them if they regain control of one or both chambers of Congress.
“If Democrats step in and start reintroducing tax credits again, I don’t think that would be good for the industry,” Cypress Creek Renewables CEO Kevin Smith said at an event held by the American Renewable Energy Council in May. Manufacturers concerned about imports due to China’s influence are seeking expanded credits.
“Let’s let it lapse and move on,” says David Burton, a tax attorney at Norton Rose Fulbright LLP. “But that’s not a universal position.”
“Tax credits are still beneficial and still productive,” he added.
However, for some small and medium-sized enterprises, the transaction costs and litigation costs involved in obtaining subsidies may end up being wasted after obtaining subsidies.
Tim Pawlenty, CEO of the Solar Energy Industry Association, said the most important thing is the ability to continue to grow as an industry. “Energy demand continues to increase, and now is not the time to ignore policy opportunities to support the construction of new power plants in our country,” he said.
What about rooftop solar power?
It’s on the decline, but it’s not just because of the July 4th deadline. The industry was hit by the phase-out of the tax credit known as 25D for rooftop systems by the end of last year under the One Big Beautiful Bill Act. As a result, the industry faces a “collapse” in 2026 and is not expected to recover to 2023’s record levels over the next decade, research firm BloombergNEF said in a report this month.
The decline comes in the wake of previous constraints on residential solar power, including high interest rates and the reversal of state net metering policies. Wood Mackenzie’s Davis said plug-in “balcony solar”, which has been gaining attention in state legislatures this year, is unlikely to make up for losses in large residential projects.
But it’s not all bad news. This megalaw allowed systems owned by third parties to continue receiving federal credits. This will give a boost to companies like Sunrun, which leases panels. Overall residential solar power generation is expected to begin increasing annually from 2027 until the end of the decade.
Residential solar power is “by no means obsolete,” said Barton, the lawyer.
Are other factors more important than the tax credit?
it depends. Permits and “Foreign Company of Concern” (FEOC) rules can be important for many projects. FEOC rules are intended to prevent the use of material from China and other foreign adversaries.
“There’s a lot of uncertainty,” Barton said, citing an example of how a U.S. company could get into trouble by purchasing equipment from Germany that may have ties to China.
The Treasury Department is expected to issue more detailed rules on what credits are allowed to be received, but it is not clear when they will be published. Barton said some big banks are hesitant to lend to developers unless there is more clarity. Still, most utility projects were in safe hands before the FEOC rule took effect in January, Davis said.
Wood Mackenzie’s analysis on Monday also found that the Trump administration’s lengthy review of wind and solar power threatens more than $121 billion in investments, with solar power likely to be the most affected. The risks are not limited to public lands, as many companies must obtain federal permits for private projects.
Solar “has the largest absolute exposure, with 30% of its pipeline at risk of additional review,” the analysis said.
The pending tariff case could also affect U.S. solar manufacturing, which has grown rapidly over the past five years, and could allow companies to avoid violating FEOC rules. And ultimately, the industry is likely to be most impacted by factors shaping the power sector as a whole, such as power demand from data centers and grid connection backlogs.
“Interconnection remains a big challenge,” Barton said.
