Watch: Barron’s Senior Energy Writer Laura Sanicola and OPIS Senior Editor of US Solar Colt Shaw discuss what’s ahead for energy this week.

Watch this week’s episode for insights into how shifting U.S. solar policy—including proposed IRA tax credit rollbacks and new foreign supply restrictions—could impact the solar industry’s supply chain, project planning, and competitive landscape.

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider. And I’m back again today with Colt Shaw, senior editor of US Solar at OPIS. Colt, thanks for being with me today.

COLT SHAW: Yeah. Thanks for having me on.

SANICOLA: Solar companies had a wild week last week. They started out the week getting a reprieve from high tariffs on Chinese components and subcomponents where it’s primarily sourced. But then, they also got the first text from the House Republicans on provisions to sunset IRA tax credits that they pretty heavily utilize.

And, some of these credits place pretty onerous restrictions on why they can source the subcomponents. So early in the week, reprieve. Later in the week, not so much. What parts of the supply chain is this going to affect?

SHAW: Yeah. As you mentioned, I think, like, basically, the main thing the industry kinda zeroed in on immediately was this foreign entity of concern or fee restrictions, that the budget bill basically proposes adding to every relevant incentive.

The language would block foreign owned or influenced, taxpayers from qualifying for the credits, but it would also block projects receiving material and, assistance from one of these FIACs, in the form of components or intellectual property.

Some view this as a potential poison pill, you know, that would block any project, using solar modules, batteries, any other component from a Chinese company, which in other words would be the majority of, solar farms in the US.

But much of the discussion this week around FIAC is over the ambiguity of the language.

For just one example, under 45Y, the PTC, the bill says material assistance excludes any assembly part or constituent material not acquired directly from a prohibited foreign entity.

It’s not exactly clear what that means, and it could be open to interpretation or even circumvention down the line. So it’s clear Congress is going to have to kinda iron out some of these wrinkles.

If they do edit the language to reflect the strictest interpretation of that, that language, it could act as either a plus for a few foreign module suppliers that aren’t owned by Chinese entities, but it could also be tailored to act as kind of a de facto domestic content requirement to secure the base tax credits.

And US module suppliers are reliant on imported sales still, so that would undermine that goal. So Right. There’s a lot up in the end at this point. Yep.

SANICOLA: The only real winner here with the strictest interpretation of the language is First Solar, which has a vertically integrated supply chain, which might be why First Solar doesn’t appear to be lobbying on the hill to have the language changed. And, to that end, obviously, these negotiations are ongoing, and the senate’s gotta bring their own version of the bill.

What does the industry expect will happen? Because so far, public markets actually said, hey. This is actually not as bad as we thought a first version of this bill to get the, quote, green new scam was going to be.

SHAW: Yeah. Yeah. I would say reactions and expectations are kinda mixed. I mean, you could look on one end.

It’s SIA, which is Solar Energy Industries Association, largest solar trade group that represents, developers mostly. They said the bill will, quote, effectively dismantle the most successful industrial onshoring effort in US history. But then you look at SEMA, which represents those American solar manufacturers, and they have not released a they’ve not released a statement one way or the other. So I think that kinda speaks volumes as well.

But I think, generally, if you talk to anyone in utility scale or commercial solar, there’s somewhat of a sense of relief.

The FIAC language around material assistance specifically was kind of a curveball, but FIAC language in general was expected in some form or another, especially with 45X, advanced manufacturing tax credit.

So I would say the phase out schedules for the most critical tax credits are not as aggressive as many feared, and the domestic content bonus was left untouched. So I think there’s some sense of this could have gone way worse.

Keith Martin of Norton Rose Fulbright, in webinar with Roth Capital said that the bill would have passed today with the language as is. The industry would have a good amount of time to plan accordingly.

So just for example, for ITC and PTC, the fiat taxpayer language regarding who owns an otherwise eligible project would take effect basically immediately next year, but the material assistance restrictions would not take effect until a year after enactment.

So if they were to pass a bill this summer, which I guess they they have to, projects would have a year from that date, to start construction in order to avoid these kind of, you know, strict guidelines around ownership and material assistance.

SANICOLA: One thing I did notice was that a lot of the, sunset dates and the proposed tax, they were only brought up by one year or so to maybe 2029, in which case, you know, there’s the possibility that a new congress, a new administration would renegotiate, to extend some of these tax credits as they have for the past couple decades.

SHAW: Yeah. It gives them a good amount of breathing room. I think some people were thinking they could try to start the phase out, like, next year. So it definitely buys them at least a little bit of wiggle room, I’d say.

But, yeah, I will say, though, just as a note on how the industry outside the US is viewing this, US solar market is extremely lucrative, and Chinese companies are constantly willing to pack up and move to new countries just to continue selling here. And I spoke to an Indian supplier this morning who’s really hoping the strictest interpretation of that FIAC, rule prevails just because it would give him a leg up over Chinese competitors.

So a lot just depends on exactly how, you know, the language is tailored or if it’s tailored over the next couple weeks and months with the reconciliation process.

But as you mentioned earlier, I think a lot of people expected the kind of first shot across the bow to be the most aggressive, and things would get pared down or maybe simplified a little bit, you know, as the process kinda plays out. So we will just have to wait and see.

SANICOLA: Alright. Thanks for breaking that down for me, Colt, and thanks everyone for joining. We’ll see you next week.