Solar & Storage: A New & Challenging Landscape

Understand how new rules may affect your school project

Schools across the country have embraced solar to reduce costs, but a July 2025 law makes significant changes that make it harder for schools to access tax credits. In many places, solar and storage remain compelling technologies for schools to evaluate despite the changes to tax credits.

See information and resources below to understand these new rules and how to manage projects under this changing environment.

Upcoming Office Hours:

CPCC/L4GG Monthly Direct Pay Office Hours
Thursday, October 9 at 1pm ET
Thursday, November 13 at 1pm ET

Attend Congressional Progressive Caucus Center and L4GG’s monthly office hours to share your clean energy project plans, raise clarifying questions, or talk through project roadblocks or concerns.

Starting in 2025, solar and storage projects are eligible for the Clean Electricity Investment Credit (Sec. 48E). The new rules affect solar and storage projects accessing the Sec. 48E tax credit.

Changes to Tax Credits for Solar Energy, Energy Storage, and Thermal Storage Projects

Changes Affecting Solar Energy Projects

  • Accelerated phase-out schedule: In general, solar projects must be placed into service by Dec 31, 2027 to be eligible for a tax credit.

  • New restrictions: Solar projects are subject to new Prohibited Foreign Entity (PFE) rules.

    • These provisions address not only the sourcing of materials used in the solar project but other transactions to which school districts are a party (e.g. municipal debt issuances, licensing agreements).

  • New guidelines: New Beginning of Construction (BOC) guidelines only apply to solar projects greater than 1.5 megawatts (MW) and therefore, are unlikely to affect schools. Please consult a qualified tax professional to confirm whether these new guidelines apply to your project.

  • No changes to the energy & thermal storage phase-out schedules: Energy storage and thermal storage projects must begin construction by Dec 31, 2035 to be eligible for a tax credit.

    • 100% of credit amount is available through CY2033

    • 75% of credit amount is available in CY2034

    • 50% of credit amount is available in CY2035

    • 0% of credit amount is available in CY2036

  • New restrictions: Storage projects are subject to new Prohibited Foreign Entity (PFE) rules.

    • These provisions address not only the sourcing of materials used in the storage project but other transactions to which school districts are a party (e.g. municipal debt issuances, licensing agreements).

Changes Affecting Energy Storage & Thermal Storage Projects

Schools that commence construction by Dec 31, 2025 and place systems into service by June 30, 2026 (assuming a July 1 - June 30 fiscal year) can receive full credit and avoid many of the new rules.

However, any solar or storage projects commencing after Dec 31, 2024 should be prepared to navigate the new "payments" rule.

For more on PFE rules, watch our video and accompanying slides.

Video: Budget Reconciliation and Energy Tax Credits (July 2025)

Video Recording

Slides

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Questions? Reach out to us at: info@undauntedk12.org.

The information on this page represents our best understanding of certain tax provisions for general informational purposes only and is not itself tax guidance. Please consult qualified tax professionals about your specific circumstances and refer to guidance issued by the IRS for detailed information on the rules associated with energy tax credits, elective pay, and other relevant tax provisions.