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 Webinar: “A Brighter Future with Solar for Schools” (Aug. 26 at 3pm ET)

Join Solar United Neighbors and Generation180 for a webinar on the benefits of solar energy to K-12 schools, what recent changes to the federal tax credits could mean for schools, how schools are funding the switch to solar, and what states are providing solar energy grants to schools.

Register here!

Changes Affecting Solar Energy Projects

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

  • 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).

Changes Affecting Energy Storage & Thermal Storage Projects

  • No changes to the energy & thermal storage phase-out schedules: Energy storage and thermal storage projects must be placed into service by January 1, 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).

Schools that commence construction before Dec 31, 2025 and place systems into service before 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 Jan 1, 2025 should be prepared to navigate the new "payments" rule. For more on PFE rules, see our video and accompanying slides.

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

Video Recording

Slides

Share your solar or energy storage project with us to be featured here next!

Salt Lake City School District in Utah receives a $1,222,653 check!

The School District of Baraboo in Wisconsin receives a $153,817 check!

Maize Unified School District 266 in Kansas receives a $104,585 check!

Braham Area Schools in Minnesota receives a $30,571 check!

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.