How the Senate Finance Committee Draft Version of the Budget Bill Could Impact Commercial Solar Projects

How the 2025 Senate Finance Committee Draft Version of the Budget Bill Could Impact Commercial Solar Projects

The Senate Finance Committee released draft legislation on June 16, 2025 that, if passed, could significantly reshape the landscape for clean energy incentives. While this bill isn’t law yet, it gives a strong indication of where federal policy may be headed — and EPCs should begin preparing now.

For additional insight, Segue Sustainable Infrastructure published an industry analysis on the SFC draft outlining the projected impact on project viability and investment.

ITC Phaseout Timeline: 30% Tax Credit Shrinks Quickly

Under the draft bill, the solar investment tax credit (ITC) and Production Tax Credit (PTC) for solar and wind would phase out as follows:

• 2025: Projects that begin construction still qualify for the full 30% solar investment tax credit
  
• 2026: Tax credit  drops to 18%
  
• 2027: Tax credit drops  further to 6%
  
• 2028 and beyond: No credit available

Phase out is based on when projects start construction, not when they are placed in service

This shortened ITC phaseout timeline could have a major impact on project economics for developers and EPCs alike (Reuters).

What EPCs should do now:
Begin construction before the end of 2025 for as many projects as possible to preserve eligibility for the full credit — either through physical work or by spending 5% of project costs (“safe harbor”).

The “safe harbor" provision defines acceptable thresholds for Chinese-sourced materials, though exact limits are still under review.

Domestic Content Solar Requirements Are Increasing

To claim full tax credit benefits, the draft raises the minimum U.S.-made component thresholds:

• Through the end of 2025: 45% domestic content
  
• 2026: 50%
  
• 2027: 55%
  
  

Projects using components from Foreign Entities of Concern (FEOCs) — including some Chinese manufacturers — will lose eligibility for tax credits if construction begins after 2025.   

Projects are disqualified if:

• Components or subcomponents are manufactured/assembled by a FEOC
  
• The taxpayer receives capital injections, subsidies, loan guarantees, or any form of financial, operational, or strategic support from a FEOC
  
• Or, it has entered into any licensing arrangement that provides access to critical technologies.

How entities comply with the above is still unclear, and the documentation burden is heavy!

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What EPCs should do now:
Audit your procurement sources. Confirm supply chains align with rising domestic content solar requirements and avoid disqualifying FEOC materials. Ensure you're modeling both the credit phaseout and material sourcing risks into your solar project financing changes.

Longer Timeline for Storage

• Energy storage projects continue to receive full credit through 2032
  
  
• Phaseout begins in 2033:
  
  
  • 100% in 2033
    
  • 75% in 2034
    
  • 50% in 2035
    
  • 0% in 2036
    
    

This provides more flexibility for long-term development in these sectors.  Please stay tuned with SDG as we have financing available for solar AND storage!

Residential Solar Credit Likely to End

The homeowner solar credit under Section 25D would be eliminated under this bill. Installations would need to be completed within 180 days of the bill becoming law to remain eligible (Politico).

What EPCs should do now:
Push to close residential installs now. Any delay risks falling outside the final eligibility window.

Why the Solar PPA Comeback Is Gaining Traction

As tax incentives phase out, Power Purchase Agreements (PPAs) are seeing renewed interest, especially in the commercial and industrial sectors.  The fundamentals remain the same - utility rates are going up, demand is going up and our transmission and distribution grid is not set up to keep up with new demand. 

What EPCs should do now:
Consider adding PPA options to your strategy. The solar PPA comeback may help clients hedge against incentive volatility.

What Happens Next?

The draft bill must still:

1. Pass the full Senate
   
2. Be reconciled with the House
   
3. Be signed into law by the President
   
   

While an optimistic timeline suggests passage by July 2025, most experts predict late September or October (AP News).

Final Thoughts: Prepare Now

Although this legislation isn’t yet law, it signals sweeping changes to the solar tax credit structure. Now is the time to prepare.  EPCs and developers, come talk to Sunrock about how we can help you. 

Next steps for EPCs:

• Lock in projects that can begin by the end of 2025
  
• Evaluate compliance with domestic content solar rules
  
• Prepare for reduced or eliminated ITC availability
  
• Adjust financing models based on solar project financing changes and credit transferability
  
• Build PPA offerings for clients in transition

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Are you an EPC, installer, or solar project partner?

We work closely with partners across California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, and Rhode Island to originate, finance, and acquire solar and storage projects at every stage.

Let’s talk about how we can support your pipeline and strategy as policy shifts take shape.

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