The 2026 Shift: How FEOC Compliance Will Reshape Solar Economics for U.S. Businesses

Beginning January 1, 2026, new Foreign Entity of Concern (FEOC) compliance rules will fundamentally change how U.S. solar and storage projects qualify for federal incentives — and reshape project economics across the commercial and industrial energy market.

Until then, the industry is operating in a rare, high-value window. Current federal, state, and utility incentives can still offset 70–120% of total project costs, but that equation is starting to shift. FEOC restrictions are tightening supply chains, raising material costs, and adding new documentation requirements — all of which will make projects more expensive and complex after 2025.

Recent data confirms this transition is already underway: solar equipment costs are rising ahead of the policy change.

FEOC in Context: A Policy Driving Market Disruption

The Inflation Reduction Act (IRA) introduced FEOC restrictions to prevent federal tax credits from subsidizing equipment or materials sourced from certain foreign entities.

For solar and energy storage projects, this means:

• Modules, inverters, and batteries must be manufactured or assembled in the United States or in an approved trade partner country.

• Cells, wafers, or components made by FEOC entities (including most Chinese manufacturers) will no longer qualify for the 30% Federal Investment Tax Credit (ITC) or related adders.

• Developers and system owners must document compliance to retain eligibility.

The intent is to strengthen U.S. manufacturing — but during the transition, it’s tightening the market and adding near-term costs.

Module Prices Are Rising Ahead of the Deadline

According to PV Magazine (Oct. 2025), U.S. solar module prices rose 3.7% in Q3 2025, returning to spring highs.

• Non-compliant panels increased 9.2%, while compliant U.S.-made modules rose 4.9%.

• Domestic cells climbed 5.7% to $0.46/W, and Southeast Asian cells rose 3–5%.

This upward pressure reflects growing demand for compliant products ahead of FEOC enforcement and limited near-term supply. Analysts expect continued increases through 2026 as projects compete for compliant inventory. For large-scale commercial and institutional buyers, these early cost trends can affect project payback and incentive value in real time.

Why FEOC Will Reshape Project Economics

Beyond the immediate price spike, FEOC will alter the financial landscape of solar deployment:

• Higher equipment costs: Domestic and compliant imports will carry price premiums.

• Tighter procurement timelines: Developers and EPCs will compete for limited compliant supply.

• Increased administrative complexity: Documentation for ITC and transfer eligibility will become more rigorous.

Together, these factors are expected to drive 15–20% higher system costs for new projects starting after 2025.

Why Acting Before 2026 Still Delivers Maximum Value

Projects initiated before the 2026 deadline can lock in today’s pricing and avoid the compliance premium.They also retain full eligibility for:

• The 30% Federal ITC

• Bonus adders (Energy Community, Domestic Content, Low-Income)

• State and utility incentives (e.g., SRECs, rebates, or performance payments)

Example:

• 1 MW rooftop system — installed cost: $2.5 million

• Incentives (Federal + State + Utility): ~$2.8 million

  Net-positive project: +$300,000

After FEOC implementation:

• 15–20% cost increase ($375,000–$500,000)

• Same project now breaks even or loses margin.

The math is simple: projects started in 2025 will have stronger cash positions and shorter paybacks than those started post-FEOC.

How Businesses Can Prepare in 2025

1. Model both scenarios.Compare pre- and post-2026 economics to understand your true cost window.

2. Start engineering and interconnection early.Utility queues and equipment allocations will fill as developers race to pre-FEOC approval.

3. Secure compliant equipment before Q1 2026.Purchase orders issued before enforcement typically retain current eligibility.

4. Engage experienced advisors.Navigating incentives, credit transfers, and FEOC compliance requires coordinated expertise.

The Long-Term Outlook

FEOC compliance will ultimately strengthen U.S. clean energy manufacturing and supply stability — but in the short term, it will create cost volatility and procurement bottlenecks.As domestic production scales, pricing will gradually normalize, but analysts agree 2024–2025 represents the best economics the market will see for years.

For commercial property owners, logistics operators, schools, and industrial facilities alike, the takeaway is clear: projects that move forward in 2025 will capture more value, more easily, and with fewer compliance barriers than those that wait.

Next Step: Get Your Facility Assessment

Envision Energy Solutions provides complimentary assessments for commercial, industrial, and institutional facilities — modeling both current and post-2026 project economics.Our vendor-agnostic team helps organizations simplify compliance, secure equipment, and capture every available incentive before the market shifts.

→ Request Your Facility Assessment Today

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Important Disclaimers

General Information:This article provides educational information about FEOC compliance and solar market dynamics as of October 2025. It is not financial, tax, or legal advice. Individual project results vary based on facility location, program eligibility, and timing.

Market Variability:Pricing data cited from PV Magazine reflects Q3 2025 U.S. averages. Actual equipment pricing may vary by supplier and project specification.

Tax Considerations:Tax credit transferability values (typically 80–85%) represent current market ranges and depend on transaction details. Consult a qualified tax advisor for guidance.

Professional Guidance Required:Solar project execution involves technical, financial, and regulatory complexities. Always engage experienced professionals before making investment decisions.