American solar manufacturing was booming—Trump's megabill could change that

President Trump's "Big Beautiful Bill," signed on July 4, has created a tale of two solar markets. Both are scrambling to adapt to dramatically compressed timelines that threaten to disrupt America’s solar manufacturing boom, built after years of relying on foreign suppliers. 

For homeowners, the 30% residential solar tax credit ends completely after December 31, 2025, giving families just months to complete installations and save an average of $9,000. Meanwhile, commercial projects face their own crunch: Projects beginning construction after June 2026 must be placed in service by the end of 2027 to claim the credit.

The result? A dangerous disconnect between America's newfound manufacturing capabilities and the market conditions needed to sustain them.

Safe harboring allows commercial developers to lock in current tax credit rates by either breaking ground on projects or investing at least 5% of project costs in equipment. While homeowners don't benefit from safe harboring provisions, the practice is causing ripple effects throughout the entire supply chain that affect every solar buyer.

"The industry is nervous about supply because of all the safe harboring of product that's no longer on the market," said David Dunlap, VP of product strategy at BayWa r.e., a global renewable energy developer and equipment distributor.

With the megabill’s compressed timelines, commercial developers are stockpiling panels, inverters, and other components to secure tax credits before they disappear—equipment that may otherwise be available to residential installers.

This is nothing new for the industry; in fact, it’s been beneficial in the past. Post-COVID, safe harboring allowed markets to grow and equipment prices to drop exponentially. Homeowners saved more, and grid reliability continually improved. But the megabill has made the safe harboring situation far more urgent: The legislation shortened the safe harbor grace period to one year and declared that projects must be in service by the end of 2027. 

To make things even more complicated, just three days after the bill was signed into law, the Trump administration issued an executive order to heavily restrict the use of safe harboring while also saying that "a substantial portion" of a project has to be built to qualify for clean energy tax credits. But what does “substantial” actually mean? That’s up to the Secretary of the Treasury to decide, and it has until mid-August to issue that guidance.

"It's legitimately fear-inducing," said Dunlap. "We should not be leveraging incentives to create a problem for ourselves that prevents us from deploying solar."

The safe harboring frenzy is pulling equipment off the market at a time when residential installers need reliable supply chains to meet the December 31, 2025 deadline for homeowner tax credits.

The timing couldn't be worse for America's solar manufacturing sector, which was finally hitting its stride. The Inflation Reduction Act (IRA), signed into law three years ago, spurred a manufacturing renaissance by adding or preserving key tax credits that have worked in tandem. 

The 45X Advanced Manufacturing Production tax credit has incentivized domestic production, while the 48C Advanced Energy Project tax credit has supported investments in facilities that produce clean energy components. Meanwhile, the 25D credit for residential systems and the 48E/45Y credits for commercial systems have stimulated demand—over 1.2 million homeowners used the 25D tax credit in 2023 alone, according to Rewiring America.

The numbers tell an incredible story: Domestic solar panel manufacturing capacity grew 619%, according to the Solar Energy Industries Association (SEIA). In fact, the U.S. has experienced a fivefold increase in solar panel production since the passage of the IRA, with U.S. facilities beginning to produce solar cells domestically toward the end of 2024, for the first time since 2019.

But the megabill's accelerated project deadlines create a troubling paradox for domestic content incentives. The IRA introduced a 10% bonus credit for commercial solar projects made with increasing percentages of U.S.-made content—40% for projects under construction in 2024, rising to 55% by 2027.

The policy was created to give developers time to establish relationships with American suppliers while steadily reducing dependence on foreign manufacturing. A clerical error initially kept the investment tax credit threshold at 40% through mid-2025, though this has since been corrected. No requirements beyond 55% were ever specified—that level was considered the practical limit before domestic content rules might become counterproductive.

While the domestic content bonus will remain available as long as the underlying 48E commercial credits exist, they could go unused for some projects. When developers are racing to complete projects by 2027 to qualify for any credits, let alone bonus credits, they're more likely to source equipment wherever it's available rather than prioritize American-made components.

To cut Chinese influence out of American clean energy projects, the Trump administration has also introduced new "Foreign Entity of Concern" (FEOC) rules in the “Big Beautiful Bill,” arguing that "reliance on so-called 'green' subsidies threatens national security by making the United States dependent on supply chains controlled by foreign adversaries."

Under the new restrictions, foreign entities and foreign-influenced companies are immediately barred from claiming commercial solar credits (48E/45Y) or manufacturing credits (45X). But the rules create additional compliance burdens for American companies: Starting in 2026, projects cannot receive "material assistance" from prohibited foreign entities if they want to qualify for tax credits.

This creates yet another escalating requirement. Companies must demonstrate that at least 40% of their 2026 project costs avoid prohibited foreign entities, with that threshold rising to 60% by 2030. Given that China controls more than 80% of the global solar supply chain, these requirements could force developers to pay premium prices for limited domestic alternatives or forfeit tax credits entirely.

"You're raising the threshold to comply, but then you're diminishing the magnitude of the incentive," said Dunlap.

The irony is stark: Policies designed to boost American manufacturing could end up undermining it. By creating impossible timelines and conflicting requirements, the megabill risks collapsing demand for solar precisely when domestic manufacturers need stable markets to justify their investments. Foreign manufacturers, meanwhile, benefit from the chaos—they can simply redirect their products to more predictable markets while American factories struggle with boom-bust cycles.

Caught in the crossfire are small, local solar installers facing an existential crisis and homeowners who want to go solar but find that equipment is increasingly scarce.

"Right now, product is going to get cheaper. Well, that means [distributors are] going to offload every ounce of product they can this year and carry zero product next year," said Dylan Hering, general manager with Centauri Systems, a Minnesota solar installation company. "That makes a lot of things more difficult. It's the right move to make, but by doing such a short sunset, there will be people who go bankrupt."

In the absence of federal tax credits, Hering supports the introduction of state-led credits to pick up some of the slack, especially in states like Minnesota that are aggressively pursuing decarbonization goals through 2040 and beyond.

An alternative pathway for installers could be to pivot toward solar leases and power purchase agreements (PPAs), where companies retain ownership of the systems and can still claim commercial tax credits for systems placed in service until 2028. But these financing models aren't available in every state and they typically deliver lower long-term savings for homeowners compared to owning their systems outright.

For homeowners, EnergySage’s best advice is to get quotes now and confirm that the equipment they see in quotes is available and ready to be installed by the end of the year. Installers are already flagging that some popular equipment—like Tesla’s Powerwall 3 and some REC solar panels—is in short supply.

In the meantime, the next few months will determine whether America's solar manufacturing boom was a blip or the foundation for long-term energy security. After years of building toward energy independence, the industry is at a crossroads. It’s a moment that represents existential risk—and potentially, unprecedented opportunity.