Wood Mackenzie, a market research organization, predicts that in order to lock in the investment tax credit (ITC) under the Inflation Reduction Act (IRA) before the deadline of July 4, 2026, US developers may reserve up to 216-240GW of photovoltaic modules through the “safe harbor” clause before then. This is large enough to meet projected U.S. capacity through the end of the decade, but supply chain constraints, tariff policies and foreign entity (FEOC) rules still pose significant challenges to project completion on time.
Since mid -2024, U.S. developers have launched an “unprecedented” wave of safe harbor reserves for photovoltaic modules. Wood Mackenzie pointed out in his report “The State of Safe harboring: A strategic outlook for US utility-scale solar development” that the move is aimed at responding to policy changes and ensuring that projects qualify for tax credits.
according to the “One Big Beautiful Bill Act” (OBBBA) signed by the trump administration on July 4, 2025, only scenic projects that start within 12 months after the bill is passed or put into operation before December 31, 2027 are eligible for 30% clean energy tax credit under IRA. This means that the developer has four years to complete the project and retain the full credit.
However, the policy environment continues to change, forcing developers to constantly adjust their strategies. The U.S. Internal Revenue Service (IRS) issued a notice stating that from September 2, 2025, projects with installed capacity of more than 1.5MW AC will no longer apply the “5% safe harbor” method, and will instead have to pass the “Physical Work Test” to prove continuous construction on site. In addition, the guidelines on “foreign entities of interest (FEOC)” also require developers to quickly adjust the supply chain layout within a short period of time.
Despite the safe harbor reserve, Wood Mackenzie stressed that the project still faces multiple risks. Developers must continue to meet IRS requirements for expenditure thresholds, continuous construction, and FEOC compliance. Financing delays, equipment supply shortages, and grid connection lags may prevent some projects from meeting the July 4, 2026 start deadline, thereby reducing the capacity to eventually successfully lock in the safe harbor.
Even for projects targeting the December 31, 2027 commissioning deadline, the challenge is equally daunting. Developers may face problems such as long lead times for transformers, labor shortages, grid connection delays, and limited component supply due to FEOC rules. In addition, anti-dumping/countervailing (AD/CVD) investigations against solar cells in India, Indonesia and Laos, as well as 232 clause investigations against polysilicon and its derivatives, may also trigger new tariff barriers. “Therefore, unless significant progress has already been made in licensing, design, procurement and grid connection, developers who start construction after mid -2026 will be unlikely to rely on ITC,” the analysts noted.
. “Smaller developers who lack these capabilities or are unable to successfully implement a safe harbor strategy may be at risk of market consolidation.
At present, ITC is still a key pillar of the economics of solar projects. But Mackenzie Wood stressed that future industry growth will be driven by accelerating growth in electricity demand and the need for new generation capacity. Previously, Wood Mackenzie and CohnReznick jointly predicted that under the baseline scenario, the United States will add 197GW DC utility-scale solar installations between 2025 and 2030, but there is a downside risk of 16% to 18% due to further policy changes.
