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| Author | Jonathan Chou |
| Updated | June 03, 2025 |
On May 22, 2025 (U.S. Eastern Time), the U.S. House of Representatives narrowly passed the draft of the One Big Beautiful Bill Act (OBBBA) with 215 votes in favor, 214 against, and one abstention. This draft includes revisions to several solar-related subsidies under the Inflation Reduction Act (IRA).
While the OBBBA draft still awaits Senate review and its formal enactment remains uncertain, its content is already influencing market expectations. This article analyzes the solar-related provisions in the draft and explores their potential impacts on the U.S. solar PV market.
Further reductions in solar PV subsidies
On the generation side, the eligibility criteria for certain tax credits have been revised from the original “beginning of construction” to “being placed in service,” effectively raising the threshold for receiving subsidies and requiring faster grid connection. In addition, all subsidy phase-out schedules have been brought forward—particularly with the Section 25D credit set to expire by the end of 2025—which is expected to suppress the future growth in the U.S. residential PV market. Overall, if enacted, the OBBBA would pose a significant threat to medium- and long-term solar PV demand in the U.S.
New provisions concerning Prohibited Foreign Entities
For non-U.S. PV manufacturers seeking to engage in the U.S. market, one of the most critical changes in the OBBBA draft is the introduction of the “Prohibited Foreign Entity” definition, which includes both “Specified Foreign Entities” and “Foreign-Influenced Entities.” Once a non-U.S. manufacturer is classified under either category, it becomes ineligible for key subsidies, such as the credits under Sections 48E, 45Y, and 45X. This has significant implications for manufacturers’ market strategies and investment planning in the U.S.
Three major impacts if the current version of OBBBA is enacted
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Policy uncertainty increases
The OBBBA draft is still pending review in the Senate, and its final content has yet to be determined. Although the Republican Party currently holds full control of Congress, the bill’s narrow passage in the House—by only a one-vote margin—reflects internal divisions within the party. Some lawmakers have expressed concerns over the proposed cuts to solar subsidies. Market sources suggest that the Senate may revise the draft bill to mitigate its potential impact on the solar PV industry and the broader economy. The future trajectory of the legislation remains highly uncertain.
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Foreign entity provisions may reshape the solar PV supply chain.
The newly introduced definitions of “Specified Foreign Entity” and “Foreign-Influenced Entity” in the draft bill would restrict certain China-affiliated companies from accessing subsidies. For companies that have already invested in or are planning to establish manufacturing facilities in the U.S., this may necessitate adjustments to ownership structures and sourcing strategies—or even prompt considerations of divestment or transformation. These changes could disrupt the progress of U.S. manufacturing localization and potentially trigger a broader reshuffling of the global supply chain.
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Tightening of subsidies may impact long-term demand
If the draft bill is enacted in its current form, higher subsidy thresholds and accelerated phase-out timelines will inevitably impact solar demand. A surge in installations may occur in the short term, but with the expiration of the Section 25D credit and the tightening of eligibility under Sections 48E and 45Y, U.S. solar PV demand is likely to decline significantly after 2026, placing pressure on medium- to long-term market development.
Given the rising policy uncertainty in the U.S., it is critical for solar PV companies planning capacity expansion to closely monitor global political and economic developments, actively expand their international sales networks, and strategically strengthen brand presence. These actions will be key to standing out amid ongoing market weakness and policy risks and ultimately succeeding in an increasingly competitive market landscape.
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