Every year a solar or battery storage project waits to break ground, the federal tax credit that helps finance it gets harder to keep.

The Investment Tax Credit, or ITC, is the federal incentive that has made solar and battery storage projects financially viable for over a decade, typically covering a significant share of a project's total cost. New sourcing rules now attach conditions to that credit that didn't exist before. Under these rules, a storage project has to prove that at least 55% of its cost comes from non-restricted sources to qualify for the ITC, if construction starts in 2026. That bar rises to 75% by 2030. The threshold isn't fixed. It's a moving target that gets stricter every year, which means the timing of when a project actually starts is now a financial decision, not just a scheduling one.

Add to that: Treasury has confirmed more comprehensive regulations on this framework are still coming before the end of the year. The rules in place today are the clearest version of them the industry is likely to get for a while. Waiting doesn't mean more clarity. It usually means more complexity.

What Actually Changed

The new sourcing conditions are known as the Prohibited Foreign Entity, or FEOC, restrictions, short for "foreign entity of concern." They took effect January 1, 2026, and they determine ITC eligibility based on where a project's components were sourced, specifically, how much of the project's cost traces back to a restricted entity or country. A project can lose its entire ITC eligibility if that threshold isn't met. This isn't a partial reduction. It's full disqualification.

One important exception: these restrictions don't apply to legacy credits on projects that were already under construction, for tax purposes, by the end of 2024. If a project predates that, none of this touches it.

What's at Stake if It's Missed

Full disqualification from the ITC eliminates up to 50% of a project's total value, often a figure baked into the financial model from day one, factored into everything from the project's projected payback period to how it was pitched to a lender or a board. Losing it after the fact doesn't just shrink a return. It can turn a project that made financial sense into one that doesn't.

And compliance isn't a one-time check at completion. Once a project is placed in service, documentation has to hold up for up to 10 years, with the IRS able to claw back the credit later if it doesn't. That's a decade of exposure tied to sourcing decisions made at the very beginning of a project.

This also isn't just a tax question anymore. Lenders and financing partners are increasingly asking for FEOC compliance documentation as part of underwriting a project, because a disqualified credit changes the deal's returns for everyone involved, not just the developer. A project's sourcing profile is quietly becoming part of its financeability.

For a facility operator or CFO evaluating a project, sourcing is no longer a background detail handled by a vendor. It's a financial variable with the same weight as equipment cost or site design, and it's one that gets more expensive to manage the longer a project sits undeveloped.

Where This Leaves Facility Operators

The practical takeaway isn't that clean energy incentives disappeared. It's that claiming them now requires the same diligence that used to apply only to construction timelines and interconnection queues. Asking a developer how they document FEOC compliance, and for how long they're prepared to stand behind that documentation, is now a reasonable and necessary question before signing anything, and it's a question worth asking sooner rather than later.

What NextNRG Builds

NextNRG designs custom microgrids and battery storage systems for commercial and industrial facilities, healthcare campuses, municipal operators, and government sites, engineered to each site's infrastructure and built with sourcing compliance considered from the start.

Contact the NextNRG team at nextnrg.com to discuss what a compliant project looks like for your site, and why the timing of when you start may matter more than you think.

This post is for informational purposes only and does not constitute financial, legal, or tax advice. Consult a qualified tax professional regarding your specific project's eligibility. NextNRG, Inc. (NASDAQ: NXXT).