US details new China limits for clean energy tax credits

The Trump administration issued new guidance on the use of foreign materials and components in U.S. clean energy projects, in a move that would further limit access to lucrative tax credits.

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Guidelines issued by the Treasury Department Thursday detail restrictions affecting battery cells, solar wafers and other equipment commonly used in renewable energy projects. Among other limits, the rules bar material from China and other U.S. adversaries, and lay out other constraints based on company ownership or other financial ties to the Asian nation. The provisions include the ability of the Internal Revenue Service to audit for compliance within six years. 

The rules, when finalized, could have an outsized influence on many solar, wind and battery projects because many developers rely on materials from China. Companies have been eagerly awaiting the guidance so they can make final investment decisions for their installations. Several large leading investment banks have been hesitant to make clean energy investments until the new foreign ownership rules are laid out. 

Chinese solar stocks fell on Friday. Jinko Solar Co. dropped as much as 4.7%, Trina Solar Co. were down as much as 2.9% and Longi Green Energy Technology Co. slipped 1.3%. The declines tracked a wider downturn in regional equities markets.

The notice offers clearer guidance to domestic solar manufacturers weighing investments in the U.S., Mike Carr, executive director of the Solar Energy Manufacturers for America Coalition, said in a statement. “The additional clarity will help advance the urgent task of de-risking America’s energy supply chains from Chinese influence,” he said.

The restrictions, which were part of President Donald Trump’s signature tax-and-spending bill, follow an executive order in July signaling stricter limits for the tax credits.

In anticipation of the new rules, some clean energy companies with ties to China have moved their operations to the U.S. or reduced financial ties to Chinese firms.

The latest guidance aligns with expectations and does not impose any unexpected compliance burdens, Mike Hall, chief executive officer of solar pricing and data provider Anza Renewables, said in a statement. “It’s important to remember that these guidelines don’t apply to projects that were safe harbored before January 1, 2026,” he added.