Introduction
September 2025 brought a wave of policy changes impacting the U.S. solar industry, from federal tax credit rules to state-level program expansions. Solar developers, manufacturers, and investors are now adjusting to new regulatory realities that will shape project economics. This policy roundup breaks down the major developments, including tighter federal guidelines for tax credits, fresh import tariffs, and notable state initiatives, and what they mean for solar businesses.
Federal Moves: Tax Credit Guidance and Trade Tariffs
1. Stricter ITC “Start Construction” Rules
The U.S. Treasury issued new guidance on August 15, 2025, narrowing how large solar projects can qualify for the federal Investment Tax Credit (ITC). Previously, developers could meet a “5 percent safe harbor” by incurring at least 5 percent of project costs before a deadline.
Under the new rules, projects over 1.5 MW must now use the Physical Work Test. For any solar farm above 1.5 MW that begins construction after September 2, 2025, the developer must demonstrate significant on-site or off-site construction work (such as foundation excavation or equipment assembly) to lock in the ITC, rather than simply spending 5 percent of the budget. Smaller projects at or below 1.5 MW may still use the 5 percent cost method until mid-2026.
This shift, part of the “Ending Unreliable Energy Subsidies” order by President Trump, aims to prevent abuse of the safe harbor but raises compliance hurdles. Utility-scale developers now face tighter timelines to start tangible construction or risk losing tax incentives. EPCs and project owners must adapt by accelerating procurement and early-stage works to satisfy the Physical Work Test, potentially reshuffling project pipelines.
2. New Tariffs on Solar Imports
In a move with major supply chain implications, the White House imposed broad tariffs on imports from India effective August 27, 2025. A punitive 25 percent tariff was added to existing duties, doubling total U.S. tariffs on many Indian goods to roughly 50 percent. While primarily a geopolitical measure tied to India’s Russian oil purchases, this directly impacts solar since India is a growing source of PV modules and cells for the U.S. market.
Industry analysts warn that Indian-made panels, which many developers had turned to as alternatives to other Asian imports under tariff pressure, will now face steep price hikes. At the same time, antidumping and countervailing duty (AD/CVD) investigations into solar imports from India, Indonesia, and Laos are advancing. In early September, the U.S. International Trade Commission ruled there is reasonable indication that underpriced imports from those countries are injuring U.S. manufacturers. The Commerce Department is expected to issue preliminary subsidy determinations in October 2025, with potential new import tariffs by year’s end.
For solar developers and EPCs, the takeaway is clear: imported panels may get more expensive and supply tighter. Many firms are now evaluating U.S.-made module options and revisiting project budgets.
Implication for Solar Businesses
The federal policy shifts present a mixed bag. Stricter ITC guidance demands more upfront construction effort, which may favor well-capitalized developers that can mobilize quickly. Smaller or newer developers might struggle to meet the Physical Work Test, possibly leading to delays or partnerships with larger EPCs.
On the other hand, the trade actions aim to bolster U.S. solar manufacturing by curbing cheaper imports. Domestic manufacturers could see a boost in demand as foreign panels face tariffs and duties. In fact, factories announced since the Inflation Reduction Act now represent more than 56 GW of new module capacity, a 700 percent increase from pre-IRA levels. However, policy uncertainty around incentive programs continues to cloud the outlook.
Solar companies must stay agile, using supplier networks to source tariff-free components and engaging in advocacy for clarity on incentive timelines.
State-Level Updates: Net Metering, Community Solar, and Storage
California Net Metering in Legal Flux
California’s NEM 3.0 policy, which reduced export credits for rooftop solar, is back under judicial review. In early September, the state’s Supreme Court ordered a rehearing of a case challenging NEM 3.0 on grounds it may conflict with laws supporting solar growth.
Clean energy advocates argue that the current policy is slowing residential and commercial solar adoption. If the court modifies or rolls back NEM 3.0, installers and financing firms could see a resurgence in rooftop demand in the nation’s largest solar market. For now, uncertainty remains, and providers are advising customers to lock in systems under existing rules while hoping for a more favorable outcome.
New Jersey’s Community Solar and Storage Push
On the East Coast, New Jersey enacted two major clean energy bills in August that took effect in September. First, the state authorized an additional 3 GW of community solar capacity, launching October 1, 2025. This expansion transforms New Jersey’s community solar pilot into a full-scale program, creating major opportunities for developers.
Second, the state established the Garden State Energy Storage Program, designed to add grid-scale batteries and boost resilience. This signals strong state support for pairing storage with solar, potentially multiplying project revenue through capacity payments and arbitrage opportunities.
Arizona’s Renewables Requirement Repeal
Arizona regulators voted to begin rolling back the state’s Renewable Energy Standard and Tariff, which since 2006 required utilities to source 15 percent of power from renewables by 2025. Proponents of repeal claim the mandate is outdated and burdens utilities, while opponents argue it is a step backward.
If the standard is rescinded, utility-scale developers may lose a key policy driver. However, Arizona’s strong solar resources and declining PV costs may sustain growth regardless. Utilities such as APS and SRP maintain voluntary clean energy goals that could continue to support development.
Other Notable Updates
- Nevada’s governor pressed the federal government to ease permitting on public lands to unlock several large-scale solar projects stalled by Bureau of Land Management policies.
- Illinois announced the next phase of its Illinois Shines incentive program for 2025-2026, offering new renewable energy credit payments for distributed and community solar.
These state initiatives highlight the patchwork nature of U.S. solar policy. Some states are scaling back, while others are ramping up programs and incentives.
Navigating the Patchwork – Tips for Solar Companies
- Optimize for ITC changes: Projects above 1.5 MW should fast-track early construction tasks, secure engineering contracts, and document physical work by required dates. Consider breaking larger projects into smaller phases if that eases compliance.
- Reassess supply chains: Developers relying on Southeast Asia or India should proactively seek U.S. or free-trade-agreement suppliers. Tariffs on India and possible AD/CVD duties could make Indian modules uncompetitive by year’s end.
- Leverage state programs: Community solar firms should target New Jersey and Illinois for new opportunities. Storage integrators should position solutions for states launching storage incentives.
- Engage in policy advocacy: The fate of programs like Arizona’s renewable standard or California’s net metering will be influenced by industry voices. Joining associations and coalitions can amplify the industry’s input.
Conclusion
September 2025’s policy changes illustrate the push and pull shaping solar’s growth. Federal actions under the current administration are tightening incentives and raising barriers for imports, which could increase short-term costs but encourage domestic manufacturing. Meanwhile, states continue to set the pace with new initiatives to expand solar and storage, even as others roll back mandates.
For solar businesses, the priority is to remain flexible and informed. Companies that can secure tax credits compliantly, adjust procurement strategies, and capitalize on state-level opportunities will be best positioned to thrive in this evolving policy environment.