The state of safe harboring: a strategic outlook for US utility-scale solar development

US solar developers rush to lock in tax credits for up to 240 GW of projects as the Trump administration rolls back the IRA  

The US utility-scale solar industry has experienced an unprecedented wave of "safe harboring" activity over the past year and a half. Developers scrambled to lock in valuable tax credits before a series of regulatory deadlines shut the door on the incentives established under the Inflation Reduction Act (IRA). President Trump’s One Big Beautiful Bill Act (OBBBA), which was signed into law on July 4, 2025, provided a one-year window for developers to begin construction and safe harbor projects, which would then have four calendar years to complete development and receive the 30% investment tax credit (ITC). 

Between mid-2024 and the July 4, 2026 deadline, developers will have successfully safe harbored between 216 and 240 GWdc of solar capacity in total - enough to meet forecasted installations through the end of the decade, according to new analysis by Wood Mackenzie.

In our recent insight 'The state of safe harboring: A strategic outlook for US utility-scale solar development', available via Wood Mackenzie Lens Power & Renewables, we explore the drivers and strategies behind safe harboring and how this affects our market outlook. Read on for an overview of some of our key findings:

We estimate that between 216 and 240 GW of utility-scale solar capacity will have been safe harbored in total  

Safe harboring allows developers to lock in tax credit eligibility and secure up to four calendar years to complete construction if they meet certain IRS requirements. But additional deadlines added more hurdles for compliance and increased urgency.  

First, an IRS notice published in mid-August eliminated the use of the Five Percent Safe Harbor method for projects larger than 1.5 MW AC after September 2, 2025. This forced developers to pivot to the Physical Work Test, which requires proving continuous construction throughout development and typically involves purchasing custom components like transformers rather than off-the-shelf modules. 

A more pressing deadline came on January 1, 2026, when complex foreign entity of concern (FEOC) restrictions went into effect. These were not fully understood at the time, since the Treasury and IRS did not release preliminary guidance until February 2026, and further guidance is still expected.   

Despite being forced to pivot strategies on short notice, developers were able to successfully safe harbor the majority of their targeted capacity before the FEOC deadline. Developers were able to achieve this because they anticipated hurdles and started safe harboring in 2024. 

Safe harboring doesn’t guarantee tax credit qualification  

Projects have to adhere to certain IRS requirements throughout development to receive the tax credit. Projects that were safe harbored under the Five Percent method could lose qualification if equipment was not delivered within the 105- day window or if total costs increase and initial spend drops below the 5% threshold. Projects using the Physical Work Test could lose eligibility if developers cannot prove continuous construction. Additionally, projects that were safe harbored after January 1, 2026 could become ineligible if they fail to meet the FEOC requirements. 

Additionally, as July 4, 2026 approaches, the likelihood that projects will miss the deadline to begin construction increases. Projects frequently get delayed due to financing constraints, delays in securing equipment—particularly highvoltage transformers, which currently have lead times of two to four years—and interconnection bottlenecks that extend study and upgrade timelines. The actual amount of safe harbored capacity may end up being slightly lower than our estimate.  

Projects starting construction after July 2026 face unrealistic development timelines  

Developers that do not safe harbor by July 4, 2026 can still claim the ITC if their projects enter service by December 31, 2027. However, completing a full development cycle in 18 months or less is rarely feasible. Utilityscale solar projects typically take three or more years to progress from early development to COD, and latestarting developers must contend with longlead transformer procurement, limited labor availability, and delayed interconnection approvals. Additionally, module supply could become constrained towards the end of 2026 as the industry grapples with the FEOC restrictions and new potential tariffs stemming from the AD/CVD investigation on solar cells from India, Indonesia, and Laos, and the Section 232 investigation on polysilicon and derivative products.  

As a result, developers beginning construction after mid2026 are unlikely to rely on the ITC unless they are exceptionally advanced in permitting, design, procurement, and interconnection well before hitting the deadline. 

Despite the challenges, solar buildout will continue in the post-ITC landscape  

The massive safe harbor activity of 2025-2026 underscores how critical the ITC remains for solar economics. However, accelerating electricity demand and the need for new generating capacity ensure utility-scale solar remains structurally strong beyond 2030, even as tax incentives fade. 

The industry is entering a new phase where project economics must increasingly stand on their own merits - a transition that will favor well-capitalised developers with procurement leverage, established supplier relationships, and the scale to navigate complex regulatory requirements. For smaller developers lacking these advantages, the inability to safe harbor may limit buildout prospects and accelerate market consolidation.