New PFE Rules Impact Battery Storage Developers and Manufacturers
The introduction of Prohibited Foreign Entity (PFE) rules has implications for battery storage developers and manufacturers. Compliance strategies are being developed in response to the uncertainty around these regulations, which affect tax credits under the Inflation Reduction Act.
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Battery storage developers face challenges due to new Prohibited Foreign Entity (PFE) rules established in 2025. These rules impact compliance with federal tax credits under the Inflation Reduction Act, which expanded benefits for clean energy projects including battery storage.
The PFE regulations categorize foreign ownership based on specified thresholds, affecting at least 25% ownership by a single foreign entity or 40% aggregate ownership by multiple entities. Storage projects are not subject to the phaseouts applied to wind and solar but still must navigate these new requirements. The ongoing uncertainty surrounding Treasury and IRS guidance may hinder progress in the industry, posing risks to compliance efforts.
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