Treasury Introduces New Rules for Clean Energy Tax Credits: A Closer Look

The US Treasury Department has tightened rules on clean energy tax credits, requiring solar companies to use domestic components and labor. The new rules aim to boost the US solar industry and create jobs. First Solar, a leading solar module manufacturer, has seen its net sales primarily from the US, with a smaller portion from India, France, and other countries. The company's sales are expected to be affected by the new rules.

The U.S. Treasury Department has recently implemented stricter rules for clean energy tax credits, mandating that solar companies use domestic components and labor. This move is part of an effort to bolster the U.S. solar industry and create jobs. The new guidelines, outlined in Notice 2025-42, aim to prevent the artificial acceleration or manipulation of eligibility for tax credits and restrict the use of broad safe harbors unless a substantial portion of the facility has been built [1].

First Solar, a leading manufacturer of solar modules, has primarily derived its net sales from the U.S., with a smaller portion from international markets such as India and France. The company's sales are expected to be affected by the new rules. First Solar has traditionally relied on a vertically integrated model, controlling its entire value chain from semiconductor cell production to module assembly and recycling. This approach has helped the company mitigate risks from volatile material costs and geopolitical tensions [2].

The Inflation Reduction Act (IRA) has significantly influenced the U.S. clean energy landscape, and First Solar has positioned itself to capitalize on this transformation. The IRA's 45X Advanced Manufacturing Production Tax Credit (MPTC) has provided First Solar with a new revenue stream, allowing the company to monetize tax credits generated from domestic production of solar modules and components. In 2025 alone, First Solar sold over $1.5 billion in 45X credits, funding its 10 GW U.S. manufacturing expansion [2].

The new Treasury rules may present challenges for First Solar, but the company's strategic focus on domestic manufacturing and its substantial cash reserves position it to navigate these changes. First Solar's vertically integrated model and IRA-driven cost advantages create a durable competitive advantage in the U.S. solar market, which is expected to meet 55% of annual demand by 2035 [2].

Investors should monitor the impact of the new rules on First Solar's operations and financial performance. However, the company's strategic alignment with the energy transition and its ability to capitalize on IRA incentives make it a compelling long-term investment. As the U.S. solar market expands rapidly, First Solar's focus on domestic manufacturing and technological innovation sets it apart from competitors.

References:
[1] https://news.bloomberglaw.com/daily-tax-report/treasury-revises-construction-rules-for-clean-energy-tax-credits
[2] https://www.ainvest.com/news/solar-ira-driven-engine-solar-supremacy-2508/