Since the passage of the One Big Beautiful Bill in July, compliance with Foreign Entity of Concern (FEOC) rules has emerged as a key question for developers and manufacturers. Ahead of forthcoming FEOC guidance from the US Department of the Treasury, many companies are starting to evaluate their supply chains and ownership structures for compliance.
To understand how clean energy developers and manufacturers are preparing, Crux surveyed companies active in the clean energy and manufacturing space in October 2025. The survey covered compliance challenges, risk-mitigation strategies, and areas where additional regulatory clarity is most needed.
Crux Policy and Research Strategist Katie Bays led the research effort. With deep expertise in energy policy and capital markets, Katie plays a central role in helping Crux and its customers understand the clean energy finance market, including trends in how the market is reacting to policy. She recently sat down with Crux's marketing team to discuss the survey's key findings, what stood out to her about the state of industry preparedness, and what clarity developers need most as 2026 approaches. Their conversation has been lightly edited for clarity and length.
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Crux: Katie, thanks so much for taking the time. Before we dive into the data, could you please tell us a little bit about this research exercise?
Katie Bays: We knew from basically every conversation that we have had with developers, lenders, and tax credit buyers that FEOC rules are very important to substantially all stages of the project development lifecycle. At a very basic level, capital markets are very good at handling complexity, but they are not very good at handling uncertainty. FEOC has elements of both complexity and uncertainty.
The objective behind this research process was to begin to construct some data around how FEOC is being implemented in practice, identify where companies feel the areas of greatest risk or uncertainty are, and see where the market is coalescing around certain sets of practices or standards that allow us to derive greater confidence that facilities will be able to comply with FEOC requirements.
Crux: What FEOC compliance issues did respondents indicate were most challenging?
KB: We went out to about 50 market participants that represent project developers and US-based manufacturers in particular. The number-one takeaway that we observed in the data was that the survey participants are very actively engaged in FEOC compliance and administration. That is surprising because the rules that govern FEOC compliance are still largely not understood and in flux.
What we see in the data is that there is a high degree of proactivity on the part of the industry in terms of trying to step up to and meet these requirements, even in the absence of total clarity on what the requirements are.
Crux: Do you think the proactive stance the industry is taking signals something broader about industry readiness entering 2026, or is it just a necessity given the circumstance?
KB: I think that what observers sometimes underestimate about the industry is the degree of expertise and professionalism that exists within it — by and large most participants are very sophisticated and very knowledgeable and see compliance as a core component of their overall responsibility as market participants. In general, most people are just trying to follow the rules. I think that's what the data really illustrates. And then the responsibility of others is to ensure that the rules are clear and that they can be followed.
Crux: What finding from this research effort surprised you the most?
KB: An interesting finding that is maybe intuitive but is still important to call out is that FEOC risk is very fact specific — the risk is not homogenous across the industry. For instance, in the ownership section, we found that more than 80% of companies in our survey data told us that they have no FEOC ownership in their capital stack. What you might take away from that is, “Oh, that's a really good statistic; 80% have no ownership.” But for the ones that do — the 16% with a minor degree of ownership and the 4% with a more significant degree of ownership — there is something significant there that has to be addressed and mitigated.
The important observation from the data is that we are presenting a series of aggregate statistics, and they are telling us that the market is in a pretty good place going into 2026. But it is also important to acknowledge that for the minority of companies that do have issues, they are, by and large, taking mitigation measures to try to address those issues.
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Crux: What are companies doing to mitigate those ownership issues?
KB: It's kind of all of the above. Where companies are identifying those kinds of ownership issues or effective control issues in contracts, they largely indicated to us that they are seeking to mitigate those issues. The mitigation measures often are: restructuring, dilution of the ownership share, restriction of the control provisions, whether that's ability to appoint board seats, etc. It seems like the interests are largely aligned among the parties in the sense that loss of access to the tax credit is bad enough that it is well worth addressing the issue.
Crux: What did respondents express would be most helpful for their FEOC preparedness entering and continuing through 2026?
KB: The two principles that people are generally looking for are consistency in the regulatory framework and a limitation on retroactivity. Companies want to comply. They, of course, cannot change decisions that were made years ago. So, companies are looking for clarity from the Internal Revenue Service (IRS) that they will not be penalized for past decisions.
I think it's important to acknowledge that there are a lot of investment restrictions that already exist on Chinese entities, especially as it relates to our systemically important institutions like our big banks. One of the areas of desired clarification would be related to regulatory consistency across not only the FEOC tax credit regime, but also across other areas of federal regulation as it relates to China.
Crux: The survey revealed really interesting patterns between components’ FEOC risk and domestic manufacturing investment in that component category. What components carry the highest and lowest FEOC risk, and how manufacturing is responding?
KB: We did ask people at a really high level what types of components generally carried the most risk. What we observed is that, as a general matter, it's the things that you would expect: it's solar components, inverters, and battery components. Those are also the areas where we are seeing investment in domestic manufacturing that is the most active and robust.
US industries are in the middle of a reshoring process. Just a few years ago, in the early 2010s, the idea that the US would be a significant manufacturer of solar photovoltaic (PV) components felt like a very distant objective. Outside of a handful of companies that were successful in manufacturing in the US, it didn't necessarily feel like an area that was going to have a huge resurgence. However, the combination of robust domestic demand for these components and effective incentives like the §45X tax credit has led to a very robust cycle of reshoring.
The solar side of the industry is relatively more mature — according to the Solar Energy Industries Association (SEIA), the US has surpassed 60 gigawatts of domestic solar module production capacity, a 37% increase from December 2024. Some of these other components, in particular batteries, are earlier in the cycle, but that portion of the domestic manufacturing industry has received $4 of every $5 that have been invested in §45X-eligible infrastructure since 2022. We've seen a massive amount of investment in battery production in the United States. While much of that has been earmarked for electric vehicles, major battery manufacturers can also package the batteries and sell them into the electric power utility-scale market. Being able to support both of those industries gives them a certain amount of resiliency and flexibility that has clearly been appealing to investors.
Crux: What did developers express as their largest challenges related to supply chain mapping in the absence of formal guidance?
KB: The impression we received was that the end user, which is the project developer, is already leaning heavily on their manufacturers and their supply chain to provide the attestation and verification not only that the supplier is not a prohibited foreign entity (PFE) or specified foreign entity (SFE), but that its supply sources and inputs are also not coming from PFEs.
The challenge is twofold: First, does your supply chain have perfect visibility into its own status, especially as a foreign-influenced entity (FIE), and do your suppliers know what their status is? When you get into some of these stickier or more gray-area ownership tests, it's possible that people just don't know. And if they don't know, they may make an attestation, but it is difficult to corroborate the veracity of it or ultimately convey that down the supply chain if facts change. That creates a certain area of ambiguity.
The other area of uncertainty is related to what you do with the attestations that you receive. Say you get a clean bill of health from your entire supply chain — everybody at every point is telling you that everything's good. How do you, and what is your obligation to, independently verify that information? We're seeing a fair amount of variance among the respondents in terms of how they deal with that question. Some people are hiring a third-party consultant, like an accounting firm or tax firm, to conduct those ownership assessments at each stage of the supply chain. Other people are putting that work onto their legal teams. Other people aren't doing that work at all. So it's really complicated. I think the lack of clarity on what the responsibility is on the ultimate obligated party is very challenging.
Crux: What clarifications did respondents express would be most helpful for their supply chain verification process?
KB: What we know about the supply chain accounting process is that companies are supposed to be able to use the safe harbor tables in Notice 2025-08, but those tables do not, for instance, include percentages for §45X. The application of the safe harbor table is helpful, but it's not comprehensive — it doesn't serve all the obligated parties.
The other issue becomes, again, if you believe you have accurate information relating to your supply chain, is that enough? What is your obligation to go out and ensure or separately corroborate the accuracy of that information?
So I think providing additional clarification and guidance related to how accounting ought to work for components or facilities that are not covered in the DC safe harbor tables would be really helpful to the industry. I think a second factor would be meeting safe harbor percentages or complying with those safe harbor percentages based upon the information that you have. Under what circumstances is that good enough and under what circumstances must a company go above and beyond to assure the accuracy of the information that they've received from their suppliers?
Crux: Only 10% of respondents indicated effective control issues within their contracts. For companies that did identify PFE concerns, what are you seeing?
KB: Most of the respondents indicated that they are trying to cure those effective control issues. We have observed that companies, to the extent that they understand what the effective control triggers are, have been relatively successful at restructuring contracts to eliminate those triggers. But the challenge becomes the uncertainty about whether or not additional kinds of contract provisions may later be included under the definition of “effective control”. I think the desire by most companies is to eliminate real or perceived effective control issues within their contract structures.
Crux: How confident are companies about correctly identifying PFE relationships and effective control arrangements that they have?
KB: Developers are navigating significant uncertainty. What we see in the data is that for about two-thirds of the audience, you had a binary result: you either observed that you do have a problem and there is something to resolve, or you were able to conclude that you do not. I think the “do not” category likely represents parties who do not have PFEs or contracts with PFEs. So it's more or less a binary question, and they're able to resolve it.
Then there is this group, about one-third of our respondent set, who have not yet been able to conclusively determine whether or not they have effective control issues. I think that's a reflection of a lack of clarity with respect to what the relevant contracts are for purposes of this analysis, and exactly what kinds of provisions in those contracts constitute effective control. What we see in the data is, for this particular part of the overall FEOC regime, you do have the most uncertainty around how to adjudicate the question.
Crux: What strategies are companies using to demonstrate material assistance cost ratio adherence and what are developers asking for to standardize that process?
KB: What we saw in the data is that most respondents are using a combination of supplier attestations and the safe harbor tables to substantiate compliance with material assistance. I think it's important to acknowledge that companies that have facilities that are not yet under construction but are expected to begin construction in 2026 have to wrestle with this issue as a core part of raising capital. Even though those facilities likely won’t enter service until 2027 or maybe later, the question of “How do I prove compliance with material assistance?” is relevant to financing decisions today. So it's important that companies have a plan.
What we're seeing is a maximalist approach where respondents are trying to utilize all of the tools in the toolkit to satisfy the question. To the extent that compliance, diligence, or documentation can be streamlined, that would be very helpful for those companies and would support continued reliable deployment of capital into energy infrastructure.
Crux: Is there anything that we didn't ask about that you think is important for market participants to know?
KB: We get a lot of questions about whether insurance is covering FEOC, and the answer right now is that, from our understanding, absent guidance it is not possible for insurers to really underwrite policies that cover FEOC risks. Over time and given additional guidance, it may become more common that some risks will be underwritten, but there are probably going to be risks.
For instance, there's a 10-year recapture period that kicks in in 2028, which we are unlikely to see insurance cover. Insurance policies don't last that long; they’re not typically a 10-year policy. So it will probably be difficult for policies to cover those kinds of risks. Then it becomes an interesting question as to how developers evolve to retain capital access in spite of those issues.
Download the full survey findings for more insights on how developers and manufacturers are preparing for FEOC compliance.
