On May 22, 2025, the House of Representatives passed its version of the budget reconciliation bill, which rolls back key provisions of the Inflation Reduction Act (IRA). With the Senate expected to pass a similar version this summer, many in the energy and legal communities ask: Can community solar projects survive in a post-IRA environment?
While it may take several forms, community solar generally allows multiple customers (both residential and commercial) to “subscribe” to a shared solar facility and receive credits on their electricity bills for their portion of the power generated, without needing to install solar panels on their property. At its core, these programs are about making the benefits of solar accessible to everyone by offering communities a pathway to decarbonization, energy equity, and local economic development.
The IRA supercharged community solar growth by restoring the 30% Investment Tax Credit (Section 48E), introducing Elective Pay for tax-exempt entities (Section 13801, new Section 6417 of the Internal Revenue Code), and providing bonus credits for projects using domestic content or serving low-income and environmental justice communities (Sections 13101-03). These initiatives encouraged the growth and development of projects by private developers and local municipalities while also benefiting communities with otherwise limited means or ready access to usable space for photovoltaic installations.
Moving forward, project economics may struggle to pencil out without continued federal support; however, community solar can continue to grow, even without the IRA. According to Q1 2025 data, 24 states plus Washington, D.C. have legislation on the books enabling community solar, and 23 of those have active programs. Because these markets have established legislative mandates, mature regulatory frameworks, and utility engagement, they will most likely remain resilient even if federal incentives are reduced.
States with the strongest programs typically share three characteristics. First, they have codified community solar within their Renewable Portfolio Standards (RPS) or through stand-alone statutes, giving long-term policy certainty. Second, they have developed robust program designs, including clear interconnection rules, standardized crediting mechanisms, and subscription protections. Third, they foster institutional collaboration among utilities, regulators, developers, and advocates, which helps ensure programs evolve to meet changing market needs. The leading examples are California, New York, Massachusetts, Minnesota, Illinois, Colorado, Oregon, New Jersey, and Maryland.
In contrast, states without enabling legislation or without active program frameworks face immediate and tangible risks if the IRA’s benefits are rolled back:
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Projects in advanced stages of development may be canceled as financing dries up or tax equity partners exit markets where the economics no longer work because of diminished returns on investment and the loss of tax credits.
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Utilities may withdraw from or suspend voluntary or pilot programs that lack statutory requirements, reducing project opportunities and creating regulatory uncertainty, or not continue to pursue their own investment in community solar programs under the Direct Pay scheme.
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Developers could reallocate capital in less stable markets, concentrating activity in the strongest states and leaving policy-lagging states, and consequently communities, behind.
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Low-income participation targets will become harder to achieve, since those projects are the most financially vulnerable without the IRA’s bonus credits and Direct Pay mechanisms.
As the federal policy landscape shifts, stakeholders across community solar face distinct and immediate challenges. Utilities must navigate changing compliance obligations and will likely encounter new pressures around rate design and interconnection, especially in states without clear statutory frameworks. Developers will need to reassess contract structures, subscription models, and risk allocation strategies while closely monitoring evolving state-level requirements and incentive programs. Municipalities and nonprofits, particularly those focused on low-income access, may become more reliant on state and local funding and will increasingly require legal guidance on Elective Pay alternatives, partnership arrangements, and project finance strategies. Meanwhile, investors are expected to become more selective, prioritizing geographic markets with strong program quality and stability, and demanding deeper legal due diligence on regulatory risk, policy durability, and the enforceability of project contracts.
Community solar is not doomed, but its growth trajectory will vary significantly across state lines in the coming months. State policy's role is now more critical than ever, and this space should be prepared to help navigate a rapidly evolving legal and regulatory landscape.
For more information on Community Solar Development, the Budget Reconciliation Bill, or how to prepare for federal regulatory changes, please contact Keith Gordon, Gelane Diamond, or Sylwia Dakowicz.
Article By DWGP Summer Associate Adriana Chavez - UC Davis School of Law, May 2026