Key takeaways from the FCC's inverter restrictions

On July 28th, the Federal Communications Commission added foreign-produced power inverters to its Covered List of equipment and services determined to “pose an unacceptable risk” to national security. The move, directed by a White House-convened interagency body, effectively bars new inverter models — without a valid FCC equipment authorization, foreign-produced equipment cannot lawfully be imported, marketed, or sold in the United States. The listing did not affect previously installed or authorized inverters, but it raised questions about how far the restriction reaches, how developers should respond, and what it means for supply and compliance over time.

On August 20th, the FCC issued a further update exempting inverters eligible for the 45X manufacturing tax credit, confirming that inverters with wired connections are covered, and narrowing the covered category to utility-interactive inverters, removing rectifiers and off-grid units. For grid-scale projects, where all equipment is utility-interactive by definition and grid-forming controls, AGC response, and ISO telemetry all depend on it, this means near-universal coverage of inverters.

Summary

An inverter is restricted only if two separate things are true: it is a covered type of device, and it is foreign-produced. The device test has two elements, both of which must be met. The origin test offers two alternative routes out, and either one on its own is sufficient to avoid restriction.

Which devices are covered

First, it is a utility-interactive inverter as defined in UL 1741, capable of converting DC to AC, and intended to run in parallel with a utility.

Second, it contains, or is designed, equipped, or configured to accept a component enabling remote communication, control, sensing, data collection or monitoring over Ethernet, Wi-Fi, cellular, Bluetooth or similar connections. A wired connection satisfies this condition. So does an empty communications slot, because an inverter built to accept a connected component is covered whether or not one is fitted.

Coverage cannot be checked by looking a model up. It has to be established from manufacturer evidence, and the Covered List names no manufacturers and no models in this category. Utility-scale central inverters and battery power conversion systems commonly sit in the Supplier’s Declaration path, where there is no FCC ID and no public database entry.

Which inverters count as foreign-produced

An inverter is foreign-produced unless it clears one of two tests: it qualifies for the 45X Advanced Manufacturing Tax Credit for domestic production, or it is a domestic end product under Buy American rules. Under those rules, it must be manufactured in the US with domestic components exceeding 65% of total component cost, rising to 75% for items delivered from 2029 onwards.

A manufacturer that clears 45X does not also need to clear the 65% threshold, and vice versa. In the August 20th clarification, the Department of War reasoned that 45X already denies eligibility to anything with material assistance from a prohibited foreign entity, so Congress had in effect already decided that inverters qualifying for it count as domestically produced.

Corporate identity is irrelevant for the Buy American test, but critical to 45X eligibility and Conditional Approval. Under the Buy American test, a US-headquartered manufacturer producing offshore makes foreign-produced equipment, and a foreign-owned manufacturer producing in the US may not. An integrator that private labels a third-party power conversion system (PCS) takes the status of the underlying equipment. 45X eligibility, however, runs two separate entity tests, one on the taxpayer (who must not be a prohibited foreign entity), and one on the eligible component (which must not have material assistance from a prohibited foreign entity). Both look at ownership and control. Conditional Approval goes further still, and is described in detail below.

Conditional approval

A manufacturer of foreign-produced inverters can apply to the Department of War or Homeland Security for a Conditional Approval, which exempts specific devices or classes of devices. As part of the application, which is due January 1, 2028, applicants disclose beneficial ownership down to 5%, a component-level bill of materials with country of origin for every component, and a committed US capital expenditure plan with quarterly progress reporting. In the equivalent process for consumer routers, listed in March, approvals ran up to 18 months and were renewable.

Key takeaways

1. While near-term risk is low, the two-to-four-year risk is material. Grandfathering protects models, not product roadmaps. Every currently authorized inverter and PCS platform will eventually be superseded, and every successor will need a new FCC authorization, which it can only get by qualifying for 45X, meeting the Buy American test, or holding a Conditional Approval. Timelines may be compressed by mandated technical changes, like a NERC or FERC inverter-based resource requirement or a UL 1741 revision, that would force manufacturers to release new hardware sooner than commercial cycles would. Separately, the FCC has a procedure, adopted in December 2025, for cutting off further imports of previously authorized equipment while leaving installed units running. Operators should consider locking in spares while the current model is authorized.
2. Re-procurement is costly and, in most cases, unnecessary. The most likely value-destroying reaction is a panic substitution away from a qualified, authorized, warranted inverter. Re-qualification costs schedule, engineering rework, and often interconnection restudy. Market analysts read the near-term impact the same way. TD Cowen’s John Miller told Canary Media that investors were treating it as close to a non-event. In the same article, Jefferies’ Julien Dumoulin-Smith commented that there is still latitude to buy existing models, though he expected any restriction on new models to drive a long, gradual shift in market share. Genuinely at-risk projects are those which depend on a model not yet authorized as of July 28: 2000 Vdc PV platforms, newly launched silicon carbide PCS, grid-forming platforms still in certification, and any model still awaiting authorization.
3. Exposure exists in contract gaps. A Change in Law clause is the mechanism that decides who bears the cost when regulation changes mid-contract. In BESS and PV supply agreements, these are commonly drafted around tariffs, duties, customs, and taxes. An FCC action on equipment authorization is not typically in scope, which means the buyer would absorb the cost. Separately, most supply agreements let the manufacturer substitute an equivalent or successor model at its discretion. That now effectively transfers a regulatory issue onto the project. Buyers should obtain a prior written consent right, with the manufacturer warranting the substitute’s status. Long-term service agreements also pose a risk. The FCC’s waiver permits software and firmware updates to authorized models but never covered hardware changes, which have been prohibited since July 28. Buyers should understand how service agreements covering foreign-produced models will handle hardware revisions, board-level redesigns, or component substitutions over their terms.

What we’re watching

We’ll continue following these developments closely, paying particular attention to how the content thresholds get applied in practice, how manufacturers establish 45X eligibility, and what lenders and tax equity start asking for in diligence.

We are also watching for any proposal to prohibit the continued importation and marketing of previously authorized inverters, which is the single development most likely to change this picture materially.