For years, discussions around Foreign Entities of Concern (FEOC) compliance have been centered on procurement and policy. Developers focused on sourcing enough qualifying equipment to preserve access to federal tax credits, while EPCs concentrated on executing projects efficiently.
Starting with projects that begin construction on or after January 1, 2026, however, FEOC and Prohibited Foreign Entity (PFE) compliance is increasingly an engineering challenge as much as a procurement one. New guidance has shifted attention from project-wide material sourcing to the inverter block level, creating a new set of design considerations that can directly affect energy production, system architecture, and project economics.
Developers and EPCs are learning how procurement decisions can now ripple directly into system design and long-term performance. Working with a strong partner can improve engineering diligence required for compliance, reduce risk, and optimize project outcomes.
At a high level, FEOC and PFE regulations are intended to limit federal incentives flowing to supply chains tied to prohibited foreign entities. The policy objective is clear: encourage greater use of domestic and non-PFE materials while maintaining eligibility for federal incentives.
As Patrick Carroll, Technical Training & Quality Manager, explained during Pure Power Engineering's internal discussion on the topic: “Where these modules are sourced from will affect the project's tax credits and the engineering challenges that follow.”
Historically, many developers viewed compliance through a project-wide lens. If enough qualifying equipment was used across the site, the project would generally remain eligible for tax incentives. Current guidance changes that equation.
The key concept is that compliance must now be evaluated at the inverter block level, not solely at the overall project level. In other words, individual inverter blocks must independently satisfy the applicable Material Assistance Cost Ratio (MACR) threshold rather than relying on favorable project-level averages.
In theory, there are three sourcing paths:
Option A: 100% non-PFE modules
• Simplifies compliance
• Maintains eligibility for tax credits
• Highest cost and often longer lead times
Option B: 100% PFE modules
• Lowest procurement cost
• Largest supply pool
• Ineligible for federal tax credits
Option C: Mixed PFE and non-PFE modules
• Balances availability and cost
• Maintains incentive eligibility
• Introduces additional compliance and engineering complexity
Many developers are expected to pursue Option C because it offers the most practical balance between economics and compliance. However, this approach introduces new design considerations that cannot be ignored. As noted, simply achieving the correct ratio of qualifying modules across a project is no longer enough. The distribution of those modules across inverter blocks becomes equally important.
At first glance, distributing qualifying and non-qualifying modules among inverter blocks may seem straightforward. In practice, it can potentially reduce energy yield or require additional components, increasing cost. Engineering diligence and expertise are needed to minimize both of these impacts.
Different PV module manufacturers often produce modules with different electrical characteristics, including variations in operating voltage and current. When module types are mixed within the same inverter architecture, the system can experience what engineers call string mismatch losses.
These losses occur primarily in two ways:
1. Series-connected modules with different currents
2. Parallel-connected strings operating at different voltages
The second scenario is far more common in real-world projects. When strings with different maximum power voltages are connected to the same Maximum Power Point Tracking (MPPT) system, they cannot all operate at their ideal output simultaneously. As a result, the inverter cannot harvest the maximum potential energy from every string.
One of the most important design variables is the inverter itself. Not all inverter architectures offer the same flexibility when accommodating mixed module populations.
Inverters with Multiple MPPTs
Inverters equipped with two or more MPPTs provide engineers with significantly more options. Different module types can be assigned to separate MPPT channels, allowing each string of modules to operate closer to its individual maximum power point. This approach can eliminate parallel-connected string mismatch concerns while maintaining compliance requirements.
As Travis Lenberg, Senior Project Manager, describes it: “You can stack all the FEOC-compliant modules on one MPPT and all the rest on the other MPPTs. It's a product choice that gives you more flexibility without needing optimizers.”
Single-MPPT and Central Inverter Systems
The challenge becomes more difficult for systems that use central inverters or other architectures with only one MPPT.
In these cases, engineers have fewer options. They can either:
• Accept mismatch losses
• Add power electronics such as power optimizers
• Rework system layouts to reduce the severity of mismatches
Each approach carries cost, performance, and operational implications.
Not all project types experience the same level of difficulty. For commercial rooftops, power optimizers are already common because rapid shutdown requirements frequently make them part of the standard design. As a result, accommodating mixed module populations is often easier.
Ground-mount, carports, and utility-scale projects face a different reality. Many of these projects avoid optimizers because of:
• Added equipment costs
• Additional maintenance considerations
• Increased component count and potential failure points
Travis Lenberg explains: “Ground mounts generally come down to cost. Developers weigh the performance benefits against the additional costs and generally decide not to install optimizers.”
One important takeaway from the expert discussion is that achieving compliance is usually possible. The real question is how efficiently compliance can be attained. A project could simply distribute qualifying modules evenly across every inverter block and satisfy the regulations. However, doing so without understanding the electrical impacts may leave energy production unutilized for decades.
Developers must therefore consider:
• Expected mismatch losses
• Inverter architecture impacts
• Equipment selection implications
• Long-term energy yield reductions
• Financial modeling adjustments
As Travis Lenberg noted, those performance assumptions become particularly important when EPCs are responsible for performance guarantees or when developers are building financial models around expected energy production.
The irony of FEOC compliance is that it creates a new optimization problem. Developers pursuing federal incentives often cannot simply cluster module types independently for best performance. Instead, they must satisfy inverter-level compliance requirements while still delivering strong energy production.
That balancing act places engineering at the center of compliance conversations.
Result:
✓ Higher energy yield
✓ Each module type operates at its own maximum power point
✓ Mismatch losses eliminated or minimized
✓ Compliance maintained
The solar industry has always adapted to new policy requirements. What makes FEOC and PFE compliance different is that the regulations now directly influence electrical design decisions. Developers can no longer think of compliance as something handled exclusively by procurement teams or legal advisors. Module sourcing decisions influence inverter selection, MPPT strategy, mismatch losses, and ultimately project economics.
The projects that succeed will not necessarily be those with the largest percentage of qualifying modules or the lowest procurement costs. They will be the projects that successfully balance compliance, energy production, constructability, and long-term financial performance. This is where thoughtful engineering becomes a competitive advantage.
For more information on FEOC, please fill out our contact us form or email info@PurePower.com.