For years, the Investment Tax Credit was treated as something handled after a project was designed, built, and placed in service. That approach no longer works.
Under the Inflation Reduction Act and clarified further under OBBBA, geothermal and energy storage projects sit at the center of ITC opportunity. They also sit at the center of risk. The difference between capturing the full credit and leaving meaningful dollars on the table almost always comes down to what happens early in design and procurement, not at tax filing.
Design engineers and ESCOs are now directly shaping ITC outcomes, whether they intend to or not.
Geothermal and Storage Have the Longest Runway, But Only If Structured Correctly
Compared to solar, geothermal and storage benefit from a more durable eligibility outlook and, in many cases, a stronger ability to stack bonuses. Many geothermal manufacturers have long histories of manufacturing in the U.S. due to long-standing public sector and federal procurement requirements.
That history helps, but it does not eliminate risk.
Modern geothermal systems, heat pumps, storage equipment, and controls are assembled from global supply chains. Even when final assembly occurs domestically, components may originate overseas. That is where Domestic Content analysis becomes challenging and where many otherwise eligible projects fail to capture the additional 10 percent adder.
Domestic Content Is Not a Marketing Statement
One of the most common failure points we see is reliance on manufacturer statements like “Made in America” or “Domestic Content compliant.”
Those statements can be helpful, but they are rarely sufficient on their own.
When safe harbor tables are not available, the IRS guidance requires use of the Adjusted Cost Method. That method relies on manufacturer-level direct costs, not invoice pricing paid by contractors or owners. Invoice pricing often includes markup, distribution, and overhead, which the guidance explicitly excludes from the calculation.
This distinction becomes critical when projects are near the Domestic Content threshold.
The Core Problem: You Cannot Get This Information Late
Manufacturers are understandably reluctant to share component-level cost data. In many cases, that information is considered proprietary.
When these requests are made after installation, manufacturers often have no contractual obligation to respond. At that point, owners, engineers, and tax advisors lose leverage. Data collection slows or stops entirely.
Projects that succeed address Domestic Content during design and procurement, when leverage still exists.
Prevailing Wage and Apprenticeship Still Matter for Larger Projects
While this discussion often focuses on Domestic Content, it is important to note that Prevailing Wage and Apprenticeship (PWA) requirements apply to projects over 1 MW if the taxpayer intends to claim the full 30 percent ITC rather than the base 6 percent credit.
For geothermal and storage projects above that threshold, PWA compliance is not optional.
Prevailing wage requires that laborers and mechanics be paid at or above Department of Labor wage rates. Apprenticeship rules require a minimum percentage of total labor hours to be performed by registered apprentices and adherence to applicable journeyman-to-apprentice ratios.
Compliance is not simply about wage rates or having apprentices on site. It requires daily tracking, proper classification, and verifiable documentation throughout construction. Projects that wait until closeout to assemble this information often discover gaps they cannot fix retroactively.
Why PWA Breaks Down in Practice
The same pattern shows up repeatedly:
- Apprenticeship hours are not tracked consistently
- Ratios are not monitored daily
- Subcontractors are unaware of documentation expectations
- Payroll data does not align cleanly with ITC reporting needs
These issues are rarely malicious. They are almost always the result of failing to plan for PWA during design and contracting.
Early Coordination Is the Only Reliable Solution
Domestic Content and PWA share the same structural weakness. Both depend on information that must be gathered over time, not reconstructed later.
Early coordination allows teams to:
- Include Domestic Content and PWA language in specs and RFPs
- Set expectations with manufacturers and subcontractors before work begins
- Align engineering scope, procurement, and compliance requirements
- Avoid late-stage data chases that delay filing and monetization
Once construction is complete, leverage is gone.
A Common Case We See Too Often
On a recent institutional geothermal project, the system was clearly ITC eligible and well designed. However, Domestic Content requirements were not addressed during procurement, and PWA tracking was treated as an administrative issue.
After installation, the project team attempted to gather manufacturer cost data and reconcile labor records. Responses were slow, documentation was incomplete, and the Domestic Content adder was nearly lost. Filing timelines slipped while the team worked to backfill missing information.
The technology qualified. The execution did not support the credit.
FEOC Is the Next Layer of Scrutiny
Foreign Entity of Concern rules will only increase supply chain scrutiny. The documentation challenges mirror what teams are already experiencing with Domestic Content.
Projects that do not establish sourcing transparency early will face increasing uncertainty.
The Bottom Line for Design Engineers and ESCOs
Geothermal and storage projects represent some of the strongest ITC opportunities available today. Capturing the full value requires more than good engineering.
It requires early planning, disciplined procurement, and compliance frameworks that are built into the project from day one.
For projects over 1 MW, both Domestic Content and PWA compliance must be addressed early or risk undermining the credit entirely.
This is why bringing in an ITC-focused partner early is no longer a nice-to-have. It is how design teams protect their work, their clients, and the financial outcomes everyone is relying on.
