Solar companies often keep projects under 5 megawatts (MW) to benefit from specific regulatory incentives, avoid complex permitting processes, and align with federal and state policies that favor smaller-scale, distributed generation projects.

Key reasons for this 5 MW threshold include:

• Federal Tax Credits (IRA Adders): The Inflation Reduction Act (IRA) offers additional Investment Tax Credits (ITC) for qualified solar facilities with a maximum output of less than 5 MW that are located in low-income communities or on tribal land. This financial incentive makes projects of this size more profitable.

• PURPA Regulations: The federal Public Utility Regulatory Policies Act of 1978 (PURPA) requires utilities to purchase power from qualifying small renewable energy producers at a rate based on the utility's "avoided cost". Recent revisions (FERC Order 872) reduced the size limit for projects automatically eligible for these provisions to 5 MW, making this size a key threshold for guaranteed market access and stable pricing.

• Permitting and Interconnection Simplicity: Larger, utility-scale projects (often considered >1 MW or >5 MW depending on the region) typically face much stricter and more time-consuming state and local permitting, environmental reviews, and grid interconnection studies. Staying under the 5 MW limit allows developers to utilize streamlined local permitting and avoid the more complex regulatory framework, saving time and money.

• Community Solar Programs: Most community solar programs, which allow multiple subscribers to benefit from a single array, are designed around projects that are typically 5 MW or less in capacity. These programs often have specific rules and compensation structures (like New York's Value Stack model) that apply only to projects within this size range.

• Grid Infrastructure Compatibility: Utility distribution grids have limits on how much power can be injected at certain points without significant and costly upgrades. Smaller projects are less likely to trigger expensive infrastructure improvements compared to a single large project, making them easier and cheaper to connect to the grid.

• Prevailing Wage/Apprenticeship Exceptions: For certain federal incentives, projects under a certain size (sometimes 1 MW, but regulations can vary) may have different compliance requirements for prevailing wage and apprenticeship rules, potentially simplifying labor compliance. 

• Net Metering compensation models vs Value Stack (VDER) compensation models may also play a role in a company’s decision to deceptively split a project in half.