Republican Legislators Pass Reconciliation Act Impacting Clean Energy Incentives
Republican legislators Thursday passed a reconciliation act that, among other things, unwinds much of the Inflation Reduction Act. The bill, which passed 218-214 with two Republicans voting no, now awaits President Donald Trump’s signature. Trump is expected to sign it.
Solar, wind, and clean hydrogen will all lose incentives under the new bill, while nuclear and geothermal see some IRA benefits preserved. The final bill is largely what emerged from the Senate Finance Committee in mid-June, though the current version offers slightly longer timelines to claim clean energy tax credits than the committee draft.
Solar and wind developers, to gain access to tax credits, will have to either connect to the grid by the end of 2027 or break ground on new projects within 12 months of the bill’s passage.
The data center sector may suffer the most under the new bill. For the last several years, solar, wind, and batteries have been an easy way for hyperscalers and developers to get inexpensive power quickly. Solar farms, for example, can typically be completed in 12 to 18 months, whereas backlogs for new natural gas turbines stretches into the early 2030s.
Climate tech startups are certain to feel some pain, too. Green hydrogen startups may feel it most acutely; tax credits worth up to $3 per kilogram of hydrogen look likely to expire at the end of 2027, five years earlier than when they were scheduled to begin phasing out under the IRA.
Geothermal, nuclear, and battery storage were spared somewhat, with their tax incentives surviving through the end of 2033. But new rules pertaining to “foreign entities of concern” could make tax credits much harder to obtain.
