Senate passes megabill that curbs IRA tax credits, drops wind and solar tax

• The Senate voted Tuesday to pass an amended version of the Republican budget megabill that significantly curtails clean energy tax credits. It does not contain a proposed excise tax on wind and solar projects that caught many by surprise when it was added late Friday.
• The final version carves out an exception to the bill’s new phaseout deadline for wind and solar project tax credits. Previously, the legislation stipulated that wind and solar projects had to be placed in service by the end of 2027 to qualify for the clean energy production credit. This was amended to exempt projects that begin construction within a year after the signing of the legislation.
• The bill that made it out of the Senate Finance Committee had softened some of the IRA cuts made in the House. That version was supplanted over the weekend by harsher language that included the now-dead excise tax. The Senate bill now heads back to the House, with Republican leadership in both chambers aiming to deliver the bill to President Trump’s desk for him to sign it into law by Friday.

Sen. Rand Paul, R-Ky., and Sen. Thom Tillis, R-N.C., continued to oppose the legislation after voting against it over the weekend. They were joined by Sen. Susan Collins, R-Maine, along with all Democrats. Vice President JD Vance provided the tiebreaking vote.

“Under the last-minute carveout, Big Green has 12 months to initiate as many subsidized projects as it wants using the insanely-easy-to-meet ‘construction’ threshold,” tweeted fossil fuel advocate Alex Epstein, who helped congressional Republicans shape the megabill. “Several Senators have already told me they didn't know about or understand this last-minute paragraph. If that's the case they should do whatever they can to fix the situation.”

Harry Godfrey, who leads Advanced Energy United’s federal policy team, said the bill would still have a significant adverse impact on clean energy and the U.S. economy.

“But the last minute changes the Senate made stepped back from the most cataclysmic impacts,” he said, like “skyrocketing electricity rates” and “the possibility of brownouts or blackouts” as a result of lack of electricity supply.

“While the commence construction or placed in service dynamic remains complex and open to a bit of interpretation, I think you see more flexibility for project development, which is important in this as a whole,” Godfrey said. However, he added, “I think our message as we move forward in this process is it's really important not to see further backsliding.”

Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, said in a release that “despite limited improvements, this legislation undermines the very foundation of America’s manufacturing comeback and global energy leadership.”

American Clean Power Association CEO Jason Grumet said the group “[appreciates] the members of Congress who worked to get this legislation to a better place” but called the bill a step backward for American energy policy.

Chirag Lala, director of energy at the Center for Public Enterprise, said in a Monday interview, “Across different provisions of this bill, what you have is either a) subsidies being outright taken away, and/or b) for the provisions that do exist, increased uncertainty across the board facing these developers. And in this kind of environment, that tends to chill investment.”

Advait Arun, a senior associate for energy finance with CPE, said Monday that even without the excise tax, the new foreign entity of concern rules would hamper clean energy development.

“[Those are] going to take years to implement and get regulation around, and the uncertainty applied so quickly in the meantime to existing projects is going to get a lot of developers pulling out of projects,” he said.

Lala echoed this, saying, “The FEOC provisions may well make the credits unusable for their respective developers because of just how uncertain implementation of those provisions are.”

“This is not something you're likely to get clarity on even in a year's time outside of passage,” he added. “The federal government, even when it wasn't being subject to staffing cuts, is notoriously slow on critical rulemaking. It was slow when you had an administration committed to the expansive implementation of these credits.”

Lala said there is a “burgeoning conversation among energy policy experts” about whether a slowdown in solar and storage investment might endanger grid reliability.

Coalition for Community Solar Access President and CEO Jeff Cramer said Monday that he thought the proposal of an excise tax on wind and solar was “a coordinated campaign to [move] the goalposts” from renewable energy opponents and “a small fringe set” of the Republican party.

“I think the 2027 ‘placed in service’ deadline is really impossible and irrational,” he said. “Certainly the drafters of this have never built a power plant, as these developers can't necessarily control interconnection timelines from the utilities and a number of other issues.”