The US House Committee on Ways and Means has proposed an earlier phase-out of the clean energy tax credits
It will end incentives for solar manufacturing a year before the scheduled end under the IRA
US renewable energy industry associations see it disrupting the domestic industrial buildout plans
ROTH sees it as a better-than-expected outcome for the phase-downs, though the final version of the bill is awaited
The Republican Party-led US House has introduced a draft reconciliation bill that proposes to accelerate the elimination of clean energy tax credits provided under the Inflation Reduction Act (IRA) cleared by US President Donald Trump’s predecessor, Joe Biden.
The US House Committee on Ways and Means has proposed its The One, Big, Beautiful Bill that it says supports pro-worker tax provisions and will help rebuild the economy.
It will impact incentives for solar, wind and electric vehicles (EV) investments; however, the change is not drastic as feared since it proposes to bring forward the elimination of clean energy tax credits for wind, solar and electric vehicles (EV) by one year.
Under current laws, the clean energy tax credits for inverters, solar and wind energy components, and battery components are to be phased out completely by December 31, 2032 (see Inflation Reduction Act 2022 Now A Law).
The draft proposes to accelerate the termination of advanced manufacturing production credit under Section 45X by December 31, 2031, while transferability is repealed for components sold after December 31, 2027. It proposes the complete elimination of wind energy components sold after December 31, 2027.
Additionally, the draft proposes to phase out clean electricity production credit with a 20% credit reduction for facilities placed in service during calendar year 2029, a 40% reduction for those coming online in 2030, a 60% for facilities put in service in 2031, and zero credit available after December 31, 2031.
For the residential solar and storage segment, the value of credit is 30% of the expenditures through December 31, 2032, phased down to 26% in 2033 and 22% in 2034. The draft tax legislation accelerates the expiration of these credits to December 31, 2025.
Analysts at ROTH say the draft shows ‘better than expected outcome for the phase downs’ and that it is an overall positive for several utility-scale as well as residential leasing-scale solar companies. “Our checks post-draft bill release suggest that the IRA adders (domcon, energy community, and low-income) remain intact and would be subject to the same phase down as the ITC,” observes ROTH’s Managing Director, Sr. Research Analyst Philip Shen, who believes this could be a meaningful benefit for several local companies. He adds that since this is only the 1st draft of the proposed legislation, it may undergo changes in the future.
Yet, Solar Energy Industries Association (SEIA) President and CEO Abigail Ross Hopper fears that this legislation will ‘effectively dismantle the most successful industrial onshoring effort’ in the country’s history.
“This legislation will cause hundreds of American factories to close, eliminate tens of thousands of jobs, force electric bills to skyrocket for everyone, weaken the reliability of our electric grid, and eliminate our capacity to compete with China,” Hopper added. “This disruption would devastate local, red-state economies, with more than 75% of at-risk factories and investments concentrated in these communities.”
According to the President and CEO of the American Council on Renewable Energy (ACORE), Ray Long, the country needs to build the equivalent of adding 12 New York Cities of new power by 2030 to remain competitive with China in the global AI race. To keep up with this demand, it is necessary to maintain certainty around the existing tax policies that have so far mobilized $115 billion in new clean energy generation, he argued.
Nevertheless, in an op-ed for the Wall Street Journal, Congressman and Chairman of the House Committee on Energy and Commerce Brett Guthrie said the proposed draft bill will end spending on ‘Green New Deal-style waste.’
“The legislation would reverse the most reckless parts of the engorged climate spending in the misnamed Inflation Reduction Act, returning $6.5 billion in unspent funds,” wrote Guthrie.
He added, “This bill would claw back money headed for green boondoggles through 'environmental and climate justice block grants' and other spending mechanisms through the Environmental Protection Agency and Energy Department.”
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