By Christa Marshall | 06/04/2025 06:49 AM EDT From spiraling job losses to spiking energy prices, analysts say slashing clean energy tax credits would be a dramatic shift in U.S. energy and industrial policy. Senate Majority Leader John Thune (R-S.D.) speaks with reporters outside his office at the U.S. Capitol on Monday. Francis Chung/POLITICO The Senate is starting to weigh changes to the House megabill that passed last month with billions of dollars’ worth of tax credits for low-carbon energy hanging in the balance. A critical group of moderate Republicans say the Senate should reconsider the House’s rapid phase down of tax credits for wind, solar and battery manufacturing, among other clean energy sources. But GOP leaders are facing pressure from fiscal hawks to make deeper spending cuts. And the White House is pushing for legislation to land on President Donald Trump’s desk this summer. Tesla CEO Elon Musk weighed in Tuesday and called the House bill a “disgusting abomination” filled with pork on X, prompting Kentucky Sen. Rand Paul and other Republicans to back him up with social media posts agreeing the bill should be changed. Advertisement In response to Musk, White House press secretary Karoline Leavitt said Tuesday “it doesn’t change the president’s opinion. This is one big, beautiful bill.” For the two energy industries adding the most capacity to the electric grid this year — solar power and utility-scale batteries — the outcome in the Senate couldn’t be more critical for their futures. As the policy debate revs up on Capitol Hill, here are four questions answered on how the budget reconciliation process may affect solar, onshore wind and batteries. Which provisions would most affect wind and solar? There are multiple provisions in the House megabill that would hinder solar and wind, but two in particular are cited frequently by analysts. One involves tight timelines to start and complete projects. Currently, the language calls for projects to commence construction within 60 days of the bill becoming law to qualify to receive technology-neutral investment and production tax credits. The timeline would block most initiatives, according to analysts. Developers also would have to ensure a project is placed in service by 2028 to receive credits, rather than an earlier plan to phase out incentives after 2031. Secondly, “foreign entities of concern” requirements that would kick in by 2026 could stymie projects. The language mandates that projects not receive “material assistance” with minerals and key components from countries such as China, Russia and North Korea to obtain tax credits. Robbie Orvis, senior director of modeling and analysis at Energy Innovation: Policy and Technology, said either provision alone — the timelines or “foreign entity” language — would be enough to block most wind and solar installations from receiving tax credits. To comply with the language, industries would have to set up a complex tracing system for their supply chains within a few months. “There’s no way the industry will ever be able to set that up on that time frame,” said Orvis. Sylvia Leyva Martinez, a solar analyst at Wood Mackenzie, said that “there is more work to be done in the Senate,” as the foreign entity language is vague, adding to confusion for developers. Without more clarity, the language could be “impossible” to implement at the Treasury Department, according to the Battery Materials & Technology Coalition, American Critical Minerals Association and Battery Advocacy for Technology Transformation group. Another obstacle for wind and solar is text blocking tax credit eligibility for projects financed through leasing arrangements in the residential sector. Currently, many rooftop solar projects operate through leasing, allowing customers to utilize panels even though they don’t own the system. If the language remains, it could force the residential solar industry to “reevaluate its entire business model,” said a research note from the law firm Paul Hastings. How would axed tax credits change deployment? It depends on the industry, and there are varying numbers, but most analysts agree that the effect on renewables, including solar and wind, could be devastating. Research firm BloombergNEF called the bill’s effects a “nightmare scenario” for clean energy advocates. Wood Mackenzie said it is a “sledgehammer disguised as a scalpel.” Rhodium Group found the bill language as it is today would reduce the amount of clean capacity added to the grid by 2035 by 57 to 72 percent. An analysis from Princeton University researchers concluded the House text could increase U.S. greenhouse gas emissions annually by 1 billion metric tons in a decade. The House megabill is “tantamount to a full repeal” of the Inflation Reduction Act, said Orvis. The Solar Energy Industries Association released a report Tuesday breaking down potential job losses in every state if the House package became law. The group has said there could be 300,000 lost jobs overall. “Lost jobs in every single state are a recipe for disaster for American families, businesses, and the U.S. economy,” said SEIA president and CEO Abby Ross Hopper in a statement. But Martinez, the Wood Mackenzie analyst, said the solar industry would not be fully decimated if tax credits were to be repealed. She noted that solar’s levelized cost of electricity is competitive with other fuels and there are existing challenges with bringing natural gas online, such as backlogs of turbines. If full rollbacks of credits occur, it would most affect smaller solar developers who don’t have much flexibility to renegotiate power purchase agreements, she said. Larger players “that have the ability to pass on costs” likely would be able to continue solar projects. But she noted it could mean utilities pass on higher costs to ratepayers. BloombergNEF has projected that under a full tax repeal, more than 80 percent of wind and solar projects would still get built. “Still, a 17% cut in renewables construction at a time when electricity demand is growing and gas turbine infrastructure is increasingly scarce is a recipe for spiking power prices,” the firm said in a research note. What about grid batteries? The hit to grid batteries could be greater than to wind and solar generally. “Battery storage is absolutely one of the hardest hit, if not the hardest hit” under the House language, said Morgan Brummund, advocacy manager at the Center for Climate and Energy Solutions (C2ES). On the deployment side, many of the same provisions that would affect wind and solar, such as rollbacks of technology-neutral tax credits, could affect storage. The battery supply chain is heavily reliant on Chinese minerals and components, which would kick in the foreign entity requirements. The foreign entity provisions alone could reduce battery storage deployments approximately 89 percent by 2035 in comparison to where the industry would be otherwise, according to C2ES modeling. Any decline could have implications not just for renewables but grid reliability, as storage can help meet electricity demand peaks. The House language also could affect battery manufacturers. “The vast majority of U.S. solar and battery factories — which together account for the bulk of the clean-tech manufacturing pipeline — are downstream solar module and battery cell factories. Their relatively higher reliance on upstream components renders all the more fraught efforts to comply with the anti-China provisions,” BloombergNEF analysts said. The industry already has been under strain because of tariffs, shifting policy at regional grid operators and pushback against some projects at the local level. How will provisions change in the Senate? It’s unclear. According to an analysis last month from E2, the majority of clean energy projects since the passage of the Inflation Reduction Act have been in Republican congressional districts. That didn’t change the outcome in the House, even though some members said they thought the cuts were too deep. Some Senate Republicans have been supportive of Inflation Reduction Act tax credits. In April, GOP Sens. Lisa Murkowski of Alaska, Thom Tillis of North Carolina, John Curtis of Utah and Jerry Moran of Kansas sent a letter to Majority Leader John Thune (R-S.D.) saying a full-scale repeal of tax credits, including for renewable power, could lead to “significant disruptions for the American people.” “Moderation may be likely simply because senators represent entire states, and diverse sectors’ multiplier effects can stretch across district boundaries,” ClearView Energy Partners said in a research note after passage of the House bill. The analysts noted that Thune hails from a state with a stake in wind energy and biofuels. On Capitol Hill on Tuesday, senators offered a few clues on which way they may go. Tillis, for example, called for changes to the foreign entity provisions and said he would not back the House bill language. The timelines for rolling back tax credits, the foreign entity language and the fate of “transferability” provisions for selling tax credits to third parties, which helps with project financing, are all areas of ongoing debate. Advocates are also watching the timeline for a phaseout of advanced manufacturing tax credits that have helped bring U.S. solar and battery plants online. Yet Republicans will be under pressure to toe the Trump line on “the Green New Scam” and give the party a legislative victory. In a research note Tuesday, research firm Jefferies said support from key lawmakers like Sen. Shelley Moore Capito (R-W.Va.) for potentially softening cutbacks to hydrogen tax credits won’t necessarily translate to other incentives that could affect wind and solar. “It seems that the budget hawks are eyeing anything and everything,” it said. Related Articles