On Tuesday, July 1, the U.S. Senate passed its version of the budget and tax bill, which will now return to the U.S. House. The Senate bill takes an ax to energy tax credits—primarily solar and wind—compromising local investment and jobs, while undermining energy security. Additionally, it is expected to drive higher electricity bills, as energy demand surges due to less clean energy investment and slower supply growth. However, several legislators managed to achieve a more gradual phaseout for solar and wind power, and a last-minute amendment that targeted energy was removed. “It’s hard to say I’m psyched about a bill that’s a step back on energy policy, but it’s considerably improved,” Jason Grumet, CEO of the American Clean Power Association (ACP), said to Bloomberg.
Clean Vehicle Tax Credits
Tax credits that help subsidize the cost of clean and electric vehicles, including the Section 25E Used Clean Vehicle Credit, the Section 30D New Clean Vehicle Credit, and the Section 45W Commercial Clean Vehicle Credit, will end on September 30, 2025. This is a slightly shorter timeline than in the House version, which maintained the used vehicle and commercial vehicle credits through the end of this year and the new vehicle credit in limited form through 2026.
On the other hand, while the Section 30C Alternative Fuel Vehicle Refueling Property Credit was set to terminate at the end of this year in the House version, it was extended through June 30, 2026, in the Senate version. For a slightly more extended period, installations for charging electric vehicles and storing or dispensing clean fuels will be eligible for this tax credit. For individuals, the credit is available for 30% of the equipment cost, with a maximum credit of $1,000.
Photo Courtesy ChargePoint
Residential Energy Tax Credits
Tax credits that help subsidize the cost of energy-efficient technologies, heat pumps, and rooftop solar, including the Section 25C Energy Efficient Home Improvement Credit and the Section 25D Residential Clean Energy Credit, will end on December 31, 2025. This timeline is identical to the one outlined in the House version.
On the other hand, the Section 45L Credit For Builders Of New Energy-Efficient Homes was set to terminate at the end of this year in the House version, with an extension through the end of 2026 for those who started construction before May 12. The credit was given a hard deadline of June 30, 2026, in the Senate version. Until then, contractors building or substantially reconstructing new energy-efficient homes will be eligible for this $5,000 tax credit per home.
Photo Courtesy American Council for an Energy-Efficient Economy
Investment And Production Tax Credits
The technology-neutral Section 48E Clean Electricity Investment Credit, which helps facilitate the construction of clean energy and fuel facilities, and the technology-neutral Section 45Y Clean Electricity Production Credit, which is available to producers of clean energy and fuels, both received better treatment in the Senate than in the House. In the House version, the projects had to begin construction within 60 days of the bill’s enactment and begin operations before the end of 2028 to take advantage of the credits. Geothermal projects, in particular, were required to commence construction by the end of 2031, and nuclear projects were required to begin construction by the end of 2028. In the Senate version, these credits are available for all technologies, except solar and wind, as long as they begin construction before the end of 2033, when they are scheduled to phase out, as provided under current law, by 2036. Technologies like batteries, geothermal, hydrogen, and nuclear, in particular, will benefit from this longer timeline. “Clean firm sources of power are now bipartisan. Republicans had a sledgehammer available to them and decided not to use it on a couple key technologies,” Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress, told the New York Times. However, energy storage narrowly escaped the fate of solar and wind. According to Latitude Media, an amendment unsuccessfully attempted to cut all of the industry’s credits at the end of 2025.
Despite the Senate bill phasing out tax credits for large-scale solar and wind projects on a more expedited timeline than under current law, they were given a one-year extension compared to earlier versions of the bill. In the House version, solar and wind projects would need to begin construction within 60 days of the legislation’s enactment and be operational by the end of 2028 to qualify for the tax credit; in the Senate version, projects need to begin construction within one year of enactment or be operational by the end of 2027.
New York Times reporter Brad Plumer explained, “The Senate bill gives a slightly longer window for new projects to begin construction and still qualify for the full tax break.” Senator James Lankford (R-OK) reacted, “Those folks that are already in line, that have already got investment dollars, that are already going — they’re going to fall in this one year. They’re going to get some construction in the ground in the next 12 months. I don’t think they’ll have a challenge doing that.” Notably, Senators Joni Ernst (R-IA), Chuck Grassley (R-IA), and Lisa Murkowski (R-AK) intended to go even further with an amendment that would have allowed projects to begin construction at any time before the end of 2027 to receive the credit.
An additional advantage that the Senate bill has over its House counterpart is its handling of solar leasing. Under the House version, leased property was ineligible for the investment tax credit and the production tax credit. Under the Senate version, however, the disqualified leased properties only include solar water heaters and small wind. Shares in Sunrun Inc., for example, went up approximately 10% as a result.
Hydrogen is also a major winner in the Senate’s legislation. Meanwhile, the Section 45V Clean Hydrogen Production Tax Credit was set to end at the end of this year in the House version, but it was extended through the end of 2027 in the Senate version. Although earlier than the 2033 date that the credits would have seen under current law, producers gained an extra two years to qualify under the Senate’s bill than under the House’s. Frank Wolak, president and CEO of the Fuel Cell & Hydrogen Energy Association, credited Senators Shelly Moore Capito (R-WV) and Bill Casidy (R-LA) with this success, noting that it “gives the industry an opportunity to advance a significant round of projects that will jump start the U.S. hydrogen market, including the crucial Regional Hydrogen Hubs.”
Photo Courtesy Solar Energy Industries Association
Manufacturing Tax Credit
One of the most significant changes to the Section 45X Advanced Manufacturing Production Tax Credit is the addition of metallurgical coal, which is used in the steelmaking process, as a qualifying critical mineral. The Senate version also phases out the credit for critical mineral producers on a longer timeline than the House version, starting in 2031 and concluding in 2033, rather than starting in 2030 and concluding in 2031. However, this is still a significant loss compared to the current law, under which critical minerals enjoyed permanent qualification for 45X. Otherwise, like the House version, the Senate version still eliminates the credit for wind components produced and sold after 2027.
Additionally, the restriction on using parts from foreign entities of concern (FEOC) – China, Iran, North Korea, and Russia – to qualify for tax credits presents a significant obstacle that is similar in both the House and Senate versions. The supply chain restrictions become more stringent over time, starting at 40% free of FEOC connections in 2026 and increasing to 60% by 2030. The timeline for energy storage is even more aggressive: 55% in 2026 and 75% by 2030. However, a significant departure from the Finance Committee text includes an exception for companies with procurement contracts in place before the bill is enacted.
Although the compliance date was extended to the beginning of next year, experts note that the uncertainty surrounding these restrictions is likely to hinder the advancement of many projects. “The FEOC provisions may well make the credits unusable for their respective developers because of just how uncertain implementation of those provisions are,” Chirag Lala, director of energy at the Center for Public Enterprise, explained to Utility Dive. “This is not something you’re likely to get clarity on even in a year’s time outside of passage. 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.”
Photo Courtesy American Clean Power Association
Excise Tax
One of the biggest successes in the bill is the rejection of an excise tax on wind and solar energy projects that was added at the last minute to the Senate bill to penalize the use of parts from foreign entities of concern. Rhodium Group analysts told Politico that the tax would have increased the costs of solar and wind projects by 10% to 20%, which “will lead to even lower wind and solar installations. The impacts of this tax would also flow through to consumers in the form of higher electricity rates.” ACP, meanwhile, estimated that the excise tax would cost clean energy businesses an additional $4 billion to $7 billion by 2036, while increasing consumer electricity prices by between 8% and 10%.
Colin Hayes, a former GOP staffer for the Senate Energy and Natural Resources Committee, described it to Heatmap News as “as one of the more misguided ideas anyone has come up with — from either party — in a very long time.” Before the section was removed from the bill, ACP’s Grumet reacted, “These new taxes will strand hundreds of billions of dollars in current investments, threaten energy security, undermine growth in domestic manufacturing and land hardest on rural communities who would have been the greatest beneficiaries of clean energy investment.”
The Fate Of American Energy
Despite some positive changes compared to the House version, the Senate bill will still harm American innovation and economic growth by shortening the lifetimes of the tax credits. Following the Senate’s passage, the Center for Climate and Energy Solutions (C2ES) and Greenline Insights released an analysis estimating the consequences of the bill. If the house passes it in its current form, the study estimates that the next decade will see 1.68 billion jobs lost, $197 billion in lost wages, and $290 billion in lost GDP. Based on the version of the Senate bill seen on June 28, Energy Innovation estimated that 770,000 jobs would be lost by 2030 and $960 billion in GDP would be lost during the reconciliation window.
“This bill will strand thousands of energy projects under development, jeopardize billions of dollars in private investment, and kill hundreds of thousands of good-paying American jobs — from electricians to contractors to local landowners and farmers who rely on these projects for stability,” Jeff Cramer, president of the Coalition for Community Solar Access, told Reuters. Energy Innovation estimated that generation capacity would fall by 300 gigawatts by 2035, at a time of rising energy demand from artificial intelligence and data centers, with wholesale electricity prices increasing by 61% and wholesale electricity costs rising by 56%.
As the House takes up the bill, industry leaders urge their representatives to fight for clean energy. “If this bill becomes law, families will face higher electric bills, factories will shut down, Americans will lose their jobs, and our electric grid will grow weaker… As the House reconsiders this legislation, every member should ask themselves what kind of future they’re voting for. Our communities, our businesses, and our futures are on the line,” Abigail Ross Hopper, president of the Solar Energy Industries Association (SEIA), said in a statement.
“The bill will raise energy costs and make it harder to keep the lights on. No one asked Congress to make their energy bills even higher. Taking away incentives for energy-saving improvements would raise monthly bills for families and businesses. It will only exacerbate the growing strain on the electric grid. And the bill goes out of its way to encourage automakers to produce inefficient cars that are costly to fuel,” reflected Steven Nadel, executive director of the American Council for an Energy-Efficient Economy (ACEEE).
“Meeting the ever-increasing energy demands of a growing American economy, including expanding manufacturing and AI technology sectors, while also keeping electricity prices in check for American families and businesses, will require every possible electron… As this bill moves back to the House, we encourage members to maintain their support for these critical tax provisions, which bolster domestic energy generation to secure true American energy dominance,” noted Heather Reams, president of Citizens for Responsible Energy Solutions (CRES).
Ray Long, president and CEO of the American Council on Renewable Energy (ACORE), added, “The clean energy industry will keep building, keep hiring, and keep innovating. And we will continue to work with policymakers who believe that American energy leadership must include all technologies, including wind, solar, and storage – because our economy, our grid, and our global standing depend on it.”
Photo Courtesy Citizens for Responsible Energy Solutions
