Final GOP bill kneecaps renewables and hydrogen but lifts nuclear and geothermal
Washington D.C. – In a significant legislative maneuver, Republican lawmakers on Thursday passed a reconciliation act that substantially rolls back provisions of the Inflation Reduction Act (IRA), reshaping the landscape for clean energy incentives across the United States. The bill, which secured passage with a vote of 218-214 and now awaits President Donald Trump’s expected signature, promises profound shifts for various energy sectors.
The legislation delivers a considerable blow to solar, wind, and clean hydrogen initiatives, which will see their existing incentives significantly curtailed. In contrast, nuclear and geothermal energy projects are set to retain a portion of their benefits previously allocated under the IRA. This final version largely aligns with the proposal that emerged from the Senate Finance Committee in mid-June, though it offers slightly extended timelines for claiming clean energy tax credits compared to its earlier draft.
For solar and wind developers, the path to accessing tax credits has become considerably narrower. Projects must now either be connected to the grid by the close of 2027 or break ground on new developments within 12 months of the bill’s enactment. This accelerated timeline poses a direct challenge to the rapid expansion seen in these sectors.
The data center industry, a major consumer of energy, may face some of the most significant headwinds. For years, hyperscalers and developers have increasingly relied on solar, wind, and battery storage solutions to secure inexpensive and quick power. The relatively short completion times for solar farms, typically 12 to 18 months, stand in stark contrast to the backlogs for new natural gas turbines, which often stretch into the early 2030s. This shift could complicate their energy procurement strategies and potentially slow down expansion in the sector.
Climate tech startups are also bracing for impact, with green hydrogen initiatives expected to feel the most acute pain. Tax credits, previously valued at up to $3 per kilogram of hydrogen, are now slated to expire at the end of 2027. This premature sunset marks a five-year acceleration from their original scheduled phase-out under the Inflation Reduction Act, posing a substantial financial challenge for burgeoning hydrogen companies.
While geothermal, nuclear, and battery storage projects have seen their tax incentives preserved through the end of 2033, new regulations pertaining to “foreign entities of concern” introduce a fresh layer of complexity. These rules could make it considerably more challenging for even these favored energy types to secure the coveted tax credits, adding an element of uncertainty to their future development.
