Editor’s note: This story was published on July 1, when the Senate passed the reconciliation bill. On July 3, after several hours of back-and-forth, the House passed it as well. Only two Republicans — Brian Fitzpatrick of Pennsylvania and Thomas Massie of Kentucky — voted against the bill.
The Senate’s treatment of clean energy tax credits became a sticking point for the House Freedom Caucus, who wanted deeper and more immediate cuts. It’s still not entirely clear why those initial holdouts, who were opposed to changes made to the bill in the Senate, changed their minds. However, they reportedly received assurances from Trump that he would implement his own crackdown on the clean energy industry.
The final bill, in essentially the same form passed by the Senate, now heads to President Trump’s desk.
The Biden administration’s assumption that concentrating clean energy jobs and investments in Republican districts would help insulate the Inflation Reduction Act from repeal has largely proven to be a wild miscalculation.
In the last month, the industry has experienced legislative ricochet over the budget bill that GOP lawmakers are using to pull back IRA provisions. In May, the House’s version of the bill caught the industry off guard with its massive cuts to federal incentives across the board. Draft language out of the Senate Finance Committee in mid-June slightly moderated those cuts.
But then the Senate’s first full draft of the bill, unveiled just before midnight on Friday, not only accelerated the phase-out of credits but also introduced a surprise excise tax on some wind and solar projects.
After nearly 24 hours of back and forth — and a weekend of frenzied industry lobbying — the Senate voted this afternoon to pass a version of its enormous budget bill that adheres closely to that Friday draft, despite calls from industry and labor groups around the country to mediate the cuts.
Heading into Monday night the industry was hopeful that amendments proposed by a handful of Republicans to soften cuts to wind and solar would make it into the final version. But as the vote-a-rama intensified in the early hours of Tuesday morning, it became clear that clean energy wasn’t a high priority for key holdouts. As Chris Moyer, who leads climate and energy policy firm Echo Communications Advisors, put it, “despite letters, statements, and expressions of concern from a handful of Republican senators, none of it made a difference.”
The Senate’s final version, passed this afternoon in a 51-50 vote, “is even worse than the House version,” Moyer added. In other words, rather than improving since May’s “holy shit moment” when House Republicans first unveiled their proposed cuts to the IRA, the last 72 hours have instead been a backslide for the industry.
That said, the outcome could have been even worse, policy experts told Latitude Media this morning. Despite fears that the sector would be first on the chopping block as fiscal conservatives negotiated to bring down the price tag of the bill in the amendment process, no new cuts appear to have made it into the final text.
Despite letters, statements, and expressions of concern from a handful of Republican senators, none of it made a difference.
But reconciliation still isn’t over. Given the disparities between the final Senate bill and the version that passed the House with a razor-thin margin, “it’s not a done deal,” Moyer said, and therefore clean energy’s lobbying marathon is still not over. However, he added, it’s “hard to see” how the bill could improve for clean energy in the House, and there’s even the potential that things could get worse still.
The excise tax on wind and solar is out
The biggest (and most unpleasant) surprise for clean energy in the Senate’s weekend bill was an excise tax on some solar and wind projects based on components sourced from China and other countries on the U.S. list of prohibited foreign entities. The tax’s removal from the final bill was the most significant change on the clean energy front.
Nobody, not even Republican Senators, seems to know exactly where that provision came from. But it faced significant pushback from clean energy developers, labor, and business groups, as well as from some Republicans, including Alaska Senator Lisa Murkowski, who was at the center of efforts to mitigate the final bill’s damage to clean energy.
Removing the excise tax was the best-case scenario for the clean energy industry heading into last night’s vote-a-rama, Power Brief CEO Jason Clark told Latitude Media yesterday.
Wind and solar credit phase-outs were delayed by a year
Both versions of the Senate bill slashed tax credits for clean energy technologies: Credits for both investment in and production of wind and solar will still phase out at the end of 2027. (The IRA originally made the credits available through at least 2032 for most projects.)
The final bill gives some projects a little bit of additional time to get underway. Projects that break ground within 12 months of the bill’s passage — presumably mid-2026 — can still qualify for credits, even if they don’t come online by 2027.
Projects beginning construction in 2026 and beyond must be placed in service by 2027 to qualify. That’s a small tweak from the weekend draft of the bill, which offered a tiered phase-out based on when projects broke ground. It’s a compromise included at the last minute overnight to help pull swing votes like Murkowski and other senators with significant renewables projects underway in their states.
It still doesn’t go nearly as far as some had hoped: An amendment authored by Senator Joni Ernst (R-Iowa) and supported by Murkowski and Chuck Grassley (R-Iowa) would have greatly extended eligibility by allowing projects that started construction by the end of 2027 to qualify. It also sought to eliminate the excise tax. That amendment never came to the floor for a vote, however, and the elimination of the excise tax was the only element of Ernst’s proposal that made it in the final bill.
Residential solar, however, did not get most of the improvements advocates sought in the wake of the House bill. The Senate’s weekend draft proposed phasing out the 25D tax credit 180 days after the bill was signed; the final version opted for the House’s (very similar) timeline of December 31, 2025.
But one bright spot for residential solar came in the form of tweaks to treatment of the 48E technology-neutral investment tax credit. While both the House bill and the Senate’s weekend draft excluded residential solar leases and PPAs from qualifying for the credit, the final Senate version removes those restrictions, though projects not under construction within 12 months must be operational by the end of 2027 to qualify.
Restrictions on ties to China were pushed back several months
Congress is using the federal list of “foreign entities of concern” to impose more stringent requirements on companies receiving federal tax credits, by withholding credits from projects and products with ties to China and other countries on the list.
While the Senate bill retained most of the House’s broad restrictions on ownership, contracts, or supply chain inputs with connections to China, it pushed the compliance start date out to January 1, 2026, giving developers several extra months.
To qualify for credits, the percentage of a project’s total costs that are connected to China must be below a certain threshold, which would increase over time. That said, clean energy advocates still largely agree the rules are overly restrictive and lack enough clarity for projects to act on.
Hydrogen advocates (mostly) got what they asked for
The domestic hydrogen industry is one of the few whose frantic lobbying efforts in the final days of the Senate’s reconciliation work paid off.
The House bill terminated the 45V credit for any hydrogen facilities not already under construction by the end of 2025. Given the challenges of building massive industrial projects like the federal hydrogen hubs, advocates said that timeline was unworkable.
So in the last few weeks of June, the industry took a “surgical” approach to saving 45V, and rallied around a single ask: Extend the credit through the end of 2029, to allow domestic hydrogen production to get off the ground.
They got close to what they asked for. The final Senate draft extends the commence construction deadline to January 2028 — two extra years.
That improvement, explained Frank Wolak, head of the Fuel Cell & Hydrogen Energy Association, is largely thanks to the industry’s champions in the Senate, Shelly Moore Capito (R-W.V.) and Bill Casidy (R-La.). Both Senators represent states set to host federal hydrogen hubs expecting billions in funding from the Department of Energy.
The extension, Wolak said in a statement Tuesday, “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.”
Energy storage kept its head down
Despite a last-minute amendment that attempted to eliminate all storage credits at the end of this year, energy storage emerged from the vote-a-rama with its federal incentives largely intact. The accelerated phase-outs that hit wind and solar in both the House and Senate versions — placed-in-service deadlines at the end of 2027 — notably do not apply to storage.
Energy storage projects can continue to qualify for both the 48E investment tax credit and the 45Y production tax credit under the original IRA timeline, and the IRA expansion of the ITC to include standalone storage remains in effect.
One small setback for storage comes in the form of an accelerated phase-out of the 45X manufacturing credit. While batteries produced and sold until the end of 2029 can qualify for the full credit, just like in the IRA, the Senate bill phases out the credit more quickly after that date. Batteries sold after December 31, 2031 will not qualify for any portion of the credit, which is one year earlier than in the IRA.
Another blow to the domestic battery supply chain: The Senate’s bill also removes the permanent status of the 45X critical minerals credit, phasing it out completely by 2034.
Join Latitude Media’s special briefing on the Reconciliation Bill on Thursday, July 10. Senior reporter Maeve Allsup will be live with Jason Clark of Power Brief to discuss the on-the-ground impacts. Register for free.
