Renewable sector advocates are warning that changes to federal incentives for clean energy proposed by Republicans will undercut the growth of new generation as demand on the power grid escalates.
Industry groups representing wind and solar companies were quick to critique the House Ways and Means Committee's portion of Republicans' budget bill for its potential to undercut President Donald Trump's objective of "energy dominance" by reducing the viability of resources on which the US will depend in the coming years.
The Ways and Means proposal "simply goes too far too fast", according to Jason Grumet, chief executive of the trade group American Clean Power Association.
"With energy demand surging, this is not the time for disruption," Grumet said. "It is possible to phase out incentives for clean energy investment, production and manufacturing without harming American consumers or businesses."
The Ways and Means bill would begin to sunset the 45Y production tax credit (PTC) and 48E investment tax credit (ITC) after 2028, with incentive values decreasing by 20 percentage points/yr from 2029 to 2031 before disappearing entirely in 2032. Moreover, the bill moves a key goalpost by pinning eligibility for both the PTC and ITC to a project's in-service date, rather than when it begins construction, which is currently the relevant deadline.
At present, the PTC and ITC will remain at current levels until the end of 2032 or when regulators determine that annual US electricity sector emissions are equal to or less than 25pc of their 2022 level, whichever comes later. Democrats who passed the law in 2022 intended the minimum 10-year window to give developers certainty when investing in projects, shifting from past practice when Congress often waited until the last minute to extend earlier versions of the incentives.
In addition, the Ways and Means bill would cancel the advanced manufacturing production credit, also known as the 45X credit, after 2031, rather than 2032, while completely disqualifying wind components after 2027. At present, wind turbine blades, nacelles and towers receive credits of 2¢, 5¢ and 3¢, respectively, multiplied by the total capacity, on a per watt basis, of the completed turbine in which those components are used. Offshore wind foundations receive similar incentives.
The legislation would also remove the ITC for residential clean energy installations after this year, up from 2034. The bill also would repeal credit "transferability" two years after the law takes effect for the PTC and ITC, and at the end of 2027 for the 45X credits, and restrict projects' eligibility for all three credits if its construction includes "material assistance from a prohibited foreign entity".
Republican lawmakers wrote their proposed changes with an eye on saving billions of dollars that they could use to partially offset over $5 trillion in expected tax cuts. But the updates would be particularly harmful for "local, red-state economies", according to Solar Energy Industries Association chief executive Abigail Ross Hopper. Over three-fourths of factories and investments threatened by the changes are located in regions represented by Republicans, and the changes will force "hundreds" of factories to close, raise electricity bills and damage grid reliability, she said.
The loss of the manufacturing credits could be particularly harmful to the offshore wind industry's supply chain, "threatening billions of dollars of investments in the Midwest, Mid-Atlantic and American South", according to Stephanie Francoeur, senior vice president of marketing and communications at offshore wind business group the Oceantic Network.
