Efforts by U.S. House committees to mark up the “One, Big Beautiful Bill” that includes most of President Donald Trump’s legislative goals could so complicate energy tax credit provisions as to make those instruments difficult to use at all.
Under proposed changes, the production tax credit and investment tax credit not only would be rolled back sooner than set out in current law, but restrictions on foreign ownership and a requirement that projects be completed to qualify for credits (rather than just be under construction) would make them much less useful for developers. (See Budget Bills Would End Energy Tax Credits Early, Claw Back Other Funding.)
“With all the unpredictability of Trump’s up-and-down tariff-taxes, the supply chain difficulties and the natural disasters that are made worse by climate change — all this chaos, no project developer worth his salt can actually guarantee when their facility will be placed in service, can they?” House Ways and Means Committee Ranking Member Lloyd Doggett (D-Texas) said at a markup hearing May 13.
Uncertainty always is bad for a capital-intensive industry and the end of the tax credits would mean ratepayers would pay more for electricity, JC Sandberg, chief of policy at the American Clean Power Association, said during a May 13 webinar hosted by the World Resources Institute (WRI).
“I think what came out of the House is hard,” Sandberg said. “It starts to look a lot like repeal.”
But it’s still early in the process, and Sandberg and others on the webinar said the language around key tax credits could change before the bill winds up on the president’s desk.
A group of four GOP senators, which is enough to erase the party’s majority in that chamber, issued a letter in April urging their colleagues against fully repealing the energy tax credits. The senators are Lisa Murkowski (R-Alaska), John Curtis (R-Utah), Thom Tillis (R-N.C.) and Jerry Moran (R-Kan.).
“Many American companies have made substantial investments in domestic energy production and infrastructure based on the current energy tax framework,” they wrote. “A wholesale repeal, or the termination of certain individual credits, would create uncertainty, jeopardizing capital allocation, long-term project planning and job creation in the energy sector and across our broader economy.”
There is pressure from another side of the GOP caucus to go further than the House’s proposal, with Energy and Natural Resources Committee Chair Mike Lee (R-Utah) introducing a bill called the Energy Freedom Act to completely repeal more than 20 “green energy subsidies” passed or expanded by the Inflation Reduction Act.
“America’s energy policy should be about keeping the lights on and costs low — not lining the pockets of special interests,” Lee said in a statement. ”The Biden administration’s green energy subsidies have rigged the market, driven up costs, and left our grid more vulnerable.”
‘Incredibly Complicated’
The new uncertainty around tax cuts comes as load growth continues apace and the other main option for addressing the growth — natural gas-fired generation — is seeing rising costs with no plans to expand the supply chain for power plant components, WRI Senior Fellow Jigar Shah said.
“I think we’re in a situation right now where there’s a lot of legislating by Twitter and not enough actual planning that’s being done through physics, right?” Shah said on the webinar. “We will end up getting to the other side. It is very obvious that clean energy technologies are now the most cost-effective way to meet all of our load growth.”
GE Vernova has no plans to expand its production of turbines and instead is producing as many as it can with its existing facilities and is happy to sell them at three times the old price, the former Biden administration official said.
Shah added that new natural gas is roughly $95-$100/MWh, with solar and storage coming in below that even at their “wildest” costs.
Developers also could have difficulty complying with another aspect of the tax bills: how to comply with language around “foreign entities of concern,” which would include using components manufactured in China. While the U.S. clean energy industry is working to reshore its manufacturing base, sourcing every nut and bolt domestically never will make sense, ACP’s Sandberg said.
“I think there are ways to do that that don’t completely destroy what’s already being built and what’s already happening in a transition,” Sandberg said. “I think what’s currently in front of us from House Ways and Means is incredibly complicated. It’s very cumbersome. It’s not entirely clear on a lot of areas.”
As written, the bill could disqualify projects from the tax credits if “any part” of their supply chain comes from China, Sandberg added. As the legislation works its way through Congress, all that could change, he said.
Even without the uncertainty from changes to tax credits, the industry already was facing a hard push to expand infrastructure, former FERC Commissioner Allison Clements said on the WRI webinar.
“The tax legislation is the latest kind of thunderstorm/lightning storm in the challenges that this administration has thrown forward relative to the development of new infrastructure in this country. But behind that, you still have a kind of constant drizzle of the regulatory lag and challenges to facilitate infrastructure development,” Clements said.
Clements was on the commission when it passed orders 2023 and 1920 to speed up generation interconnection queues and expand the grid. But she noted Order 2023 will not really start to make an impact for another year and Order 1920 will not lead to any actual new transmission plans until the end of the decade.
“How do you hook more stuff onto the grid we’ve already paid for?” Clements asked. “We have to operate the existing system more efficiently.”