The Senate Just Dropped a Sledgehammer on Clean Energy
A quick look at what's in the latest Senate bill
This story is a part of a larger series about Republicans’ current attempts to repeal the Inflation Reduction Act. You can read some recent stories in the series here, here, and here. I’m also posting a short article and data visualization about the bill everyday on LinkedIn. Come say hi!
Yesterday the Senate Finance Committee released their long-anticipated reconciliation bill and, with it, their plans to repeal the Inflation Reduction Act.
Going into the week, the consensus was that the “cooler heads” of the Senate would pass a much better bill than the disastrous one that came out of the House last month. But that consensus view appears to have been wrong.
The Senate’s bill is a slight improvement compared to the House version, but it still takes a sledgehammer to the IRA and threatens to slow clean energy deployment, raise energy prices, kill jobs, and make America less competitive with geopolitical rivals like China. Make no mistake: This is a bad bill that clean energy advocates should be doing everything to stop or revise significantly.
The bill phases out solar and wind tax credits starting in 2026 (6 months from now) and kills all of the IRA’s consumer tax credits outright within months. That timeline is better than the House bill’s draconian provision, which would have required projects to start construction within 90 days of the bill’s passage and reach final operation by the end of 2028. But it still puts many projects at risk.
The Senate bill contains a few other marginal improvements for clean energy development. It would allow developers to sell their tax credits (transferability), which makes it cheaper to develop projects. And most industry analysts believe the foreign entity of concern (FEOC) provisions are more workable than the House versions.
Nuclear, geothermal, and hydro projects emerged as the biggest winner of the Senate bill. If passed, the bill would have those tax credits last until the mid-2030s, a much more realistic timeline for projects that are likely to take decades to even get to the start of construction.
Battery storage also surprisingly made the list of technologies that would qualify for tax credits until the IRA’s original mid-2030s phase down. These projects face many headwinds due to how severely they’ve been impacted by tariffs. But if they can receive tax credits over the next decade, it will help reduce the cost of development and result in a more stable electric grid.
In today’s newsletter, I’ll share a summary of some of the most important clean energy provisions in the Senate bill. If you’re interested in reading the raw text, you can find it here. (A more readable version is here starting at Chapter 5).
A fast phase out for solar and wind tax credits
The Senate bill creates an aggressive timeline for eliminating solar and wind tax incentives, but gives developers more notice than the House version.
Under the Senate approach, solar and wind projects have until the end of 2025 to begin construction if they want to qualify for today's full investment and production tax credits. After that, the credits shrink rapidly:
2026: Projects receive only 60% of current credit values
2027: Projects receive only 20% of current credit values
2028 and beyond: No credits available
The “start of construction” requirement is much better than the “placed in service” requirement in the House bill.
It’s also worth noting that solar and wind projects can qualify as starting construction in one of two ways:
5% Safe-Harbor: A project is treated as having “begun construction” if the owner pays or incurs at least 5 % of the total project cost by 31 Dec 2025 and then makes continuous efforts toward completion (e.g., placing equipment orders, executing contracts, securing permits).
Physical work: Alternatively, a project qualifies once physical construction of a significant nature starts — such as pouring turbine foundations, installing tracker posts, or manufacturing custom transformers — and the developer maintains continuous construction thereafter.
Battery storage emerges as a surprise winner
Unlike solar and wind, battery storage projects emerged relatively unscathed from the Senate Finance bill's clean energy rollbacks.
While the clean electricity production and investment credits face significant phase-outs for wind and solar starting in 2026, battery storage projects can continue accessing the full clean electricity investment credit through the later phase-out timeline that applies to "all other qualified facilities" - meaning 100 percent of the credit through 2033, then gradual reductions to 75 percent in 2034, 50 percent in 2035, and zero by 2036.
This is good news for battery storage, especially considering how much tariffs have already raised prices for materials.
Nuclear, geothermal and hydro get preferred treatment
Nuclear, geothermal, and hydropower projects escape the harsh 2026-2028 phase-out timeline imposed on wind and solar, instead following the original IRA phase-out schedule beginning in 2034.
If any of these projects begin construction before 2034, they will receive the full tax credit, offering a long timeline for projects that will likely need it.
Consumer tax credits hit the hardest
The Senate bill also moves aggressively to eliminate consumer-facing clean energy incentives:
Rooftop solar: Residential solar installations face a double hit from both the clean electricity investment credit phase-outs and a specific prohibition on "wind and solar leasing to residential customers." This latter provision would significantly impact third-party solar leasing models from companies like Sunrun that have driven much of the residential solar market's growth.
Electric Vehicles: All EV credits face rapid termination - the new clean vehicle credit ends 180 days after enactment, the used EV credit terminates 90 days after enactment, and commercial clean vehicle credits expire 180 days after enactment for most vehicles (with immediate restrictions on smaller commercial vehicles).
Home Energy Efficiency: The residential clean energy credit (solar, batteries, heat pumps) terminates 180 days after enactment, while the energy efficient home improvement credit ends on the same timeline. The new energy efficient home credit for builders also faces a 12-month termination deadline.
Read more reporting and commentary on the bill
Those are some of the main provisions I’m tracking. But the bill is hundreds of pages long and even the clean energy parts stretch dozens of pages. So there’s a lot more to this bill. Here are some other resources, posts and articles for those that want to dive deeper:
Leah Stokes’ thread on Bluesky arguing the bill is “garbage”
Jesse Jenkin’s thread on Bluesky arguing the bill “hot trash”