Trump tax bill squeeze on clean power could raise energy bills

Reuters

a day ago

June 10 - President Trump's tax bill passed by the House of Representatives on May 22 is set to slow the country's clean energy expansion by accelerating the expiry of key tax credits introduced under the 2022 Inflation Reduction Act (IRA) and making them harder to access.
The bill, which is now being debated by the Senate, shortens the window for developers to start and complete new clean energy projects in order to qualify for a production tax credit (PTC) or an investment tax credit (ITC). Developers would have to begin construction within 60 days of the bill's enactment and the project must become operational before the end of 2028 in order to access the tax credits. The inflation act stipulated these tax credits would be available until at least 2032.
Solar and battery storage activity soared on the back of falling costs and tax credits but President Trump's rollback of clean energy support and prioritisation of fossil fuels will curb activity in the coming years, industry experts warn.
"Requiring a range of advanced energy projects to commence construction within 60 days of enactment, along with moving up the 'placed in service' deadline to 2028, will pull the rug out from a host of projects in active development and effectively end use of the ITC & PTC going forward," Advanced Energy United, an association supporting low carbon power and transport, said in a statement.
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If approved, the bill could see a surge in clean energy investments in the short-term as developers rush to meet new construction deadlines, followed by a "big drop," Gautam Jain, Senior Research Scholar, Center on Global Energy Policy at Columbia University, told Reuters Events.
Approval of the bill would see a lot of projects trying to start construction within 60 days, John Powers, Schneider Electric's VP for Cleantech and Renewables, said.
For companies with renewable energy or carbon reduction targets, 'it's the time to be proactive in the market,' Powers noted.
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Beyond the short-term bump, the bill would "have an adverse impact on deployment," Jain warned.
In the long run, this would likely lead to "higher electricity costs for consumers," he said, since the levelised cost of solar and other clean power sources have dropped significantly over the last 10 to 15 years and are often lower than the cost of gas-fired power.
Import worries
Trump's cutbacks to clean energy support and higher import tariffs and have created major uncertainty for developers and manufacturers.
Clean power developer RWE has introduced higher requirements for future investments in the U.S. since the start of the year, a spokesperson told Reuters Events. RWE owns and operates over 10 GW of US clean power capacity and has over 4 GW under construction.
"In addition to a stable incentive framework, all necessary federal permits must be in place, all relevant tariff risks mitigated and projects must have secured offtake at the time of the investment decision," the spokesperson said. "Only if these conditions are met will further investments be possible, given the uncertain policy environment.'
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Developers are concerned about another restriction in Trump's tax bill that would prevent developers and manufacturers from gaining tax credits if they source components from foreign entities of concern (FEOC). This includes China, a key global supplier of components for solar, wind and battery storage. The bill has slowed the expansion of U.S. clean energy manufacturing as suppliers await clarity before making investments in new factories. Developers and manufacturers are already facing higher costs due to hikes in import tariffs imposed by President Trump.
Developers had feared the bill would also restrict the transferability of tax credits, a mechanism which has expanded financing sources for small and mid-size developers, but following a last-minute change this was left intact for the life cycle of the tax credits.
The bill also reflected more kindly on nuclear power developers by giving them a later deadline of breaking ground by the end of 2028 in order to qualify for tax credits.
Trump wants to accelerate a new wave of nuclear plant construction and on May 23 he ordered the U.S. Nuclear Regulatory Commission (NRC) to streamline regulations and fast-track new licenses for reactors. In March, the DOE reissued a tender for $900 million of federal funding towards light water reactor (LWR) SMR technology (Gen III+), removing a requirement for community engagement.
Senate scrutiny
Trump has said he wants Senate approval and a final bill on his desk by July 4 but many Republican Senators have seen benefits from the tax credits in their states and the bill may be adapted and sent back to the House.
The Senate tends to be a moderating force in comparison to the House, David A. Sausen, partner at Arnold and Porter, noted.
'I think there's some hope that some of the more extreme measures here will be dialed back,' he told Reuters Events.
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The clean energy sector has called for less drastic changes to the tax credits along with greater clarity on the foreign entity measures, which could take time. The foreign entity rules would take effect on January 1, 2026, under the current bill.
'I'm getting a lot of concern from clients that it's going to be very difficult to interpret these (foreign entity) rules,' Sausen said.
The current language of the rules is "fundamentally unworkable," Advanced Energy United said.
The foreign entity rules must be clarified and should not deter manufacturing investment, Schneider Electric's Chief Policy Officer Jeannie Salo told Reuters Events.
'Let's remember the underlying goals of the bill...They want a tax policy to bring down the deficit, of course, but they want a tax policy that's going to attract more manufacturing and investment into the United States," Salo said.
"We need to make sure that there aren't provisions in the bill that inadvertently disrupt that goal.'