House Budget Bill Threatens Clean Energy Sector Support

The clean energy industry is left in the dark in the wake of the US House of Representatives' 28 May 2025 passage of a revised budget reconciliation bill. Nicknamed by the bill as the "One Big Beautiful Bill Act," the bill dramatically slashes clean energy tax credits and overturns the majority of incentives that were originally passed under the Inflation Reduction Act (IRA). The move has been a concern to the entire clean energy sector since it can affect current and future projects, drive up investment costs, and affect overall development in the sector.

The bill cancels technology-neutral clean energy production and investment tax credits for projects that fail to start construction within 60 days of the bill's enactment. The credits had been the motivation for clean energy innovation as well as private investment. By cancelling the incentives, the bill will discourage investor interest and, in the process, cause many clean energy projects in the United States to be cancelled.

The most affected segment is residential solar. Tax credit for leased residential and community solar arrays was retroactively repealed for projects starting after 1 January 2025. This has already had a real-world effect, with stock in SunRun, one of the largest residential solar firms, dropping by nearly 40% upon announcement.

Further, the bill brings sweeping reforms to tax credits for most clean energy sectors. Tax credits for non-nuclear clean energy projects will be phased out entirely after 2028. Nuclear energy projects, however, will be financed up to 2031, but other key sectors like carbon capture, clean fuel, and clean manufacturing also get new prohibitions, whose future is undecided in the present legislative scenario.

The legislation also modernizes rules governing "foreign entities of concern," advancing the effective date of companion restrictions to 2026. Some lawmakers originally had requested weaker rules in this area to permit clean energy developers who are US-based. But the new timeline might now present even greater challenges, slowing or stopping projects that depend on foreign supply chains.

Non-profit groups and trade associations have raised an alarm at the wider economic and environmental implications of the bill. The bill's opponents predict that it may lead to increased energy prices, make the US less competitive in the international clean energy marketplace, and slow momentum towards clean sources of energy. The elimination of the bipartisan momentum that had previously encouraged clean energy investment is regarded as a significant policy flip-flop.

While the House passed the bill, the clean energy industry is waiting for the Senate with the possibility of amendments. The Senate has been more conservative in its previous versions and diluted some of the stronger House legislation. Industry analysts think that the Senate will restore provisions of the tax incentives or phase out some of the stronger provisions in order to provide stability in the energy industry.

As the bill proceeds to the Senate, clean energy developers and players watch events closely. They all expect the shift in the legislature to protect substantial segments of the economy and stop bringing the nation's clean energy revolution to a stop. The Senate hearing will probably dictate the pace and extent of future clean energy growth in America.

Source & Credits
KnowESG through MSN News (28 May 2025) – "Clean Energy Industry on Edge as House Passes Budget Bill"