US Senate Budget Bill Proposal Keeps Cuts to Solar, Wind Incentives

Senate Clean Energy Bill: Wind and Solar Credits Phased Out, Hydropower Extended

WASHINGTON, June 16 (Reuters) – A U.S. Senate panel proposed a full phase-out of solar and wind energy tax credits by 2028 but extended the incentive to 2036 for hydropower, nuclear, and geothermal energy, which are favored by President Donald Trump's administration, according to a draft bill circulated on Monday.

The draft bill, part of a sprawling Republican budget package, made several changes that clean energy advocates pressed for to a bill passed in the House last month. But industry representatives said the text did not go far enough to preserve their sector's key incentives.

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The language released by the committee chair, Republican Senator Mike Crapo, envisages phasing out subsidies enshrined by the Biden-era 2022 Inflation Reduction Act for solar and wind in 2026 by reducing the incentive to 60% of its value and ending it by 2028. Under current law, the tax credits would not start phasing out until 2032.

In a change from the House bill, the Senate would grant 100% of the credit to hydropower, nuclear, and geothermal facilities until 2033, then phase it out to zero by 2036, according to the draft.

Malcolm Woolf, CEO of the National Hydropower Association, praised the extended timeline for new hydro facilities but said the Senate had failed to extend the tax credit to upgrades of existing facilities, many of which are in need of relicensing.

"We hope that this measure will be adopted later this Congress to ensure that these multi-purpose facilities continue to provide clean, reliable energy for generations to come," Woolf said in a statement.

A summary of the bill text released by Crapo said it would eliminate hundreds of billions of dollars of clean energy subsidies, which it described as unnecessary, and would support consistent energy sources over intermittent renewable energy.

Shares of U.S. solar energy companies tumbled in extended trade on Monday after the changes were unveiled.

"Despite modest improvements on several provisions, this legislation does not go far enough to remove the threat to one of the greatest economic success stories in American history," Abigail Ross Hopper, president of the Solar Energy Industries Association, said in a statement.

The Senate language gives more time for clean energy projects to use the tax credits than the House version, which required that a project must start construction within 60 days of the bill's enactment and be placed in service by Dec. 31, 2028 to qualify for the tax credits.

The Senate language changes it so that facilities need to begin construction in a certain year to claim the credit rather than be placed in service.

Since the House narrowly passed its version of Trump's budget known as the One Big, Beautiful Bill Act last month, some electric utility executives, lawmakers, and clean energy industry groups have pressed Senate Republicans to make the provisions related to IRA clean energy tax credits less drastic.

Senate Republican moderates, including Alaska's Lisa Murkowski and Utah's John Curtis, have been urging the Senate tax panel to give clean energy projects more time to use the credits.

The Senate bill retains some of the restrictions called for in the House bill against the use of tax credits for projects that rely on equipment or critical minerals from foreign adversary nations like China. But under the Senate bill, some publicly traded companies using materials from China would face fewer restrictions.

The bill text also introduced a formula for calculating whether a project received "material assistance" from a foreign entity that would preclude it from being eligible for the incentives.

Clean energy industry groups had opposed those restrictions because they would severely affect projects that rely on Chinese components in their supply chains.

The Senate's version of the bill preserves project developers' ability to sell, or transfer, their tax credits to third parties to reduce financing costs. The House bill had phased out that provision.

Like the House bill, the Senate bill eliminates consumer-facing credits for installing rooftop panels and making other energy-related home improvements.

"Eliminating the tax credits that save families money is a profound mistake," Ari Matusiak, CEO of the electrification nonprofit Rewiring America, said in a statement.

The electric utility industry, which had flagged concerns that nearly 75 gigawatts of planned new generation capacity of renewable energy would be canceled between 2025 and 2032 at a time of rapidly growing energy demand if the House version passed, said the Senate version made progress on key provisions including project timelines and transferability.

"These modifications are a step in the right direction," said Pat Vincent-Collawn, interim President, Edison Electric Institute (EEI).