05/20/2025
Make your voice heard to support clean energy tax credits
From its enactment in 2022 through Jan. 2025 the Inflation Reduction Act (IRA) has provided economic stimuli responsible for the creation of over 406,000 new jobs from over $600 billion in private investment, according to Forbes, with $315 billion in the past year. While economic benefits have come to all 50 states, Atlas Public Policy has estimated that nearly 80% of the investment capital has been in Republican congressional districts.
However, Donald Trump has repeatedly attacked the IRA and has stated that he wants it repealed. Despite no legislative action to date, these statements combined with the ongoing confusion around tariffs have caused chaos in the renewable energy markets. Climate Power has estimated that over 42,000 jobs have been lost and 64 large, utility scale projects have been cancelled or paused resulting in the loss of $57 billion in investment. We have seen a dramatic slow-down in C&I project proposals as hosts are unwilling to make investment decisions.
The loss of potential renewable energy production is ill-advised from an energy policy perspective. Over the next 15 years, US electricity demand is forecast to rise as much as 50% as AI, cloud computing, increased manufacturing output and EV charging demands grow (S&P Global Commodity Insights). With projects currently in construction, renewables are projected to provide 93% of electricity grid capacity with natural gas providing the remaining 7% of the total estimated 63 GW over the next year (source: EIA).
So, what is the path forward to meet demand? There is a growing confluence of opinion that the US must adopt an “energy from all sources” approach to provide US energy dominance and retain leadership in technology innovation and development of AI. Twenty-one Republican members of the House have joined in a letter to Rep. Jason Smith, Chair of the House Ways and Means Committee, to preserve the tax credits in the IRA.
Similarly, industry leaders such as John Ketchum, CEO of NextEra Energy, notes that natural gas-fired turbines currently have a 5-year backlog while utility scale wind and solar can be completed in 12-18 months and distributed generation can occur in less than half that time. He also said “…our message is, don’t pull away from renewables because they’re the only thing we have as a country that we can build to meet the demand that’s here right now and that’s really low cost.”
Last week the House published its draft Budget Reconciliation Bill which gives us the first indication of the headwinds we face. In summary, the following changes to the IRA are proposed (https://www.utilitydive.com/news/house-gop-proposes-early-phaseout-of-ira-clean-energy-tax-credits/747970/?_kx=tXle50K3J_eSFpG7_Rs86ldY6hWJ--qO9_L8JcDktV0.Sqgyri ):
• ITC and PTC for solar, wind, batteries, nuclear, geothermal and other technologies begin to step down after 2028 and are phased out completely after 2031. These dates apply to non-residential and utility-scale projects.
• Critically, to receive the credits, the project must be “placed in service” during the claimed calendar year. This poses obvious difficulties for utility-scale systems that can take years to move through interconnection studies, permitting, sourcing long lead-time electrical components, construction and commissioning. This is particularly true for any planned nuclear facilities which may take a decade or more to develop and permit.
• A two-year phase down of tax credit transferability. This will be particularly harmful to small and mid-size businesses and developers where transferability has been important to provide access to tax equity capital without requiring the complexity of traditional tax equity transactions and third-party ownership of projects.
• Restrictions on foreign ownership of projects claiming 45Q (carbon capture) and 45Z (clean fuels) credits but 45Q is maintained through 2032 while 45Z is carried through 2031.
• Elimination of the clean hydrogen credit by the end of 2025.
• End of tax credits for electric vehicles and EV chargers by the end of 2025.
• Elimination of the 25D ITC for residential solar systems by the end of 2025, again with the requirement of being “placed in service” in 2025.
It is too early to predict what the economic and grid capacity consequences of all these proposed actions will be. However, we want to draw particular emphasis to the final bullet above. Elimination of the residential ITC is likely to cause an immediate and drastic contraction of the residential solar market. While a handful of states provide state incentives (SREC and other) that will help some home-owners, for most consumers the double hit of a 30% increase in the net cost of a system coupled with an undetermined increase in component costs due to tariffs will eliminate the economic benefit of going solar. This proposal could easily lead to the loss of thousands of jobs of residential installers and the closing of large numbers of small and mid-size solar businesses.
What can you do? We urge you to IMMEDIATELY write to or call your House representative regarding the residential ITC and the phase-out of transferability. Focus your message on specific economic arguments that will resonate with your Representative, such as the number of employees you have and how many will be laid off if these credits are eliminated, the economic cost to your community, loss of consumer choice for sourcing power and the savings lost by consumers that can be used to off-set everyday living expenses. Also, other high-level topics that apply to your Congressional District, e.g. construction of solar component manufacturing plants. Avoid climate change and similar broad topics.
We are still seeking to finance or acquire 2025 COD projects as well as securing or a portfolio of projects for:
1) School, University and not-for-profit host projects: 500 kW and greater.
2) Municipal or small utility projects: 1 MW - 20MW with signed PPAs and completed interconnect agreements.
3) C & I projects: 500 kW and greater.
4) Portfolio of projects at NTP or COD.
5) Community solar projects greater than 1MW.
6) Utility scale projects: 20MW or larger with signed PPAs and completed interconnect agreements and EPC agreements.
If needed, we can work with you to finish developing the project(s) and use your EPC or we can provide one to assure compliance with the labor requirements of the Inflation Reduction Act
The House Ways and Means Committee’s draft budget scales back the technology-neutral clean energy investment and production tax credits while leaving carbon capture credits largely intact.
