An updated draft of the Senate’s megabill text slashes tax incentives for wind and solar energy – and adds a new tax on future wind and solar projects.
The initial draft released by Senate Republicans earlier this month cut the credit for any wind and solar projects that did not “begin construction” by certain dates, while the latest version bases incentives on when projects actually begin producing electricity — a much higher bar to clear.
The first draft gave any project that began construction this year full credit, any project that began construction next year 60 percent credit and any project that began construction in 2027 20 percent of the credit, before they were phased out thereafter.
The new legislation instead says that the credits will only apply to facilities that begin producing electricity before the end of 2027.
In addition, it imposes a new tax on some wind and solar projects that are placed in service after 2027.
The projects that will be taxed if a certain percentage of the value of their components come from China.
The Democrats’ 2022 Inflation Reduction Act included hundreds of billions of dollars in tax credits for low-carbon energy sources, including renewable energy. These subsidies were expected to massively reduce the U.S.’ planet warming emissions.
The GOP’s cuts to the credits are expected to severely curtail those gains.
If they pass, the cuts represent a win for the party’s right flank, which has pushed for major cuts to the credits, and a loss for it’s more moderate wing which has called for a slower phaseout.
The renewables lobby slammed the changes as hampering the sector.
“In what can only be described as ‘midnight dumping,’ the Senate has proposed a punitive tax hike targeting the fastest-growing sectors of our energy industry. It is astounding that the Senate would intentionally raise prices on consumers rather than encouraging economic growth and addressing the affordability crisis facing American households,” Jason Grumet, CEO of the American Clean Power Association, said in a written statement.
“These new taxes will strand hundreds of billions of dollars in current investments, threaten energy security, and undermine growth in domestic manufacturing and land hardest on rural communities who would have been the greatest beneficiaries of clean energy investment,” he added.
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