U.S. congress considers bill that would decimate clean energy

The U.S. Senate is rushing through the sprawling tax package backed by President Trump, one that provides tax cuts mostly benefitting the wealthy. But sudden last-minute provisions tucked into the legislation could cripple the U.S. renewable energy industry.

The legislation covers many issues that could restructure American society in a way that exacerbates inequality, strains the energy system, and pumps huge sums of money into expanding the domestic security force seeking to deport immigrants. 

The bill, named “The One, Big, Beautiful Bill,” provides $4 trillion in tax cuts, the vast majority of which are enjoyed by the wealthy. In order to cover the enormous price tag, the bill shreds the safety net, cutting nearly $1 trillion in spending on Medicaid, which provides health insurance for the poor, and cuts $288 billion from food support for low-income households. The overall impact will be to redistribute wealth from the bottom to the top.

The House of Representatives passed a version of the bill in May, and the Senate is rushing to finish up its bill before the July 4^th deadline the White House laid out for the Congress.

One key priority for the Trump administration is to repeal the Inflation Reduction Act (IRA), the signature climate and energy package passed in 2022 during President Biden’s term. The House bill goes very far in pursuit of that goal, eliminating the $7,500 tax credit for electric vehicles and phasing out clean electricity tax credits, among other cuts. Experts said, if passed, it would amount to a “full repeal” of the IRA.

The prevailing wisdom was that the Senate would moderate some of those cuts. But in a surprise move, the text of the Senate bill, released on June 28th, just a few days before Senators is expected to vote on the bill, contained some draconian provisions that would make the legislation even more damaging to the solar and wind industries.

Not only would the Senate bill eliminate tax credits for renewables, but it would impose an entirely new tax on solar and wind beginning in 2027 if those projects were built with “material assistance” from “foreign entities of concern” (FEOC). Basically, if the supply chains have exposure to China, then solar and wind projects will be subjected to a new tax. Because China dominates the global clean tech industries, the provision will effectively tax most clean energy projects in the U.S.

The impact could be to raise costs of clean energy projects by 10 to 20 percent, resulting in new project installations plunging by 72 percent.

To add insult to injury, the Senate bill also would provide new tax benefits for oil and even a subsidy for coal.

If passed into law, U.S. renewable energy installations would grind to a halt, capital would stop flowing into the sector, and factories would shut down.

A dirtier and more costly grid

A study from the think tank Energy Innovation found that the punitive Senate provisions would result in 300 GW of electric power capacity that doesn’t get built, would inflict $960 billion in damage to GDP, and erase 770,000 jobs. The knock-on effects on electricity markets would be profound, pushing up prices by 19 percent by 2030 and 61 percent by 2035.

An analysis of the House bill concluded that the U.S. would potentially make virtually no progress in cutting emissions through 2035.

But the provisions targeting renewables “imposes new and perhaps insurmountable uncertainties on project developers and investors, rendering the remaining provisions of the Inflation Reduction Act unusable and creating untenable pressures for clean energy deployment,” the Center for Public Enterprise said in an analysis. The think tank added that the bill “presents a serious threat not just to clean energy investment, but to grid stability itself.”

“Without a policy ecosystem conducive to project development, the American grid is in danger of load shedding, brownouts and blackouts, and grid failure,” the analysis concluded.

As Gas Outlook has reported, the bottlenecks for gas turbines means that taking a sledgehammer to the clean tech sector does not mean that gas can simply pick up the slack. Instead, it would likely result in intense strain on the grid, higher prices, higher emissions, and even potential blackouts.

Unions blasted the legislation. North America’s Building Trades Unions (NABTU), which supports oil and gas projects in addition to renewable energy, called the Senate bill “a massive insult to working men and women.”

“If enacted, this stands to be the biggest job-killing bill in the history of this country,” the building trades union said in a statement. “Simply put, it is the equivalent of terminating more than 1,000 Keystone XL pipeline projects.”

The International Brotherhood of Electrical Workers (IBEW) issued a similar warning, calling the bill a “direct attack on working families” that would result in “hundreds of thousands of good-paying construction jobs.”

Even the U.S. Chamber of Commerce, one of the most powerful business lobbying groups in the country and who counts some of the top oil and gas producers as members, had reservations about the taxes on renewable energy, even though it backed the broader package.

“Overall, the Senate has produced a strong, pro-growth bill. That said, taxing energy production is never good policy, whether oil & gas or, in this case, renewables,” the Chamber said. “Electricity demand is set to see enormous growth & this tax will increase prices. It should be removed.”

At the time of publication, there was uncertainty about whether the energy provisions would survive in the legislation. Throughout the day on June 30th, a group of Republican senators were maneuvering to remove the language from the broader package.

Republican Senator Lisa Murkowski from Alaska told reporters: “I don’t want us to backslide on the clean energy credits.”

(Writing by Nick Cunningham; editing by Sophie Davies)