House budget bill effectively halts US clean energy boom

By Valerie Volcovici and Nichola Groom

WASHINGTON, May 22 (Reuters) - The House budget bill that narrowly passed in an early morning vote on Thursday would effectively put the brakes on a clean energy production boom in the United States spurred by subsidies enacted in 2022.

Republican lawmakers' "one big beautiful bill" to carry out President Donald Trump's plan to cut taxes and boost spending on the military and border enforcement would end Biden-era tax credits for clean energy projects years sooner than planned in an earlier draft, rendering them unusable for most companies.

"We and many others had expected the first bill to be the worst version: This was wrong," Roth Capital clean energy analyst Philip Shen wrote in a note to clients.

Shares of clean energy companies tanked following the vote. Project developers and manufacturers that benefit from the subsidies said the rollback would shutter factories, kill jobs and increase electricity costs for U.S. households.

"If Congress does not change course, this legislation will upend an economic boom in this country that has delivered an historic American manufacturing renaissance, lower electric bills, hundreds of thousands of good-paying jobs, and tens of billions of dollars of investments primarily to states that voted for President Trump," Abigail Ross Hopper, president of the Solar Energy Industries Association, said in a statement.

Energy analysts at the Rhodium Group said their preliminary review of the bill found the changes could raise household energy costs by 7%.

Solar, wind and battery storage are expected to account for 93% of new U.S. electric capacity this year, according to the U.S. Energy Information Administration.

The American Petroleum Institute praised the bill for "preserving competitive tax policies," as well as opening up more oil lease sales and eliminating Biden administration policies such as its fee on methane emissions for the oil and gas industry.

REPUBLICAN DISTRICTS BENEFIT

Clean energy groups voiced dismay that the budget proposal passed with the support of over two dozen Republican representatives who had urged House leaders to preserve key Inflation Reduction Act provisions because their districts have benefited from clean energy and manufacturing investments.

As of August 2024, more than half of all IRA-backed projects were in Republican House districts, according to an analysis last year by E2, a firm that advocates for pro-environment economic policies.

"Despite many reassurances that Members support domestic manufacturing, a vote for this bill was a vote to close U.S. factories and concede manufacturing jobs of the most important energy resource of the 21st century to China," said Michael Carr, executive director of the Solar Energy Manufacturers For America Coalition.

The changes to a committee proposal from last week would advance by three years an end-date for the use of clean electricity tax credits for wind, solar and battery storage projects to 2028 and require projects to begin construction within 60 days of the bill's passage, according to a summary.

It would also have a chilling effect on residential solar by preventing companies that lease solar panels from claiming a key tax credit. A tax credit for homeowners that own their own panels will also be eliminated.

Shares of Sunrun RUN.O, the top U.S. solar leasing company, were down 38% in afternoon trade.

The House bill also eliminates the "transferability" of tax credits that enabled developers to sell their tax credits and use the funds to finance project construction, a feature that made it easier to get them running. Some nuclear energy projects are exempted.

It also strengthened restrictions on the use of tax credits for any project backed by Chinese companies or using materials produced in China under a provision targeting “foreign entities of concern." China dominates all aspects of the clean energy supply chain and the restrictions effectively eliminate the ability of most projects to claim the credits.

House leadership had initially promised to carefully reform the credits, not end them.

"This isn’t a scalpel, it’s a meat cleaver, and it will hurt us all," said Heather O'Neill, president of clean energy lobby group Advanced Energy United.