Despite last-minute changes, US Senate bill deals big blow to renewable energy

By Valerie Volcovici

WASHINGTON, July 1 (Reuters) - The U.S. Senate's massive budget bill that passed on Tuesday will make it harder to develop wind and solar energy projects, despite the removal of some contentious provisions, industry advocates and lawmakers said.

The Senate dropped a proposed excise tax on solar and wind energy projects that don't meet strict standards after last-minute negotiations with key Republican senators seeking better terms for renewables.

Iowa Senator Joni Ernst, fellow Iowa Senator Chuck Grassley and Alaska Senator Lisa Murkowski, whose votes were crucial to the bill's passage, had introduced an amendment calling for removal of that tax, which caught lawmakers by surprise after it made it into the last draft text.

Many Republican states host large renewable energy industries.

The Senate also changed language about which solar and wind projects can use the 2022 Inflation Reduction Act’s tax credits. In the Senate's final version, projects will be able to use the lucrative credits if they begin construction before 2026. A previous version was based on when the projects enter service.

But overall, the Senate bill will make it too challenging to move forward with many new wind and solar energy projects, likely depriving the United States of added electricity capacity at a time of soaring energy demand, critics said.

That could mean higher consumer bills and lost jobs around the country at project sites dependent on the credits.

"Senate Republicans just voted to trigger the largest spike in utility bills in American history," said Lena Moffitt, executive director at climate advocacy group Evergreen Action.

The Trump administration has brushed off criticism of the bill's aggressive phase out of renewable energy tax credit and its impact on grid stability and power prices, saying that ending these subsidies will pave the way for preferred baseload energy like gas and nuclear.

"The One Big Beautiful Bill removes the nonsense and distortions from energy markets and unleashes American business to produce energy that works WITHOUT subsidies!," Energy Secretary Chris Wright said on X.

President Donald Trump said the package that would slash taxes, reduce social safety net programs and boost military and immigration enforcement spending priorities.

Research firm C2ES estimated that the United States will lose 2.3 million jobs as a result of the bill.

Another research firm, Energy Innovation, projected that the bill would result in a fall of 300 GW of electricity capacity at a time of soaring demand due to data center and AI growth.

Business and labor groups earlier this week had blasted the bill's phaseout of tax credits.

The Senate bill effectively phases out renewable energy tax credits after 2026 if projects haven't started construction. Otherwise, wind and solar projects whose construction starts after that must be placed in service by the end of 2027.

Community solar project developers warned that the bill would stop in their tracks thousands of projects already under development.

"This bill will strand thousands of energy projects under development, jeopardize billions of dollars in private investment, and kill hundreds of thousands of good-paying American jobs — from electricians to contractors to local landowners and farmers who rely on these projects for stability," said Jeff Cramer, president of the Coalition for Community Solar Access.

Meanwhile, the bill included a new tax credit for coal used in steel making that had been typically available only for critical minerals used in weapons making and green energy.

Opponents said that could lead to hundreds of millions of dollars in subsidies for an industry that has suffered in recent years.

Heather Reams, president of conservative clean energy group Citizens for Responsible Energy Solutions, praised the bill for preserving tax credits to boost hydrogen, nuclear energy, geothermal and hydropower, as well as carbon capture technologies.

But she urged House lawmakers to try to make the wind and solar tax credits more useable.

“As this bill moves back to the House, we encourage members to maintain their support for these critical tax provisions, which bolster domestic energy generation to secure true American energy dominance,” she said.