Senate Approves Republican Budget Bill Phasing Out Renewable Energy Tax Credits

The Senate has approved a comprehensive Republican budget bill that eliminates a proposed tax on solar and wind energy projects but phases out tax credits for wind, solar, and other renewable energy sources. The bill, passed with a 51-50 vote, marks a significant move by President Donald Trump and Republican lawmakers to dismantle the 2022 climate law enacted by Democrats under Joe Biden. Vice President JD Vance cast the tie-breaking vote after three Republican senators voted against the bill.

The bill now advances to the House for final legislative approval. Initially, the bill included an excise tax on solar and wind generation projects, which faced bipartisan opposition from lawmakers, clean energy developers, and advocates. The final version removes this tax but retains the phase-out of clean energy incentives, which is more aggressive than the draft version released two weeks prior.

Critics, including Democrats and environmental groups, argue that the Republican plan will stifle growth in the wind and solar industry, leading to higher utility bills for Americans. They warn that the measure could jeopardize hundreds of renewable energy projects intended to enhance the nation’s electric grid. Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, stated that the bill undermines America’s manufacturing comeback and global energy leadership. She cautioned that if the bill becomes law, families will face higher electric bills, factories will shut down, Americans will lose their jobs, and the electric grid will become weaker.

The American Petroleum Institute, the leading lobbying group for the oil and gas industry, praised the bill’s passage, stating that it will usher in a new era of energy dominance by unlocking investment opportunities and expanding access to oil and natural gas development. Republicans, on the other hand, argue that the measure represents historic savings for taxpayers and supports the production of traditional energy sources such as oil, natural gas, coal, and nuclear power, thereby increasing reliability.

In a compromise approved overnight, the bill allows wind and solar projects that begin construction within a year of the law’s enactment to receive a full tax credit without a deadline for when the projects are “placed in service,” or connected to the grid. Projects that begin later must be placed in service by the end of 2027 to qualify for a credit. The bill also retains incentives for technologies such as advanced nuclear, geothermal, and hydropower through 2032.

Changes to the renewable energy language, including the removal of the excise tax on wind and solar, were negotiated by a group of Republican senators, including Alaska Sen. Lisa Murkowski and Iowa Sens. Joni Ernst and Chuck Grassley. Murkowski, who voted in favor of the final bill, described her decision-making process as “agonizing,” stating that she had to consider the impact on her constituents, particularly those in isolated rural communities in Alaska who rely on renewable energy for independence.

Critics, such as Rhode Island Sen. Sheldon Whitehouse, the top Democrat on the Senate Environment and Public Works Committee, described the bill as “massively destructive,” arguing that it increases costs for everyone by burdening the healthcare system, making families go hungry, and sending utility bills through the roof. Whitehouse also criticized the bill for saddling future generations with trillions of dollars in debt to serve giant corporations, fossil fuel polluters, and billionaire Republican megadonors.

Wyoming Sen. John Barrasso, a Republican and former chairman of the Senate Energy panel, praised the bill for rescinding many elements of what he called the Biden administration’s “green new scam,” including electric vehicle tax credits and a first-ever fee on excess methane emissions from oil and gas production. The bill also increases oil and gas leases on public lands and revives coal leasing in Wyoming and other states.

Clean energy advocates expressed deep disappointment with the bill, arguing that it undoes much of the 2022 climate law approved by Democrats. Nathaniel Keohane, president of the Center for Climate and Energy Solutions, a nonprofit seeking to accelerate the global transition to net-zero greenhouse gas emissions, stated that the bill represents a significant step backward for America’s energy future. He warned that curtailing incentives for electricity generated from wind and solar power will raise energy prices for households and businesses and threaten the reliability of the electric grid.