Senate Republicans Propose Bill Slashing Solar, Wind Incentives

The Republican Party in the Senate has proposed a bill that significantly impacts renewable energy incentives, particularly targeting solar and wind power while largely sparing nuclear and geothermal energy sources. This bill comes a month after the House of Representatives passed a reconciliation bill. The Senate Finance Committee's proposal aims to strike down certain provisions of the Inflation Reduction Act (IRA) that support renewable energy, while leaving others intact.

The bill targets solar, wind, and hydrogen energy the most. On the other hand, geothermal, nuclear, hydro, and long-term storage energy sources remain relatively unscathed. Carbon capture falls somewhere in between. The Senate Republicans are moving swiftly to terminate residential solar tax credits, giving individuals only 180 days after the bill's signing to apply. Solar leasing companies will be ineligible for any credits, further draining the residential solar market.

Incentives for commercial wind and solar energy will have a longer timeline, though not as generous as under the IRA, which extends these incentives until 2032. Full credits will apply to projects initiated within six months of the bill's signing. Projects starting construction in 2026 will receive a 60% credit, and those starting in 2027 will receive 20%. After that, tax credits will disappear.

Hydrogen energy tax credits will end this year, aligning with the House-passed version. This move adds another hurdle for hydrogen startups, which have long been affected by policy changes. Carbon capture remains, but with altered details. Currently, the primary 45Q tax credit differentiates based on the use of captured carbon, with companies using it to enhance oil recovery receiving less funding. The Republican Senate plan eliminates this distinction, making all carbon capture projects eligible for the same incentives.

Other technologies, such as nuclear, geothermal, and hydro, will see a slight extension in the phase-out period for tax credits. Projects starting construction in 2033 will now receive full credits, an extension of one year from the IRA. After that, credits will gradually phase out, reducing to 75% in 2034, 50% in 2035, and disappearing in 2036.

These measures largely align with Republican priorities: weakening solar and wind energy while preserving nuclear and geothermal. Support for long-term storage is a surprising addition; if it survives the reconciliation process intact, it could indirectly promote solar and wind energy by making them more attractive as around-the-clock energy sources.

However, this is not the final decision. The bill, in its current form, cannot be signed by President Donald Trump. First, it must pass through the Senate's legislative experts for review and then be submitted to the House of Representatives, which has set a July 4 deadline for passing the entire package.