GOP Bill Impacts Renewables, Nuclear & Geothermal Energy

Revisions to Clean Energy Incentives Approved by Congress

A reconciliation act was approved by Republican lawmakers on Thursday. This legislation includes provisions that significantly alter aspects of the Inflation Reduction Act (IRA).

The bill, which secured passage with a vote of 218-214 – with dissent from two Republican representatives – is now pending the signature of President Donald Trump. Approval by the President is widely anticipated.

Impact on Renewable Energy Sources

Under the new law, incentives for solar, wind, and clean hydrogen will be reduced. However, certain benefits established by the IRA for nuclear and geothermal energy will be maintained.

The final version of the bill closely resembles the draft released by the Senate Finance Committee in June. A slight modification extends the timeframe for claiming clean energy tax credits compared to the initial committee proposal.

Tax Credit Timelines for Solar and Wind

Developers of solar and wind projects will be required to meet specific deadlines to qualify for tax credits. Projects must either be connected to the electrical grid by December 31, 2027, or construction must commence within one year of the bill’s enactment.

Potential Effects on Data Centers

The data center industry is projected to experience substantial consequences from this legislation. Previously, solar, wind, and battery storage solutions offered a rapid and cost-effective means for large-scale operators to secure power.

For instance, solar farms can typically be completed within 12 to 18 months. In contrast, acquiring new natural gas turbines is currently facing delays, with delivery schedules extending into the early 2030s.

Challenges for Climate Tech Startups

Companies focused on climate tech are expected to encounter difficulties as a result of these changes. Startups involved in green hydrogen production may be particularly affected.

Tax credits valued at up to $3 per kilogram of hydrogen are likely to expire by the end of 2027. This represents a reduction of five years from the original phase-out schedule outlined in the IRA.

Partial Preservation of Incentives

Geothermal, nuclear, and battery storage technologies will retain some level of tax incentives through 2033. Nevertheless, new regulations concerning “foreign entities of concern” could complicate the process of obtaining these credits.