As the Senate finalizes plans to vote on its revisions of the omnibus spending bill, the renewable energy sector knows its tax credits to build clean energy projects will sunset more quickly, but maybe not as onerously as the draconian provisions in the House version of the \u201cOne Big, Beautiful Bill\u201d dictate.<\/p>\n
\n
What remains uncertain are both the details and whether any \u201cpoison pills\u201d of the House version could still find their way into the final legislation that could dramatically limit supply-chain materials or prevent small developers from participating in tax credits.<\/p>\n
All of this is happening when the U.S. needs more power from any means necessary to satiate \u201cunprecedented\u201d rising electricity demand for the first time in decades, driven largely by the data center construction boom to power AI and more, said Exelon CEO Calvin Butler. Butler chairs the Edison Electric Institute, representing investor-owned electric utilities nationwide, and his company, Exelon, is No. 192 on the Fortune 500.<\/p>\n
\u201cWe believe the [clean energy] tax credits are key,\u201d Butler told Fortune<\/em> in a June 26 interview. \u201cWe don\u2019t believe you can get to [U.S.] energy dominance without having renewables as part of the solution. That\u2019s the all-of-the-above approach.\u201d<\/p>\nButler said the utilities association is \u201camenable\u201d to the Senate version of the bill, even if the tax credits ideally would be extended for longer. \u201cWe\u2019ll take what we can get,\u201d he added. \u201cWe\u2019re optimistic, but on top of it.\u201d<\/p>\n
Much of the GOP has sought to expedite oil and gas at the expense of renewables. Currently, the legislation is threatened by GOP infighting and a Senate parliamentarian ruling against taxation changes to Medicaid. The Inflation Reduction Act clawbacks desired by a large portion of the GOP are just a small part of the unwieldy bill.<\/p>\n
Of particular concern are provisions addressing both the \u201ctransferability\u201d of tax credits\u2014considered necessary by smaller and midsize developers to get many projects off the ground\u2014and the \u201cforeign entity of concern\u201d (FEOC) provisions. The FEOC rules, which only applied to electric vehicle tax credits in the IRA, would now apply to all clean energy tax credits, essentially limiting needed supply-chain materials from China.<\/p>\n
Transferability, which is restored in the Senate bill for now, allows smaller developers to raise capital by transferring tax credits at a discount to larger buyers with greater tax liability that can immediately take advantage of the tax benefits. Eliminating transferability would hurt smaller developers that need extra optionality to raise capital.<\/p>\n
The House version of the bill axed transferability after 2027, placed strict FEOC rules on all tax credits, did away with EV and residential solar tax credits, and required that new clean energy utility projects would have to break ground within 60 days of the bill\u2019s signing and placed into service by the end of 2028\u2014an impossibility for many hundreds of planned projects.<\/p>\n
The pending Senate version restores transferability, keeps more lenient and phased-in FEOC rules on all tax credits, and allows clean energy projects to break ground through the end of 2027\u2014potentially finishing after President Trump\u2019s presidency. Residential solar and EV tax credits remain at risk.<\/p>\n
\u201cWe believe the transferability is critical for significant development and growth in renewables,\u201d Butler said.<\/p>\n
What comes next<\/h2>\n
For U.S. solar developer Avantus, CEO Cliff Graham said maintaining transferability is vital to the industry.<\/p>\n
\u201cIf transferability goes away, it\u2019s kind of a backdoor way to shut down the IRA,\u201d said Graham, who\u2019s currently developing solar projects in California, Nevada, and Arizona.<\/p>\n
If transferability is maintained, the irony is the winding down of the IRA tax credits would speed up wind and solar construction projects, he said. \u201cWe\u2019re in the queue. We\u2019re already there. We can deploy in 18 months. Gas plants are years away for [hyperscalers].\u201d<\/p>\n
\u201cYou\u2019re going to have an artificial stampede off all these people trying to get their [renewable] projects in on time,\u201d Graham said, which will trigger supply-chain shortages. \u201cEquipment is going to get even more expensive.\u201d<\/p>\n
Roman Kramarchuk, head of climate market and policy analysis for S&P Global Commodity Insights, said he believes the foreign entity of concern rules could prove the more problematic \u201cpoison pill\u201d for the renewable industry, although the Senate version is again less onerous.<\/p>\n
The biggest pain point Is utility-scale battery storage because China has a near-monopoly on many of the battery components.<\/p>\n
\u201cIt\u2019s really hard to imagine doing storage equipment without having elements of either battery cells or modules coming out of China,\u201d Kramarchuk said. FEOC rules are the \u201chidden piece\u201d of the legislation that \u201ccould really stifle the uptake of and use of the tax credits.\u201d The \u201cclearer definitions\u201d in the Senate version are at least easier to deal with than the strict and vague FEOC rules in the House bill.<\/p>\n
Instead of a total ban on Chinese materials, the Senate FEOC rules would phase-in supply-chain restrictions, allowing developers to reduce their China-sourced materials each year on a set schedule.<\/p>\n
As Graham said, the goal is always to use U.S. materials, but there isn\u2019t enough domestic manufacturing yet, and even when there is, they will still have to source a lot of materials from China and elsewhere.<\/p>\n
\u201cWe want to use as much domestic content as possible. There just isn\u2019t enough today to be able to get done what needs to get done,\u201d Graham said.<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"
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