US Senate budget bill proposal keeps cuts to wind incentives

The US Senate tax committee proposed a full phase-out of solar and wind energy tax credits by 2028 but extended the incentive to 2036 for hydropower, nuclear and geothermal energy, which are favored by President Donald Trump's administration, according to a draft bill circulated on Monday.

The language released by the committee chair, Republican Senator Mike Crapo, envisages phasing out tax credits enshrined by the Biden-era 2022 Inflation Reduction Act for solar and wind energy in 2026 by reducing the incentive to 60 per cent of the credit's value and ending it by 2028.

It would grant 100 per cent of the credit to hydropower, nuclear and geothermal facilities until 2033, then phase it out to zero by 2036, according to the draft.

A summary of the bill text released by Crapo said it would eliminate hundreds of billions of dollars of clean energy subsidies, which it described as unnecessary, and would support consistent energy sources over intermittent renewable energy.

The senate language gives more time for clean energy projects to use the tax credits than the house version, which required that a project must start construction within 60 days of the bill’s enactment and be placed in service by December 31, 2028 to qualify for the tax credits.

This raised concerns among some lawmakers and project proponents who said the changes threatened electricity reliability and jeopardized investments made across the country.

Since the house passed its version of Trump's budget known as the "One Big, Beautiful Bill Act" last month, some electric utility executives, lawmakers and clean energy industry groups have been pressing Senate Republicans to make the provisions related to IRA "clean energy" tax credits less drastic.

Senate Republican "moderates", including Alaska's Lisa Murkowski and Utah's John Curtis, have been urging the senate tax panel to give "clean energy projects" more time to use the credits, enable developers to continue to sell their tax credits to use funds for construction and ease restrictions on foreign ownership.

The senate bill retains some of the restrictions called for in the house bill against the use of tax credits for projects that rely on equipment or critical minerals from foreign adversary nations like China. But under the senate bill, some publicly traded companies using materials from China would face fewer restrictions.

The bill text also introduced a formula for calculating whether a project received "material assistance" from a foreign entity that would preclude it from being eligible for the incentives.

"Clean energy" industry groups had opposed those restrictions because they would severely affect projects that rely on Chinese components in their supply chains.

The senate's version of the bill preserves project developers' ability to sell, or transfer, their tax credits to third parties to reduce financing costs. The house bill had phased out that provision.

The electric utility industry, which had flagged concerns that nearly 75 gigawatts of planned new generation capacity of renewable energy would be cancelled between 2025 and 2032 at a time of rapidly growing energy demand if the house version passed, said the senate version made progress on key provisions including project timelines and transferability.

"These modifications are a step in the right direction," said Edison Electric Institute (EEI) interim President Pat Vincent-Collawn.

(Reporting by Valerie Volcovici and Nichola Groom; Editing by Leslie Adler, David Gregorio and Lincoln Feast.)