Publication date:
June 27, 2025
Renewable Energy Industry Braces for Potential Tax Credit Changes
Renewable energy leaders are closely monitoring potential changes to tax credits and sourcing rules as the Senate approaches a vote on new legislation.
Renewables
The renewable energy industry is on high alert as the U.S. Senate nears a vote on legislation that could significantly impact tax credits and sourcing rules for clean energy projects. Industry leaders are particularly concerned about provisions addressing the transferability of tax credits and the "foreign entity of concern" (FEOC) rules.
The transferability of tax credits is crucial for smaller and mid-sized developers to secure funding for their projects. The current Senate version of the bill maintains transferability, unlike the House version which proposed eliminating it after 2027. This provision allows developers to raise capital by transferring tax credits at a discount to larger buyers who can immediately utilize the tax benefits.
The FEOC rules, which previously only applied to electric vehicle tax credits under the Inflation Reduction Act (IRA), may now extend to all clean energy tax credits. This expansion could potentially limit the sourcing of essential supply chain materials from China, a major concern for the industry.
Calvin Butler, CEO of Exelon and chair of the Edison Electric Institute, emphasized the importance of clean energy tax credits in achieving U.S. energy dominance. "We don't believe you can get to U.S. energy dominance without having renewables as part of the solution," Butler stated.
The pending Senate version of the bill offers some relief compared to the House version. It restores transferability, maintains more lenient and phased-in FEOC rules, and extends the timeline for clean energy projects to break ground through the end of 2027. However, residential solar and electric vehicle tax credits remain at risk.
Cliff Graham, CEO of U.S. solar developer Avantus, stressed the critical nature of transferability for the industry's growth. "If transferability goes away, it's kind of a backdoor way to shut down the IRA," Graham warned.
The FEOC rules pose a particular challenge for utility-scale battery storage, given China's near-monopoly on many battery components. Roman Kramarchuk of S&P Global Commodity Insights noted that these rules could significantly hinder the uptake and use of tax credits in the renewable sector.
As the Senate approaches its vote, the renewable energy industry remains cautiously optimistic but wary of potential "poison pills" that could dramatically limit supply chain options or prevent smaller developers from participating in tax credits. The outcome of this legislation will have far-reaching implications for the future of clean energy development and the United States' ability to meet its climate goals.
The transferability of tax credits is crucial for smaller and mid-sized developers to secure funding for their projects. The current Senate version of the bill maintains transferability, unlike the House version which proposed eliminating it after 2027. This provision allows developers to raise capital by transferring tax credits at a discount to larger buyers who can immediately utilize the tax benefits.
The FEOC rules, which previously only applied to electric vehicle tax credits under the Inflation Reduction Act (IRA), may now extend to all clean energy tax credits. This expansion could potentially limit the sourcing of essential supply chain materials from China, a major concern for the industry.
Calvin Butler, CEO of Exelon and chair of the Edison Electric Institute, emphasized the importance of clean energy tax credits in achieving U.S. energy dominance. "We don't believe you can get to U.S. energy dominance without having renewables as part of the solution," Butler stated.
The pending Senate version of the bill offers some relief compared to the House version. It restores transferability, maintains more lenient and phased-in FEOC rules, and extends the timeline for clean energy projects to break ground through the end of 2027. However, residential solar and electric vehicle tax credits remain at risk.
Cliff Graham, CEO of U.S. solar developer Avantus, stressed the critical nature of transferability for the industry's growth. "If transferability goes away, it's kind of a backdoor way to shut down the IRA," Graham warned.
The FEOC rules pose a particular challenge for utility-scale battery storage, given China's near-monopoly on many battery components. Roman Kramarchuk of S&P Global Commodity Insights noted that these rules could significantly hinder the uptake and use of tax credits in the renewable sector.
As the Senate approaches its vote, the renewable energy industry remains cautiously optimistic but wary of potential "poison pills" that could dramatically limit supply chain options or prevent smaller developers from participating in tax credits. The outcome of this legislation will have far-reaching implications for the future of clean energy development and the United States' ability to meet its climate goals.
