The Republican-controlled Congress passed a reconciliation bill on Thursday that significantly rolls back many provisions of the Inflation Reduction Act (IRA), impacting the renewable energy sector and hydrogen incentives. The legislation passed narrowly, 218-214, with two Republicans dissenting, and now awaits President Donald Trump’s anticipated approval.
Renewable Energy Incentives Reduced Under GOP Bill
The new legislation diminishes tax benefits for solar, wind, and clean hydrogen projects, while maintaining some incentives for nuclear and geothermal energy. The final version closely reflects the Senate Finance Committee’s mid-June proposal but offers slightly extended deadlines for claiming clean energy tax credits.
Stricter Timelines for Solar and Wind Projects
To qualify for tax credits, solar and wind developers must connect their projects to the grid by the end of 2027 or commence construction within 12 months following the bill’s enactment. These timelines impose tighter constraints compared to previous provisions, potentially delaying new renewable deployments.
Data Centers Face Energy Supply Challenges
The data center industry is poised to experience substantial impacts, as solar, wind, and battery storage have been preferred sources of affordable and rapidly deployable energy. Solar installations typically take 12 to 18 months to complete, whereas natural gas turbine backlogs extend into the early 2030s, complicating energy procurement for hyperscalers and developers.
Hydrogen and Climate Tech Startups Confront Reduced Support
Green hydrogen enterprises are particularly vulnerable, with tax credits of up to $3 per kilogram set to expire by the end of 2027—five years earlier than previously planned under the IRA. This accelerated phase-out may hinder the growth of climate technology startups reliant on such incentives.
Preserved Incentives for Nuclear, Geothermal, and Battery Storage
Tax incentives for geothermal, nuclear, and battery storage projects remain intact through 2033, providing some stability for these sectors. However, newly introduced regulations addressing “foreign entities of concern” could complicate the acquisition of tax credits, potentially limiting access for certain developers.