Republican legislators have passed a reconciliation bill that substantially dismantles significant portions of the Inflation Reduction Act, with a particular focus on curtailing incentives for renewable energy sources while favoring nuclear and geothermal energy. The bill narrowly passed the House on Thursday by a vote of 218-214, with two Republicans joining all Democrats in opposition. President Donald Trump is widely anticipated to sign the legislation into law in the coming days.
The newly-approved measures end tax incentives for solar, wind, and hydrogen projects prematurely, significantly reshaping the renewable energy landscape. However, specific provisions from the Inflation Reduction Act relating to nuclear and geothermal energy have survived intact, extending their beneficial tax treatment.
Under the revised policy framework, solar and wind energy developers must now either secure their connection to the energy grid by the end of 2027 or begin construction on their projects within 12 months of the new law being enacted to qualify for remaining incentives. These stringent restrictions come at a time when certain sectors, notably data centers, have increasingly relied on swiftly-deployed renewable sources for affordable, reliable energy supplies. Solar projects are usually completed within 12-18 months, while obtaining new gas-powered generators currently faces delays stretching into the early 2030s, adding pressure to companies seeking quick access to power.
Climate-focused startups are expected to feel considerable impacts from these regulatory adjustments. Green hydrogen enterprises are particularly vulnerable; incentives previously available of up to $3 per kilogram will now likely terminate at the end of 2027, five years earlier than the scheduled phase-out under the Inflation Reduction Act.
Meanwhile, tax credits for nuclear power, geothermal energy, and battery storage systems are preserved until the end of 2033, although developers could face increased scrutiny and difficulty accessing credits under updated regulations targeting involvement from “foreign entities of concern.”
