The Senate’s version of the One Big Beautiful Bill (OBBB) has made two green energy tax credits more problematic. The Inflation Reduction Act (IRA) expanded existing
energy tax credits at a projected cost of nearly
$2 trillion. As the reconciliation window closes, Congress has a critical opportunity to repeal the IRA’s expansion, lock in necessary savings, and promote pro-growth policies.
Senate Revisions to the House’s IRA Repeal
Under the IRA, most of the green energy tax credits were set to fully phase out between 2032 and the point at which greenhouse gases dropped to 25% below 2022 levels. In
the bill that passed the House, conservatives secured earlier an earlier phase-out deadline for most credits and a requirement that projects seeking to qualify for the Investment Tax Credit (ITC) and the Production Tax Credit (PTC) must
begin construction within 60 days of enactment and be
placed in service before December 31, 2028.
The ITC and PTC have
primarily been used by wind and solar developers and, since beginning construction within 60 days is a difficult task, these two forms of energy production would have been the most impacted by the new requirement.
In contrast, the
Senate-passed version of the OBBB undermines these safeguards. The Senate bill includes a 2027 placed-in-service deadline for wind and solar projects seeking to qualify for the ITC and PTC; however, there is an exemption.
Wind and solar projects that begin construction within the next twelve months are not subject to the placed-in-service requirement and developers can still collect subsidies for up to four years while they finish construction and then collect another ten years of subsidies once they place the project into service.
To fulfill the construction requirement, all a wind or solar developer must do is either break ground on the site in question or incur at least 5% of the total cost of the facility and receive the components purchased. One or the other must occur within the 12-month window to qualify the project for this exemption from the placed-in-service requirements. Once qualified, the developer has four years to place that project into service and begin producing and delivering electricity.
For example, a solar developer can break ground on a project in June 2026 and qualify for the PTC, delay placing the project into service for four years, and then collect ten more years of subsidies. This means locking in these subsidies through 2040 for projects that follow this path.
Wind and solar are two of the most
problematic sources of energy for a reliable energy grid. Solar and wind are non-dispatchable energy sources, which means that they can provide too much or too little energy depending on external conditions (
i.e., weather). Americans shouldn’t have to see their tax dollars used to subsidize the destruction of their own power grid.
Instead, Congress should ensure that this loophole is closed. At a minimum, wind and solar projects seeking the ITC or PTC should be required to meet the 2027 placed-in-service deadline to receive taxpayer subsidies.
