The House budget bill that narrowly passed in an early morning vote on Thursday would effectively put the brakes on a clean energy production boom in the United States spurred by tax credits enacted in 2022.
The changes made from the House tax-writing committee's proposal last week would advance by three years an end-date for the use of technology-neutral clean electricity tax credits for wind, solar and battery storage projects to 2028 and require projects to begin construction within 60 days of the final bill's passage, according to a bill summary.
The House bill also eliminates the "transferability" of tax credits that enabled developers to sell their tax credits and use the funds to finance their projects’ construction, a feature that made it easier to get projects up and running except for some nuclear energy projects.
It also strengthened restrictions using tax credits for any project associated with “foreign entities of concern,” which includes companies, subsidiaries and materials linked to China. China dominates all aspects of the clean energy supply chain and the restrictions effectively kill most projects, which rely on many components sourced from there.
The budget proposal passed with the support of over two dozen Republican representatives who had urged House leaders to preserve key IRA tax credit provisions because their districts have benefited from clean energy and manufacturing investments.
Advocates for the clean energy industry blasted the bill on Thursday, saying it will destroy billions in investments around the country and complaining that House leadership had initially promised to carefully reform the credits, not kill them.
"If enacted as written, this bill will weaken our power system and send shockwaves throughout the U.S. economy by raising electricity prices, killing tens of thousands of jobs, and ceding energy dominance to China," said Heather O'Neill, president of clean energy lobby group Advanced Energy United.
"This isn’t a scalpel, it’s a meat cleaver, and it will hurt us all."
The American Petroleum Institute praised the bill for "preserving competitive tax policies" as well as opening up more oil lease sales and eliminating Biden administration policies such as its fee on methane emissions for the oil and gas industry.
Analysts at JP Morgan described the IRA tax credit changes as "unfavorable" in an analysis, and said the bill contained "significant negative changes" from last week's proposal that it hopes the Senate can reverse.
Energy analysts at the Rhodium Group said its preliminary review of the bill found the changes amount "to the impact of a full repeal of the energy tax credits" and could raise household energy costs by 7%.
Clean energy stocks took a hit on Thursday.
Sunrun (RUN.O) shares fell as much as 33%, Complete Solaria (SPWR.O) fell nearly 22% while Enphase Energy, Maxeon Solar and SolarEdge Technologies dipped between 10% and 15.6%.
Shares of JinkoSolar fell 2.3%, while First Solar and Canadian Solar dropped 6.5% and 10%, respectively.
