Republican lawmakers on Thursday passed a sweeping reconciliation bill that will roll back major parts of the Inflation Reduction Act (IRA), dealing a significant blow to several clean energy sectors.
The legislation narrowly passed the House in a 218-214 vote, with two Republicans breaking ranks to oppose it. It now heads to President Donald Trump’s desk, where he is expected to sign it into law.
Under the bill, incentives for solar, wind, and clean hydrogen will be slashed or expire earlier than planned, dramatically shifting the landscape for renewable energy developers. In contrast, nuclear and geothermal energy will retain some of their existing tax benefits.
The final version of the bill closely mirrors what the Senate Finance Committee advanced last month, though it does include slightly extended deadlines for claiming clean energy tax credits compared to the committee’s earlier draft.
Short Timelines for Solar and Wind
For solar and wind developers, the window to secure incentives is tight. To qualify for tax credits, projects must either connect to the grid by the end of 2027 or break ground within 12 months of the bill’s passage.
This accelerated timeline could create a scramble among developers who rely on these subsidies to make projects financially viable.
Data Centers Could Feel the Pinch
The data center industry—especially the big tech companies known as hyperscalers—may be hit the hardest. Over the past few years, they’ve leaned heavily on solar, wind, and battery storage to power massive facilities cheaply and quickly.
Solar farms, for instance, can often be built in 12 to 18 months, while getting new natural gas turbines online can take years longer, with current backlogs stretching into the early 2030s.
Climate Tech Startups Brace for Impact
Green hydrogen startups are also facing steep challenges. Under the Inflation Reduction Act, tax credits of up to $3 per kilogram of hydrogen were set to last well into the next decade. The new bill, however, will cut those credits off by the end of 2027, a full five years before they were scheduled to begin phasing out.
Some Technologies Spared
Not all sectors are losing support. Geothermal, nuclear, and battery storage managed to hang onto their incentives, which will remain in place until the end of 2033.
However, the bill introduces stricter rules about sourcing materials and technology from “foreign entities of concern.” These provisions could make it much more difficult for developers to actually claim the tax credits, even if their projects meet other criteria.
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