Senate Finance Committee Proposes Major Cuts to Solar and Wind Tax Credits While Energy Storage Incentives Remain Intact

**Senate Finance Committee Reconciliation Bill Cuts Solar Credits While Energy Storage Remains Intact**

US tax incentives for solar photovoltaic (PV) and wind power are facing significant reductions, although those for energy storage are expected to remain unchanged. On June 16, 2025, Senator Mike Crapo, the chairman of the Senate Finance Committee, released a draft of the legislation pertaining to the budget reconciliation bill within the committee’s jurisdiction.

In a statement, Crapo emphasized that the legislation aims to achieve substantial savings by implementing major cuts to Green New Deal expenditures while still safeguarding support for the most vulnerable populations. This bill made its way to the Senate after narrowly passing the House of Representatives in late May.

Initially, the House version of the bill proposed an immediate end to tax credits for electric vehicles (EVs) and residential clean energy, along with drastically shortened timelines for tax credits related to solar PV, wind, and energy storage. The revised committee proposal calls for the investment tax credits (ITCs) for solar PV and wind to start phasing out in 2026. Projects that begin construction in 2026 will be eligible for only 60% of the credit’s value, dropping to 20% in 2027 and eliminating it altogether the following year. A similar timeline applies to the clean electricity production tax credits (PTCs) for solar and wind.

However, the ITC for “other qualifying facilities,” which include geothermal, nuclear, hydroelectric, and energy storage, will follow the original phaseout schedule starting in 2032. These facilities will receive 100% of the credit in 2033, 75% in 2034, 50% in 2035, and then nothing in 2036.

One positive aspect of the bill is that it retains the transferability of the tax credits that are preserved. However, it restricts access to credits for projects receiving significant assistance from prohibited foreign entities (PFEs) or foreign entities of concern (FEOCs). Any project that begins construction after December 31, 2025, will be ineligible for any credits if it has received such assistance.

For solar PV, the precise definitions of FEOCs and PFEs will be crucial. While the US imports a limited number of PV components directly from China, which is among the designated countries, facilities in Southeast Asia backed by Chinese companies could also be affected, making access to remaining tax credits challenging.

Advanced manufacturing credits are likely to remain, but the same restrictions regarding assistance from PFEs or FEOCs could hinder investments in US domestic production.

The Senate may pass the bill and send it to the President for approval as early as July 4, though many observers believe a more realistic timeline is late September or early October.

In a recent interview with Energy-Storage.news, Isshu Kikuma, an energy storage analyst at BloombergNEF, indicated that if the reconciliation bill effectively repeals the Inflation Reduction Act (IRA)—which introduced or extended many incentives for a decade starting in 2022—solar and wind installations could see a significant decline in the US.

Abigail Ross Hopper, President and CEO of the Solar Energy Industries Association (SEIA), expressed that while the finance committee bill offers “modest improvements” on several provisions, it fails to adequately protect what she described as “one of the greatest economic success stories in American history.” She stated, “This bill makes it harder to do business in America for US manufacturers and small businesses, which will likely lead to an energy-strained economy with higher electric bills over the next five years.”

Ray Long, President and CEO of the American Council on Renewable Energy (ACORE), criticized the bill as a “premature rollback of solar and wind tax credits,” warning that it could undermine American energy leadership and jeopardize billions in private investments that currently benefit communities across the nation. He stressed that this represents a retreat from the market’s need for certainty and scope to make the energy investments necessary to meet increasing electricity demand.