Senate Reconciliation Bill Draft Retains Energy Storage Tax Credits While Cutting Solar, Wind, and EV Incentives

Senate Reconciliation Bill Draft Retains Energy Storage ITC While Cutting Solar PV, Wind, and EV Incentives
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By Andy Colthorpe
June 17, 2025
US & Canada, Americas Grid Scale, Connected Technologies, Distributed Policy

Senator Mike Crapo, chairman of the US Senate Finance Committee, announced last week that the focus of the new bill should be to support President Donald Trump’s 2017 tax cut agenda. The draft legislation, released on June 16, outlines the budget reconciliation bill’s sections under the committee’s oversight.

Despite potential cuts to incentives for solar photovoltaic (PV), wind, and electric vehicles (EVs), tax credits for energy storage projects remain intact. The bill was introduced to the Senate in late May, having passed the House of Representatives by a narrow margin. Initially, the House version proposed the immediate termination of tax credits for EVs and residential clean energy, as well as significantly reduced timelines for the tax credits for solar, wind, and energy storage.

In its current form, the committee’s proposal phases out investment tax credits (ITCs) for solar PV and wind starting in 2026. Projects commencing construction in 2026 would receive only 60% of the credit’s value, with a drop to 20% in 2027, and nothing by the following year. The same schedule applies to clean electricity production tax credits (PTCs) for solar and wind. However, for “other qualifying facilities”—including geothermal, nuclear, hydroelectric, and energy storage—the original phaseout timeline remains, beginning in 2032 and culminating in a complete phaseout by 2036.

One positive aspect of the bill is that it retains the transferability of the tax credits. However, it restricts access to these credits for projects receiving significant assistance from prohibited foreign entities (PFEs) or foreign entities of concern (FEOCs). Any project starting construction after December 31, 2025, will be ineligible for credits if it involves such foreign assistance, including materials sourced from China, a primary supplier of energy storage components to the US.

Advanced manufacturing credits are also expected to remain, although they may face similar restrictions regarding foreign involvement. Meanwhile, the bill proposes the elimination of tax rebates for EVs, residential clean energy credits, and energy efficiency credits for both residential and commercial buildings.

The Senate may pass the bill and send it to the president for approval as early as July 4, although a late September or early October timeline seems more likely. As the bill progresses through the Senate, there is concern among clean energy industries, scientists, and environmental advocates regarding the abrupt reduction in support for renewable energy and storage. Some hope that Republican Senators may amend the bill’s contents during debates.

Isshu Kikuma, an energy storage analyst at BloombergNEF, expressed that without the Inflation Reduction Act (IRA), which had extended many incentives through 2022, installations of energy storage, solar, and wind could sharply decline in the US. While some industry stakeholders cautiously welcomed the retention of ITCs for eligible projects until 2032, many industry groups voiced significant apprehension.

Abigail Ross Hopper, President and CEO of the US Solar Energy Industries Association (SEIA), remarked that while the finance committee’s bill included “modest improvements,” it failed to sufficiently protect what she described as “one of the greatest economic success stories in American history.” Hopper warned that the proposed measures would hinder domestic solar energy production, negatively impacting US manufacturers and small businesses, potentially leading to higher energy costs over the next five years.

Jason Grumet, CEO of the American Clean Power Association (ACP), noted that the proposed changes would not only increase electricity bills but also threaten hundreds of thousands of jobs nationwide. He emphasized that abrupt modifications to clean energy tax credits would unfairly penalize companies making good faith investments based on current laws.

Ray Long, President and CEO of the American Council on Renewable Energy (ACORE), criticized the bill for prematurely rolling back solar and wind tax credits. He warned that this could jeopardize billions in private investments benefiting communities across the US, ultimately retreating from the necessary market stability for energy investments needed to meet rising electricity demand.

All three association leaders underscored that the proposed limitations on clean energy growth could harm US economic growth and international competitiveness. Hopper stressed that if the bill passes, American consumers would face higher electricity bills, job losses, factory closures, and potential blackouts, all while ceding the AI race to China. Grumet added that high-paying jobs and technological innovation could be driven overseas due to the lack of reasonable timelines for adapting to increased taxes.

Long concluded by urging Congress to finalize a bill that embraces all energy technologies and honors existing pro-growth policies crucial for enhancing American competitiveness.