US House Proposes Termination of Clean Energy Tax Credits, Impacting Solar and Lithium Battery Industries

Is the export of photovoltaic lithium batteries undergoing changes? The U.S. House of Representatives plans to terminate clean energy tax credits.

On May 16, 2025, it was reported that the Trump administration is seeking to end the green policies established during the Biden era by canceling tax credits for clean energy. This move is expected to deliver a significant blow to the U.S. clean energy sector and create greater uncertainty for Chinese photovoltaic and lithium battery companies looking to enter the U.S. market.

The proposed $4.9 trillion legislative package aims to extend tax cuts from Trump’s first term. According to the Joint Committee on Taxation (JCT), approximately 11% of the funding supporting this bill would come from the cancellation of clean energy tax credits established under the Inflation Reduction Act (IRA).

The U.S. is now initiating a comprehensive review of the IRA, which represents a key legacy of the Biden administration. Not only is the Trump administration using executive orders to repeal these policies, but legislative efforts are also underway to reverse the green transformation initiatives of the past four years, potentially eliminating hundreds of billions in clean energy subsidies.

On May 12, the House Ways and Means Committee unveiled a tax fundraising proposal titled “THE ONE, BIG, BEAUTIFUL BILL.” The following day, after an overnight session, the committee and Republican lawmakers voted in favor of this bill, taking the first step toward abolishing Biden’s clean energy incentives. The committee recommends a phased cancellation or elimination of relevant tax credits included in the IRA, such as those for consumer electric vehicle purchases and home energy efficiency improvements, as well as the gradual removal of various essential clean energy subsidies.

The response from the industry to the release of the new proposal has been overwhelmingly negative. Some clean energy advocates argue that even if the proposed phase-out is not as severe, it will still deal a significant blow to the clean energy sector. The Solar Energy Industries Association (SEIA) and the American Clean Power Association (ACP) both claim that the bill will lead to job losses and force U.S. factories to shut down. Furthermore, this legislation will create even greater uncertainty for Chinese photovoltaic and lithium battery companies seeking to enter the U.S. market.

According to analysis from the American Action Forum (AAF), the bill proposes to significantly cut about 60% of the IRA energy tax credits. JCT data indicates that this measure will generate approximately $515 billion in tax revenue from 2025 to 2034, accounting for about 60% of the revenue increase expected from eliminating all IRA energy provisions, which is estimated at $852 billion.

Specifically, the proposal aims to terminate multiple clean energy tax credits, including all credits for clean electric vehicles (for new, used, and commercial vehicles), alternative fuel vehicle charging infrastructure credits, all residential energy efficiency credits, and clean hydrogen production credits. The JCT estimates that the cancellation of these credits will raise about $306 billion in funding from 2025 to 2034. Most of these tax credits would be eliminated immediately, taking effect after December 31, 2025, which is at least seven years earlier than the expiration date set by current law (December 31, 2032). Additionally, the credits for used clean electric vehicles and new energy-efficient homes will be eliminated after December 31, 2026.

The bill also proposes to gradually eliminate and restrict other clean energy tax credits, such as those for clean electricity production and investment, clean fuel production, carbon capture, nuclear power production, advanced manufacturing production, and certain energy property credits. JCT estimates that cutting these tax credits will generate approximately $210 billion from 2025 to 2034.

The House Ways and Means Committee suggests an early termination of the 48E investment tax credit and 45Y production tax credit for wind, solar, and other clean energy sources starting in 2029, with a complete elimination by the end of 2031. Furthermore, the specified calendar year will no longer refer to the “start date” but rather the “placed in service date,” meaning that any projects not “placed in service” by December 31, 2028, will only qualify for a reduced tax credit amount. Specifically, the bill stipulates that facilities placed in service in the 2029 calendar year will see a 20% reduction in tax credit amounts; those in 2030 will see a 40% reduction; those in 2031 will see a 60% reduction; and projects placed in service after December 31, 2031, will no longer qualify for tax credits. The transfer of tax credit amounts will be eliminated for facilities starting construction two years after the bill takes effect.

Additionally, the committee plans to revoke the residential investment tax credit (25D) from the draft budget bill. If enacted, this would eliminate the residential solar tax credit at the end of this year, nearly ten years earlier than the originally planned expiration on December 31, 2034. Homeowners with solar photovoltaic systems are likely to rush to finish their projects before the end of 2025, potentially causing a surge in solar installations, according to clean energy company EnergySage. Data from EnergySage indicates that a typical residential solar panel system, after utilizing the investment tax credit (ITC), costs $20,552, but this cost could rise by $8,978 after the deadline.

The bill also introduces strict limitations related to foreign entities of concern, restricting taxpayers from obtaining energy credits. For example, taxpayers identified as foreign entities of concern (FEOC) or engaging in economic activity with FEOCs will be ineligible to apply for energy credits. However, tax credits for carbon capture and storage, as well as direct air capture (i.e., 45Q), which are favored by the oil and gas industry, will largely remain unchanged, although there will be some restrictions on foreign ownership of projects. The proposal also extends tax relief for sustainable aviation fuels, which provides encouragement for biofuel producers looking to expand their market. JCT estimates that modifications to clean fuel production tax credits will cost $45 billion from 2025 to 2034.

The bill will also reclaim unspent funds from nine renewable energy and electrification subsidy programs established under the IRA, including tribal energy loan guarantees and financing for transmission facilities, while removing unspent funds from the Department of Energy’s loan office. Furthermore, the bill aims to revoke all unspent funds from the $27 billion greenhouse gas reduction fund managed by the U.S. Environmental Protection Agency (EPA). The former EPA administrator, Lee Zeldin, appointed by Trump, previously attempted to cancel these funds, which included $7 billion for the “Solar for All” program, but a federal court ordered the agency to fulfill the allocated funding.

On April 24, the Climate Action Campaign reported that the EPA had announced in a court ruling that it had terminated 377 grants funded by the IRA and would cancel an additional 404 grants in the coming weeks. In the context of a shift in energy and environmental policy and tariffs disrupting supply chains, the U.S. clean energy sector is facing unprecedented challenges, and the green manufacturing boom during Biden’s term is undergoing a fundamental reversal. Rising costs due to tariffs have slowed the development of sectors ranging from photovoltaics and batteries to electric vehicles.

According to industry organization E2, the IRA and its related tax credits have prompted private sector investments exceeding $131 billion in clean energy projects and facilities across the U.S. Since the passage of the IRA, approximately 400 large-scale clean energy projects have been announced, but this trend is now rapidly cooling. Documents obtained by the Associated Press indicate that about 300 clean energy projects are currently under review, covering wind, solar, energy storage, and electric vehicle infrastructure. Energy media E&E News reported that the Trump administration is drafting a “blacklist” of projects that could lose funding, which could total billions of dollars. According to E2’s latest data, in the first three months of this year, companies have abandoned plans for nearly $8 billion worth of clean energy projects, most of which involve factories producing a range of products from grid batteries to electric vehicles. This sharply contrasts with Biden’s era, where only $2.1 billion in investments were canceled between 2022 and 2024.

The introduction of this bill aimed at ending clean energy tax credits further complicates the situation for the U.S. clean energy sector. This significant shift in U.S. energy tax law will undoubtedly stifle most new clean energy projects and jeopardize financing for many ongoing projects. Jason Grumet, CEO of the American Clean Power Association (ACP), stated, “If this proposal is adopted, it will raise energy costs for American consumers, force U.S. factories to close, and threaten American jobs.” Abigail Ross Hopper, president and CEO of the SEIA, also expressed that, “This proposed legislation will effectively destroy the most successful industrial resurgence effort in U.S. history, supported by states that overwhelmingly voted for President Trump.” Erik Lensch, CEO of Leyline Capital, noted, “Reducing clean energy tax credit policies will send a chilling signal to investors in solar and battery projects and make it harder to complete projects already in development. A sudden policy reversal will undermine confidence and could lead to job losses, rising costs, and stagnation in development.” A recent survey by the American Council on Renewable Energy (ACORE) indicated that most respondents believed that uncertainty regarding tax credit policies could result in reductions of 84% and 73% in activities in the renewable energy sector for investors and developers, respectively.

If this bill officially takes effect, it will undoubtedly bring greater uncertainty to Chinese photovoltaic and lithium battery companies looking to enter the U.S. market. In recent years, leading photovoltaic manufacturers in China have accelerated their plans to establish factories in the U.S. Integrated leaders such as Canadian Solar and LONGi Green Energy have made significant progress, with 5GW of module production capacity already in operation and shipping products. Other companies, including JinkoSolar, JA Solar, and Trina Solar, are also establishing production capabilities in the U.S. Last year, JinkoSolar and Canadian Solar confirmed that their U.S. factories had received tax credits under the IRA.

In terms of lithium batteries, Gotion High-Tech has set up battery and material production bases in Illinois and Michigan, and plans to officially launch its first “Made in America” battery pack product at its Fremont factory by the end of 2023. Contemporary Amperex Technology Co., Ltd. (CATL) is conducting business in the U.S. through a technology licensing collaboration, while Ford is opening a lithium iron phosphate battery factory in Michigan based on its licensing agreement with CATL. Tesla is also working with CATL in Nevada under a similar agreement to produce batteries.

After the House Ways and Means Committee completes its review and voting, the bill will be submitted to a full House vote. Following that, it will move to the Senate, where a decision must be made by July 4th regarding any amendments, rejection, or approval of the bill. The bill only requires a simple majority vote in the Senate to pass, and currently, Republicans hold a 53 to 47 majority in the Senate.