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As bad as previous drafts of the reconciliation bill have been, this one is worse.
Senate Republicans are in the final stages of passing their budget reconciliation megabill — which suddenly includes a new tax on solar and wind projects that has sent many in the industry into full-blown crisis mode.
The proposed tax was tucked inside the latest text of the Senate reconciliation bill, released late Friday night, and would levy a first-of-its-kind penalty on all solar and wind projects tied to the quantity of materials they source from companies with ties to China or other countries designated as adversaries by the U.S. government. Industry representatives are still processing the legislative language, but some fear it would kick in for certain developers as soon as the date of its enactment. Taken together with other factors both in the bill and not, including permitting timelines and Trump’s tariffs, this tax could indefinitely undermine renewables development in America.
On Saturday, as legislators began to digest the new text, Senator Brian Schatz declared on X not once, not twice, but three times that with the new penalty, this bill would on its own “kill” the U.S. solar energy industry, leading to energy shortages and raising costs across the board. "I promise you,” he wrote, “this bill is worse than you think.”
Senator Sheldon Whitehouse of Rhode Island, a staunch advocate for climate policy, said in a statement to Heatmap that the tax will help China and hurt American families, “all so Republican oil and gas donors can make even bigger profits. This isn’t policy; it’s pay-off.”
Without this new tax, energy companies might’ve quietly swallowed the bitter pill of losing the incentives established in the Inflation Reduction Act. In the weeks since the first version of this legislation was introduced in the House, I’ve interviewed numerous renewables developers, tax attorneys, and cleantech investors, who have emphasized the resilience of the industry given rising energy demand and explained that there would still be many ways for projects currently under development to qualify for the credits before they’d be phased out. The history of renewable energy tax credits in the U.S. is full of of phase-outs and restarts. The industry’s been at least somewhere like this before.
But the withdrawal of incentives is one thing. A targeted federal tax that could increase development costs by up to 20% that is levied over longstanding supply chain relationships that will take not years but rather decades to rebuild is another.
The American Council on Renewable Energy said in a statement that the latest iteration of the bill “effectively takes both wind and solar electric supply off the table, at a time when there is $300 billion of investments underway, and this generation is among the only source of electricity that will help to reduce costs and keep the lights on through the early 2030s.” The North America’s Building Trades Unions issued a statement after the text’s release calling it the “biggest job-killing bill in the history of this county” and adding that that “simply put, it is the equivalent of terminating more than 1,000 Keystone XL pipeline projects.”
“I think it’s impossible to overstate how this new version of the bill makes the House bill look moderate by comparison,” Andrew Reagan, president of Clean Energy 4 America, told me in an exasperated tone over the phone Saturday afternoon. “The hope as I see it is that as the full impact of how devastating this proposal would be for every state in the country comes into play, as this comes to the floor, Senate Republicans who claim to care about this issue come to [Majority Leader John] Thune and ask to amend this.”
The tax would apply to new solar and wind construction and be calculated based on the degree to which a project exceeds statutory limits for materials sourced from “foreign entities of concern,” i.e. Russia, North Korea, Iran, and most especially China. Solar projects would have to pay a 50% tax on the value of the overage, and wind projects would pay 30%.
Here’s a simplified example to illustrate how it would work: Say you are developing a solar project that will begin operating in 2028, and the total cost of all of your material inputs is $100,000. The new law would require that at least 50% of the value of all of your materials come from entities disconnected from Chinese companies and investment (the statutory limit for 2028), but your project is only able to achieve 40%. The extra $10,000 dollars you paid to companies with ties to China would be subject to the 50% solar tax, adding $5,000 to the total cost of your project. And this doesn’t even touch the new expense of capturing and reporting all of this supply chain data for the federal government.
The rules for how developers would actually calculate the value of their various material inputs will be subject to the Treasury’s interpretation and guidance, so it is impossible to determine how harshly this tax would fall on any individual solar or wind energy facility. Even so, Rhodium Group has estimated that it would increase project costs overall by 10% to 20% — a whopping total to eat on top of losing key tax credits.
This penalty for sourcing linked to China dates back to the IRA’s consumer electric vehicle tax credit. As I was first to report years ago for E&E News, Senator Joe Manchin successfully limited the credit’s scope by requiring qualifying cars to be made with an increasing percentage of materials from the U.S. or a country with a free trade agreement and mandating that materials could not come from a foreign entity of concern. This tactic mostly failed to reshore mineral supply chains as quickly Manchin had hoped it would, but it did ensure that relatively few vehicles qualified.
This anti-foreigner approach to energy policy has now been taken up by Republicans in Congress to erode the IRA overall. As my colleagues Emily Pontecorvo and Matthew Zeitlin have explained, the Senate legislation would deny tax credits to companies that have supply chains with any ties to China, which many say would effectively stop them from qualifying for the credits.
This specific policy approach is something I’ve previously dubbed the GOP’s “anti-China trap” for renewable energy. Now, on top of cutting off companies from tax credits, this trap will catch them for failing to reinvent their supply chains overnight with little if any warning. Of course, reshoring these supply chains will also be more difficult because of other provisions in the bill that would erode and eliminate advanced manufacturing tax incentives originally designed to encourage companies to make more of these components at home.
The only silver lining here is that the fight isn’t over. It wouldn’t surprise me to see a senator try to get rid of this tax as the bill moves through the amendment process on the Senate floor.
I expect some sort of intervention here because there appears to be momentum from powerful entities outside of Congress to get rid of this tax. Reviews of this piece of the bill are so bad, it has put the American Clean Power and the U.S. Chamber of Commerce on the same side as pro-fossil “philosopher” Alex Epstein, who is also calling on senators to oppose the tax.
“I just learned about the excise tax and it’s definitely not something I would support,” he posted to X yesterday, adding he’d rather they focus on removing the tax credits instead of creating a new cost. “I stand for energy freedom, always, in every situation,” he added in a separate post defending his opposition.
Elsewhere on X yesterday, Elon Musk spent hours (on his birthday, no less) going after the Senate bill, reposting energy wonks’ rants about the bill and its tax on renewables, including from Jesse Jenkins, the host of Heatmap’s very own Shift Key podcast.
So, okay, but will Musk, Epstein or any of these other critics convince at least one senator to force a successful vote on getting rid of the tax? That’s really the only way it can go away, because it’s very likely the Senate will force the House to pass whatever it passes.
I talked to Jenkins hours after Musk reposted him and filled up his replies. Like the iconoclastic billionaire, he told me he thinks this legislation is worse than anything congressional Republicans had released before it. A big reason for that is indeed the excise tax, a completely new idea that hadn’t been in any other previous draft of the bill or debated in committee, which he sees as a “obviously, deliberatively punitive attack on the wind and solar industry for what appears to be purely ideological reasons.”
“It’s going to kill hundreds of billions of dollars in investment and hundreds of gigawatts of new supply that would otherwise help us meet rapidly growing electricity demand. So, yeah, higher energy prices, less jobs, less investment in American energy production, and less confidence in the American business environment,” Jenkins said. “No one is asking for this.”
Debate on the bill is expected to begin later today, and the amendment process will stretch into Monday morning at least.
Additional reporting by Emily Pontecorvo
Editor’s note: This story has been updated to include a statement from Senator Sheldon Whitehouse.
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A longtime climate messaging strategist is tired of seeing the industry punch below its weight.
The saga of President Trump’s One Big Beautiful Bill Act contains at least one clear lesson for the clean energy industry: It must grow a political spine and act like the trillion-dollar behemoth it is. And though the logic is counterintuitive, the new law will likely provide an opportunity to build one.
The coming threat to renewable energy investment became apparent as soon as Trump won the presidency again last fall. The only questions were how much was vulnerable, and through what mechanisms.
Still, many clean energy leaders were optimistic that Trump’s “energy abundance” agenda had room for renewables. During the transition, one longtime Republican energy lobbyist told Utility Dive that Trump’s incoming cabinet had a “very aggressive approach towards renewables.” When Democratic Senator John Hickenlooper introduced would-be Secretary of Energy Chris Wright at the fracking executive’s confirmation hearing, he vouched for Wright’s clean energy cred. Even Trump touted Wright’s experience with solar.
At least initially, the argument made sense. After all, energy demand is soaring, and solar, wind, and battery storage account for 95% of new power projects awaiting grid connection in the U.S. In red states like Texas and Oklahoma, clean energy is booming because it’s cheap. Just a few months ago, the Lone Star State achieved record energy generation from solar, wind, and batteries, and consumers there are saving millions of dollars a day because of renewables. The Biden administration funneled clean energy and manufacturing investment into red districts in part to cultivate Republican support for renewables — and to protect those investments no matter who is president.
As a result, for the past six months, clean energy executives have absorbed advice telling them to fly below the radar. Stop using the word “climate” and start using words like “common sense” when you talk to lawmakers. (As a communications and policy strategist who works extensively on climate issues, I’ve given that specific piece of advice.)
But far too many companies and industry groups went much further than tweaking their messaging. They stopped publicly advocating for their interests, and as a result there has been no muscular effort to pressure elected officials where it counts: their reelection campaigns.
This is part of a broader lack of engagement with elected officials on the part of clean energy companies. The oil and gas industry has outspent clean energy on lobbying 2 to 1 this year, despite the fact that oil and gas faces a hugely favorable political environment. In the run up to the last election, the fossil fuel industry spent half a billion dollars to influence candidates; climate and clean energy advocates again spent just a fraction, despite having more on the line. My personal preference is to get money out of politics, but you have to play by the rules as they exist.
Even economically irresistible technologies can be legislated into irrelevance if they don’t have political juice. The last-minute death of the mysterious excise tax on wind and solar that was briefly part of the One Big Beautiful Bill Act was a glaring sign of weakness, not strength — especially given that even the watered-down provisions in the law will damage the economics of renewable energy. After the law passed, the President directed the Treasury Department to issue the strictest possible guidance for the clean energy projects that remain eligible for tax credits.
The tech industry learned this same lesson over many years. The big tech companies started hiring scores of policy and political staff in the 2010s, when they were already multi-hundred-billion dollar companies, but it wasn’t until 2017 that a tech company became the top lobbying spender. Now the tech industry has a sophisticated influence operation that includes carrots and sticks. Crypto learned this lesson even faster, emerging almost overnight as one of the most aggressive industries shaping Washington.
Clean energy needs to catch up. But lobbying spending isn’t a panacea.
Executives in the clean energy sector sometimes say they are stuck between a rock and a hard place. Democrats and the segment of potentially supportive Republicans at the local and federal levels talk and think about clean energy differently. And the dissonance makes it challenging to communicate honestly with both parties, especially in public.
The clean energy industry should recognize that the safest ground is to criticize and cultivate both parties unabashedly. The American political system understands economic self interest, and there are plenty of policy changes that various segments of the clean energy world need from both Democrats and Republicans at the federal and state levels. Democrats need to make it easier to build; Republicans need to support incentives they regularly trumpet for other job-creating industries.
The quality of political engagement from clean energy companies and the growing ecosystem of advocacy groups has improved. The industry, disparate as it is, has gotten smarter. Advocates now bring district-by-district data to policymakers, organize lobby days, and frame clean energy in terms that resonate across the aisle — national security, economic opportunity in rural America, artificial intelligence, and the race with China. That’s progress.
But the tempo is still far too low, and there are too many carrots and too few sticks. The effects of President Trump’s tax law on energy prices might create some leverage. If the law damages renewable energy generation, and thereby raises energy prices as energy demand continues to rise, Americans should know who is responsible. The clean energy sector has to be the messenger, or at least orchestrate the messaging.
The campaigns write themselves: Paid media targeting members of Congress who praised clean energy job growth in their districts and then voted to gut jobs and raise prices; op-eds in local papers calling out that hypocrisy by name; energy workers showing up at town halls demanding their elected officials fight for an industry that’s investing billions in their communities; activating influencers to highlight the bright line between Trump’s law and higher electricity bills; and more.
If renewable energy is going to grow consistently in America, no matter which way the political wind blows, there must be a political cost to crossing the sector. Otherwise it will always be vulnerable to last-minute backroom deals, no matter how “win-win” its technology is.
On IRA funds, rescissions, and EV battery technology
Current conditions: The National Weather Service is advising Americans in 11 states affected by heat waves to avoid coffee and alcohol due to dehydration risk • There have been more wildfires in London this summer than in all of 2024 • We’re at the halfway point in climatological summer and the United States’ hottest day of the year — 124 degrees Fahrenheit in Death Valley, California, on Monday — may now be behind us.
It has long been a “big mystery” how much grant funding from the Inflation Reduction Act the Biden administration ultimately got out the door before leaving the White House. Previously, the administration had announced awards for about 67% of the $145.4 billion in grants. Still, it wasn’t until Republicans in Congress began their rescissions of the bill’s unobligated funds that a fuller picture began to emerge.
According to reporting by my colleague Emily Pontecorvo, the Biden administration spent or otherwise obligated about $61.7 billion before leaving office, with President Trump’s One Big Beautiful Bill clawing back $31.7 billion from 47 IRA programs. Programs that had the greatest proportion of their funding obligated include:
There’s a lot more in the data to dig through, too, which Emily does here.
Senate Republicans voted narrowly Tuesday evening to advance President Trump’s $9.4 billion rescissions package, with Vice President JD Vance casting the tie-breaking vote. Three Republican senators — Mitch McConnell of Kentucky, Susan Collins of Maine, and Lisa Murkowski of Alaska — joined Democrats in opposing the package. Congress must vote to approve the rescissions by Friday to meet a statutory 45-day deadline that began when President Trump sent his proposal on June 3. The vote-a-rama is set to begin Thursday afternoon.
The proposed package would eliminate $1.1 billion from the Corporation for Public Broadcasting, which funds PBS and NPR, as well as large portions of foreign assistance programs. (A controversial plan to cut $400 million from the country’s AIDS relief program, known as PEPFAR, was ultimately removed to convince Republican holdouts.) But as I’ve written before, the package also takes aim at $1.7 billion of the $3.6 billion appropriated for the Economic Support Fund, which has historically been used to work with international partners to mitigate the impacts of climate change, as well as $125 million from the Clean Technology Fund, which provides financial resources for developing countries to invest in clean energy projects. The White House has said the programs do not “reflect America’s values or put the American people first.”
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China announced Tuesday that to protect the valuable breakthroughs that have allowed it to produce inexpensive electric vehicles, it will begin to restrict “eight key technologies for manufacturing [EV] batteries,” The New York Times reports. The move, which is effective immediately, will require a license from the Chinese government before any technologies can be transferred overseas “through trade, investment or technological cooperation.”
The move follows pressure by the European Union on Chinese EV and battery manufacturers to build factories within the bloc. As I covered in Heatmap AM yesterday, electric vehicle sales are booming in China in large part due to their affordability, with the nation being the “only large market where EVs are on average cheaper to buy than comparable combustion cars,” BloombergNEF has found. Though lithium-ion phosphate battery technology originated in the United States more than three decades ago, Chinese companies BYD and CATL have “figured out a way to further increase the number of recharges, making it comparable to more traditional battery chemistries,” in addition to advances in mass-production and capacity, the Times adds.
The third quarter of 2025 will “likely” see record sales of electric vehicles in the United States as would-be buyers rush to use the $7,500 tax credit before it expires on September 30, Cox Automotive’s Kelley Blue Book reported this week. Electric vehicle sales were lower in Q2 of 2025 than in 2024 by 6.3%, with 310,839 new EVs sold, marking “only the third decline on record, and a sign of a more mature market,” Stephanie Valdez Streaty, senior analyst at Cox Automotive, said in a statement. Additionally, sales of used EVs — only a third of which had qualified for government incentives anyway before those were eliminated — are up, with 100,000 units sold in Q2. But the real story will be what happens in Q3, where there’s “about to be a fire sale” as consumers race against the clock, Andrew Moseman writes for Heatmap. If you’re among the shoppers, he’s got the scoop on EV deals here.
The United States will either “reform” the International Energy Agency or “withdraw,” Energy Secretary Chris Wright told Bloomberg Tuesday during the Pennsylvania Energy and Innovation Summit at Carnegie Mellon University. The IEA, which was originally established to focus on oil security during the 1970s, has been characterized by Republicans as becoming a “cheerleader” for the renewable energy transition, in the recent words of Senator John Barrasso of Wyoming. Wright echoed those concerns in his conversation with Bloomberg, telling the publication that the IEA’s projections that oil demand will plateau this decade are “total nonsense.” Despite the threats, Wright stressed that his “strong preference” for handling the IEA is “to reform it.”
Several major beauty brands, including L’Oréal Paris and Neutrogena, are set to include environmental impact ratings on their packaging. “The EcoBeautyScore” — which runs from A to E — “indicates the environmental footprint of beauty products based on its entire lifecycle, from ingredients to packaging and how it is disposed of,” Cosmetics Business reports.
Rob does a post-vacation debrief with Jesse and Heatmap deputy editor Jillian Goodman on the One Big Beautiful Bill.
It’s official. On July 4, President Trump signed the Republican reconciliation bill into law, gutting many of the country’s most significant clean energy tax credits. The future of the American solar, wind, battery, and electric vehicle industries looks very different now than it did last year.
On this week’s episode of Shift Key, we survey the damage and look for bright spots. What did the law, in its final version, actually repeal, and what did it leave intact? How much could still change as the Trump administration implements the law? What does this mean for U.S. economic competitiveness? And how are we feeling about the climate fight today?
Jillian Goodman, Heatmap’s deputy editor, joins us to discuss all these questions and more. Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: I want to ask a version of the Upshift / Downshift question of both of you, which is, how are you feeling?
Jillian Goodman: Dizzy. I’m feeling dizzy.
Jesse Jenkins: I would like a break. Yes.
Meyer: You both had your faces up against the coalface of this policy change over the past two weeks. And I’m not someone who thinks how we feel about climate change is always the most salient question. At some point of working on it professionally, I think one just kind of is like, well, this is the thing I work on, and I get up in the morning and I try to make it better, and it doesn’t really matter whether I’m optimistic or pessimistic at the moment because you just keep pushing. That’s how it works.
Jenkins: I think it’s how you survive in this game this long, is adopting an attitude like that to some degree.
Meyer: The U.S. just went through a kind of clattering change to its energy and climate policy and got rid of a number of policies that, although flawed, were pushing the U.S. energy system in the right direction, and were a real vote of confidence and of good faith in the energy transition. Has watching the events of the past two weeks made you feel pessimistic about the energy transition to come? Or are you feeling like, you know, for a world where Trump won, for a world where the U.S. faced the constraints and the political environment that it did in 2023 and 2024 and 2025, we can work with this and there’s gonna be new stuff coming down the pipeline and we’re gonna keep deploying.
Goodman: I will say, kind of similar to you, Rob, doing this work is sort of my way of processing my climate anxiety, or at least putting some kind of wall of professionalism between that climate anxiety and my daily life. Like, this is my contribution, and I think about it as a professional, and I don’t really think about it as a human as often.
I will say, it’s shocking to me how much of a … you know, it is not a 100% policy reversal, but the extent to which the government of the United States was willing to throw out its existing climate policy that took however many years and decades to get to just really kind of floors me. And it’s the kind of thing that we can’t do again, at least not in this way. It’s not that U.S. companies will never again trust a climate-oriented tax credit. I think that’s a bit of an overstatement. But this approach has been tried, and then it’s been undone. And so whatever approach is tried in the future will have to be something new, and it’ll have to be motivated by different arguments, and it will have to have different structures. And that project, I think, is also kind of daunting.
Jenkins: Yeah, so look, this is a terrible piece of policy for the United States, and for the world. And so on the one hand, I’m mad as hell about it, right? I mean, we haven’t even talked about the broader effects beyond climate of this bill. It’s going to kick nearly one in 20 Americans off of their health insurance. It’s going to explode the deficit so that we can mostly give tax cuts to wealthy people and corporations who don’t need it. It’s going to reduce food stamp spending for people who can’t afford to eat so that people who can afford first class flights can have another vacation. Like, this is just bad policy, and it is a bad way to do energy policy, to completely reverse course just because the other guy won the election, rather than to have a more thoughtful rationalization of the tax code for energy investment.
I think it’s particularly scary to think about the implications for our automotive sector, having basically replaced a pretty thoughtful and fairly successful domestic industrial strategy around EVs and batteries with basically nothing except for some subsidies that build a wall around the United States is really concerning.I don’t know that we’re gonna have a globally relevant auto industry in five years …
Mentioned:
The REPEAT Project report on what the OBBBA will mean for the future of American emissions
The Bipartisan Policy Center’s foreign entities of concern explainer
The new White House executive order about renewables tax credits
And here’s more of Heatmap’s coverage from the endgame of OBBBA.
This episode of Shift Key is sponsored by …
The Yale Center for Business and the Environment’s online clean energy programs equip you with tangible skills and powerful networks—and you can continue working while learning. In just five hours a week, propel your career and make a difference.
Music for Shift Key is by Adam Kromelow.