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It’s not early phase-out. These 3 changes could overhaul the law’s clean electricity supports.
On Monday, the Republican-led House Ways and Means Committee released the first draft of its rewrite of America’s clean energy tax credits.
The proposal might look, at first, like a cautious paring back of the tax credits. But the proposal amounts to a backdoor repeal of the policies, according to energy system and tax analysts.
“The bill is written to come across as reasonable, but the devil is in the details,” Robbie Orvis, a senior analyst at Energy Innovation, a nonpartisan energy and climate think tank, told me. “It may not be literally the worst text we envisioned seeing, but it’s probably close.”
The proposal would strangle new energy development so quickly that it could raise power costs by as much as 7% over the next decade, according to the Rhodium Group, an energy and policy analysis firm.
Senate Republicans have already indicated that the proposal is unworkable. But to understand why, it’s worth diving into the specific requirements that render the proposal so destructive.
The clean energy tax credits are one of the centerpieces of American energy policy. They’re meant to spur companies to deploy new forms of energy technology, such as nuclear fusion or advanced geothermal wells, and simultaneously to cut carbon pollution from the American power grid.
The U.S. government has long used the tax code to encourage the build-out of wind turbines or solar panels. But when Democrats passed the Inflation Reduction Act in 2022, they rewrote a pair of key tax credits so that any technology that generates clean electricity would receive financial support.
Under the law as enacted, these clean electricity tax credits provide 10 years of support to any electricity project — no matter how it generates power — for the foreseeable future. But the new Republican proposal would begin phasing down the value of the credit starting in 2029, and end the program entirely in 2032.
That might sound like a slow and even reasonable phase-out. But a series of smaller changes to the law’s text introduce significant uncertainty about which projects would continue to qualify for the tax credit in the interim. Taken together, these new requirements would kill most, if not all, of the tax credits’ value.
Here are three reasons why the Republican proposal would prove so devastating to the American clean electricity industry.
The new Ways and Means proposal begins to phase out the clean energy tax credits immediately. The proposal cuts the value of the tax credit by 20% per year starting in 2029, and ends the credit entirely in 2032.
But the GOP proposal changes a key phrase that helps financiers invest confidently in a given project.
Under the law as it stands today, developers can’t claim a tax credit until a project is “placed in service” — meaning that it is generating electricity and selling it to the grid. But a project qualifies for a tax credit in the year that construction on that project begins.
For example, imagine a utility that begins building a new geothermal power plant this year, but doesn’t finish construction and connect it to the grid until 2029. Under current law, that company could qualify for the value of the credit as it stands today, but it wouldn’t begin to get money back on its taxes until 2029.
But the GOP proposal would change this language. Under the House Republican text, projects only qualify for a tax credit when they are “placed in service,” regardless of when construction begins. This means that the new geothermal power plant in the earlier example could only get tax credits as set at the 2029 value — regardless of when construction begins.
What’s more, if work on the project were delayed, say by a natural disaster or unexpected equipment shortage, and the power plant’s completion date was pushed into the following year, then the project would only qualify for credits as set at the 2030 value.
In other words, companies and utilities would have no certainty about a tax credit’s value until a project is completed and placed in service. Any postponement or slowdown at any part of the process — even if for a reason totally outside of a developer’s control — could reduce a tax credit’s value.
This makes the tax credits far less dependable than they are today. Generally, companies have more ability to plan around when construction on a power plant begins than they do over when it is placed in service.
This change will significantly raise financing costs for new energy projects of all types because it means that companies won’t be able to finalize their capital stack until a project is completed and turned on. The most complicated and adventurous projects — such as new geothermal, nuclear, or fusion power plants — could face the highest cost inflation.
The Inflation Reduction Act as it stands today attaches a “foreign entity of concern” rule to its $7,500 tax credit for electric vehicle buyers.
In order to qualify for that EV tax credit, automakers had to cut the percentage of Chinese-processed minerals and battery components that appear in their electric models every year. This phased in gradually over time — the idea being that while China dominates the EV and battery supply chain today, the requirement would provide a consistent spur to reshore production.
Somewhat ironically, the GOP proposal ditches the EV tax credit and its accompanying foreign sourcing rules. But it applies a strict version of the foreign entity of concern rule to every other tax credit in the law, including the clean electricity tax credits.
Under the House proposal, no project can qualify for the tax credits unless it receives no “material support” from a Chinese-linked entity. The language defines “material support” aggressively and expansively — it means any “any component, subcomponent, or applicable critical mineral” that is “extracted, processed, recycled, manufactured, or assembled.”
This provision, in other words, would essentially disqualify the use of any Chinese-made part, subcomponent, or metal in the construction of a clean electricity project, although the rule includes a partial and narrow carve-out for some components that are bought from a third-party. Even a mistakenly Chinese-sourced bolt could result in a project losing millions of dollars of tax credits.
Technically, the law also disqualifies the use of goods from other “foreign entities of concern” as defined under U.S. law, which include Russia, Iran, and North Korea. But China is the United States’ third largest trading partner, and it is the only manufacturer of the type of goods that matter to the law.
Solar projects would face immediate challenges under the new rule. China and its domestic companies command more than 80% of the market share for all stages of the solar panel manufacturing process, according to the International Energy Agency.
But then again, the proposal would be an issue for virtually all energy projects. Copper wiring, steel frames, grams of key metals — even geothermal plants rely on individual Chinese-made industrial components, according to Seaver Wang, an analyst at the Breakthrough Institute. These parts also intermingle on the global market, meaning that companies can’t be certain where a given part was made or where it comes from.
These new and stricter rules would kick in two years after the reconciliation bill passes, which likely means 2027.
This provision by itself would be unworkable. But it is made even worse by being coupled to the tax credit’s change to a “placed in service” standard. That’s because projects that are already under construction today might not meet these new foreign entity rules, essentially stripping them of tax credits that companies had already been banking on.
These projects have assumed that they will qualify for the tax credits’ full value, no matter when their power plant is completed, because they have already begun construction. But the GOP proposal would change this retroactively, possibly threatening the financial viability of energy projects that grid managers have been assuming will come online in the next few years.
In some ways, these two changes taken together are “worse than repeal,” Mike O’Boyle, an Energy Innovation analyst, told me. “A number of projects under construction now will lose eligibility."
It is also made worse by the House GOP plan to phase out the tax credits. If companies could plan on the tax credits remaining on the books long-term then the foreign entity rules might spur the creation of a larger domestic — or at least non-Chinese — supply chain for some clean energy inputs. But because the credits will phase out by 2032 regardless, fewer projects will qualify, and it won’t be worth it for companies to invest in alternative supply chains.
Finally, the House Republican proposal would end companies’ ability to sell the value of tax credits to other firms. The IRA had made it easier for utilities and developers to transfer the value of tax credits to other companies — essentially allowing companies with a lot of tax liability, such as banks, to acquire the rights to renewable developers’ credits.
The GOP proposal ends that right for every tax credit, even those that Republicans have historically looked on more favorably, such as the tax credit that rewards companies for capturing carbon dioxide from the atmosphere.
This change — coupled with the foreign entity and placed-in-service rules — will have an impact today on power markets by further gumming up the pipeline of new energy projects planned across the country, according to Advait Arun, an analyst at the Center for Public Enterprise.
The end to transferability “functionally imposes higher marginal tax rates on all of these projects,” Arun told me. “The prices that developers will get for their tax credits on the tax equity market today will be a lot lower than normal.”
That could significantly raise the cost of any new energy projects that get planned. And that will lead in the medium term to a further slowdown in the growth of electricity supply, just as turbine shortages have made it more difficult than ever to build a new natural gas power plant.
While many of these changes may seem academic, they will hit energy consumers faster than legislators might realize. Natural gas prices in the U.S. have been unusually high in 2025. A slowdown in the growth of non-fossil energy will further stress natural gas supplies, raising power prices.
Taken together, Orvis told me, these changes to the IRA “will increase the price of the vast majority of new capacity coming online next year,” Orvis said. “It’s an immediate price hike for new energy, and you can’t replace that with new gas.”
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That’s okay for clean energy firms, terrible for manufacturers, and a big risk for everyone.
Over the past few months, you could put together three different — and somewhat conflicting — pictures of the American economy.
For companies exposed to the AI boom, business has been good — excellent, even. The surge in ongoing capital investment into data centers and electricity has been larger than other recent booms, such as the telecom buildout. Electricity demand is soaring, especially in Texas and the Mid-Atlantic. Technology companies have signed power offtake deals with nuclear and hydroelectricity companies. If anything, companies exposed to artificial intelligence are more afflicted by congested supply chains and shortages than by slack demand — see the yearslong waiting lists to get a new transformer or natural gas turbine.
Outside of the AI economy, though, the economy has been a fair bit colder. You might even say it’s been frozen by indecision. When you talk to business leaders, they confess confusion about where things are heading. President Trump’s constantly changing tariffs — and his administration’s mercurial policy shifts — have made it difficult for non-AI-exposed businesses to plan long-term capital investment.
You could hear this view from clean energy manufacturing and traditional fossil firms alike. When I talked to John Henry Harris, the CEO of the medium-duty truck maker Harbinger Motors, for an episode of Heatmap’s Shift Key podcast in June, he told me that his company was just about to shift a production process to Mexico when a last-minute Trump change made it cheaper to keep it in China. Meanwhile, an oil and gas executive recently told the Dallas Federal Reserve: “The Liberation Day chaos and tariff antics have harmed the domestic energy industry. Drill, baby, drill will not happen with this level of volatility.”
But the data contradicted that tepid view. This was the third picture that we were getting of the economy. Through the summer, federal surveys showed an economy that was performing okay. In May, according to the Bureau of Labor Statistics, the U.S. economy added 139,000 jobs; it gained another 147,000 jobs, apparently, in June. The AI boom was clearly contributing to those robust reports. But how could an economy that business leaders otherwise described as difficult be going so well?
Now we can finally square these disparate pictures.
On Friday, the federal government released its newest tranche of job numbers. The headline number was mediocre — the U.S. added a mere 73,000 jobs in July — but the guts of the report were worse. The government revised down its estimate of the May and June reports by a total of 258,000 jobs. With these new numbers in hand, it’s clear that the labor market has essentially stalled out since Liberation Day in April.
The unemployment rate slightly rose to 4.2%, which was in line with what economists predicted.
These new reports clarify that the broader American economy wasn’t actually thriving. Its summer strength was a mirage the whole time. Outside of AI, things are downright frigid. And as President Trump continues to shuffle tariffs and increase trade uncertainty, we can expect conditions to worsen. Trump seems hellbent even on clouding our ability to understand the underlying economy: on Friday afternoon, he fired the Bureau of Labor Statistics commissioner, a career civil servant.
If you squint, you can see a hazy “AI sector” versus “non-AI sector” distinction in the data, even among the energy and decarbonization companies we cover at Heatmap. But it’s not obvious. Contrary to what you might expect when power demand is surging, utility employment was basically flat last month. Heavy and civil engineering construction jobs were up by 6,000, and “nonresidential specialty trade contractors” — a category that can include electricians — gained nearly 2,000 jobs.
But manufacturing lost 11,000 jobs last month, with the motor vehicles industry driving 2,600 of those losses. Mining, quarrying, and oil and gas jobs were down. The Institute of Supply Management report, a private survey of U.S. manufacturing activity, showed the sector shrank in July for the fifth month in a row.
And even though the Department of Government Efficiency’s deferred buyout program for more than 150,000 people has yet to hit, the federal government bled 12,000 jobs.
In a way, the clean energy industry — or at least solar, battery, nuclear, and geothermal developers — might consider themselves lucky. Despite the best efforts of Trump’s officials, and despite the chaos of President Trump’s policies, they have been able to eke through the past few months because of the AI boom. Nearly 70% of all new power-generating capacity added to the U.S. grid in the first quarter of this year came from solar panels, and the government has thrown its weight behind next-generation nuclear and geothermal technologies. A tepid jobs report might even bring some interest rate relief from the Federal Reserve.
But if that AI boom slows down, we should all watch out below.
A conversation with Heather O’Neill of Advanced Energy United.
This week’s conversation is with Heather O’Neill, CEO of renewables advocacy group Advanced Energy United. I wanted to chat with O’Neill in light of the recent effective repeal of the Inflation Reduction Act’s clean electricity tax credits and the action at the Interior Department clamping down on development. I’m quite glad she was game to talk hot topics, including the future of wind energy and whether we’ll see blue states step into the vacuum left by the federal government.
The following conversation has been lightly edited for clarity.
During Trump 1.0 we saw blue states really step into the climate role in light of the federal government. Do you see anything similar taking place now?
I think this moment we’re in – it is a different moment.
How are we handling load growth? How are we making sure consumers are not paying for expensive stranded assets? Thinking about energy affordability? All of those challenges absolutely present a different moment and will result in a different response from state leaders.
But that’s where some of the changes our industry has gone through mean we’re able to meet that moment and provide solutions to those challenges. I think we need aggressive action from state leaders and I think we’ll see that from them, because of the challenges in front of them.
What does that look like?
Every state is different. Take Virginia for example. Five years after we passed the Virginia Clean Economy Act – a big, bold promise of action – we’re not on track. So what are the things we need to do to keep the foot on the accelerator there? This last legislative session we passed the virtual power plant legislation that’ll help tremendously in terms of grid flexibility. We made a big push around siting and permitting reform, and we didn’t quite get it over the finish line but that’s the kind of thing where we made a good foundation.
Or Texas. There’s so much advanced energy powering Texas right now. You had catastrophic grid failure in Hurricane Uri and look at what they’ve been able to build out in response to that: wind, solar, and in the last few years, battery storage, and they just passed the energy waste reduction [bill].
We need to build things and make it easier to build – siting and permitting reform – but it’s also states depending on their environment looking at and engaging with their regional transmission organization.
You saw that last week, a robust set of governors across the PJM region called on them to improve their interconnection queue. It’s about pushing and finding reforms at the market level, to get these assets online and get on the grid deployed.
I think the point about forward momentum, I definitely see what you’re saying there about the need for action. Do you see state primacy laws or pre-emption laws? Like what Michigan, New York, and California have done…
I’m not a siting expert, but the reform packages that work the best include engagement from communities in meaningful ways. But they also make sure you’re not having a vocal minority drowning out the benefits and dragging out the process forever. There are timelines and certainty attached to it while still having meaningful local engagement.
Our industry absolutely has to continue to lean into more local engagement and community engagement around the benefits of a project and what they can deliver for a community. I also think there’s a fair amount of making sure the state is creating that pathway, providing that certainty, so we can actually move forward to build out these projects.
From the federal government’s perspective, they’re cracking down on wind and solar projects while changing the tax credits. Do you see states presenting their own incentives for renewables in lieu of federal incentives? I’ve wondered if that’ll happen given inflation and affordability concerns.
No, I think we have to be really creative as an industry, and state leaders have to be creative too. If I’m a governor, affordability concerns were already front and center for me, and now given what just happened, they’re grappling with incredibly tight state budgets that are about to get tighter, including health care. They’re going to see state budgets hit really hard. And there’s energy impacts – we’re cutting off supply, so we’re going to see prices go up.
This is where governors and state leaders can act but I think in this context of tight state budgets I don’t think we can expect to see states replacing incentive packages.
It’ll be: how do we take advantage of all the flexible tools that we have to help shape and reduce demand in meaningful ways that’ll save consumers money, as well as push on building out projects and getting existing juice out of the transmission system we have today.
Is there a future for wind in the United States?
It is an incredibly challenging environment – no question – for all of our technologies, wind included. I don’t want to sugar-coat that at all.
But I look at the whole picture, and I include wind in this: the technologies have improved dramatically in the past couple of decades and the costs have come down. When you look around at what resources are around to deploy, it’s advanced energy. We’re seeing it continue to grow. There’ll be headwinds, and it’ll be more expensive for all of us. But I look at what our industry and our technologies are able to offer and deliver, and I am confident we’ll continue to see growth.
The Grain Belt Express was just the beginning.
The anti-renewables movement is now coming for transmission lines as the Trump administration signals a willingness to cut off support for wires that connect to renewable energy sources.
Last week, Trump’s Energy Department with a brief letter rescinded a nearly $5 billion loan guarantee to Invenergy for the Grain Belt Express line that would, if completed, connect wind projects in Kansas to areas of Illinois and Indiana. This decision followed a groundswell of public opposition over concerns about land use and agricultural impacts – factors that ring familiar to readers of The Fight – which culminated in Republican Senator Josh Hawley reportedly asking Donald Trump in a meeting to order the loan’s cancellation. It’s unclear whether questions around the legality of this loan cancellation will be resolved in the courts, meaning Invenergy may just try to trudge ahead and not pick a fight with the Trump administration.
But the Grain Belt Express is not an anomaly. Across the country, transmission lines tied to both renewable sources and more conventional fuels – both fossil and nuclear – are facing a growing chorus of angst and anguish from the same crowds that are fighting renewable energy. In some ways, it’s a tale as old as widespread transmission itself. But I am also talking about farmers, ranchers, and rural towns who all now mention transmission lines in the same exasperated breaths they use to bemoan solar, wind, and battery storage. Many of the same communities fighting zero-carbon energy sources see those conflicts as part of a broader stand against a new age of tech industrial build-out – meaning that after a solar or wind farm is defeated, that activism energy is likely to go elsewhere, including expanding the grid.
I’ve been trying to figure out if there are other situations like Grain Belt, where a project facing local headwinds could potentially be considered no longer investable from a renewables-skeptic federal perspective. And that’s why since Invenergy lost its cash for that project, I have been digging into the Cimarron Link transmission line, another Invenergy facility proposed to carry wind energy from eastern Oklahoma to the western part of the state, according to a map on the developer’s website.
Do you remember the campaign to ban wind energy in Oklahoma that I profiled at the start of this year? Well, one of the most prominent scalps that this activism movement has claimed was bagged in late 2024, when they successfully pressured Governor Kevin Stitt into opposing a priority transmission corridor proposed by the Biden administration. Then another one of the activists’ biggest accomplishments came through an anti-wind law enacted this year that would, among other things, require transmission projects to go through a new certification program before the state’s Corporation Commission. Many of the figures fighting Cimarron and another transmission line project – NextEra’s Heartland Spirit Connector – are also involved in fighting wind and solar across the state, and see the struggles as part and parcel with each other.
Invenergy appears to want to soldier on through this increasingly difficult process, or at least that’s according to a letter some landowners received that was posted to Facebook. But these hurdles will seriously impact the plausibility that Cimarron Link can be completed any time soon.
Now, on top of these hurdles, critics want Cimarron Link to get the Grain Belt treatment. Cimarron Link was told last fall it was awarded north of $300 million from the Energy Department as a part of DOE’s Transmission Facilitation Program.
Enter Darren Blanchard, a farmer who says his property is in the path of Cimarron Link and has been one of the main public faces of opposition against the project. Blanchard has recently been pleading with the DOE to nix the disposition of that money if it hasn’t been given already. Blanchard wrote the agency a lengthy request that Cimarron get similar treatment to Grain Belt which was made public in the appendix of the agency’s decision documents related to the loan cancellation (see page 23 of this document).
To Blanchard’s surprise, he got a reply from the Transmission Facilitation Program office “responding on behalf of” Energy Secretary Chris Wright. The note, to him, read like they wanted him to know they saw his comment: “We appreciate you taking the time to share your views on the project,” it read.
Now, this might’ve been innocuous. I haven’t heard back from the Energy Department about Cimarron Link and I am personally skeptical of the chances a grant is canceled easily. There is no high-level politician calling for the cancellation of this money right now, like there was in Sen. Josh Hawley and the Grain Belt Express.
But I do believe that if there is a will, there is a way with the Trump administration. And as anti-renewables sentiments abound further, there’ll be more ways to create woe for transmission projects like Cimarron that connect to renewable resources. Should voices like Blanchard aim their sights at replicating what happened with Grain Belt, well… bets may be off.
Over the next few weeks, I will be chronicling more fights over individual transmission projects connected to zero-carbon sources. Unique but with implications for a host of proposed wires across the country, they’re trend-setters, so to speak. Next week I’ll be tackling some power lines out West, so stay tuned.