Green shares tumble as Republican hardliners take axe to tax credits

The US House of Representatives early Thursday narrowly passed a massive tax and spending bill that aggressively rolls back federal clean energy tax credits, although it is expected to undergo changes in the Senate.

The 'One, Big, Beautiful Bill' was approved by a party-line Republican 215-214 vote in the 435-seat House. Two Republicans voted no, one “present,” and two others did not vote.

Notably, one of them was Representative Andrew Garabino of New York, who had led an unsuccessful effort within the caucus to thwart faster sunset of the tax credits and tougher eligibility criteria. Before the vote, he told reporters, “It is not what I had hoped it would be.”

All Democrats opposed the measure; three seats are vacant in the chamber.

Shares in clean energy-related businesses fell sharply in reaction, including wind turbine giant Vestas which was up to 11% lower in late trading in Copenhagen. In New York, solar group Sunrun closed down 35%, while NextEra Energy, the nation's largest clean energy developer and owner, was off 6.4%. First Solar, the largest US player, declined 4.3%.

Jacob Pedersen, chief stock analyst at Denmark’s Sydbank, said the revisions in the bill "look like a well-orchestrated attempt to derail the onshore wind industry".

In the Senate, where Republicans have a 53-47 majority, they intend to pass the reconciled bill using an arcane process called "budget reconciliation" that requires a simple majority vote.

This is what Democrats under Biden did to pass the Inflation Reduction Act IRA), the 2022 climate law that included long-term extension of the tax credits. It did not receive a single Republican vote.

Majority Leader John Thune of South Dakota will have the option of giving Senate committees the opportunity to make changes to the bill and then send it to the floor for a vote, or do so directly.

After approval by the Senate, the House can either pass the Senate bill, or the two chambers would have to reconcile differences and approve an agreed-upon text.

Last month, five Republican senators in a letter publicly cautioned against rescinding clean energy incentives, asserting the country should maintain a "stable and predictable tax framework in the interest of promoting domestic energy development."

'We’re constraining the hell out of wind and solar'

Republican Chip Roy of Texas, who championed deep cutbacks in availability of tax credits despite his state’s leadership in clean energy, said: “We’re constraining the hell out of wind and solar, which is good.”

The bill phases out technology-neutral clean electricity tax credits after 2028 for wind, solar, and other renewable sources, requiring projects to begin construction within 60 days of President Donald Trump signing it into law.

This shorter eligibility period would be difficult to meet for many projects given lengthy US processes for permitting and interconnection. Presently, they can qualify for tax credits when “placed in service.”

The earlier version began stepping down the credits’ value after 2028 on a 80%, 60%, 40% basis over the three subsequent years before going away in 2032.

The approved bill also has tougher and more complicated restrictions on foreign entities of concern (FEOC) that effectively would proscribe any clean energy project viewed to benefit China from claiming the tax production or manufacturing tax credits.

This provision would largely affect the battery storage and solar sectors given their reliance on processed materials, cells, and components from suppliers in China or their subsidiaries in Southeast Asia.

In a social media post, Trump lauded passage of the legislation, calling it “arguably the most significant piece of legislation that will ever be signed in the history of our country.”

He exhorted Senate Republicans to “get to work and send this Bill to my desk AS SOON AS POSSIBLE!“

The bill extends about $4.5trn in corporate and individual tax cuts Congress approved in 2017 during Trump’s first term that are set to expire at yearend.

'Unworkable' legislation slammed

Clean energy industry groups slammed the bill.

“This unworkable legislation is willfully ignorant of the fact that deploying solar and storage is the only way the US power grid can meet the demand of American consumers, businesses, and innovation,” said Abigail Ross Hopper, CEO of the Solar Energy Industries Association.

Advanced Energy United CEO Heather O'Neill said the bill abruptly dismantles bipartisan, longstanding tax policy on clean energy.

She asserted if enacted as written, the bill would raise electricity prices, weaken the US power system, kill tens of thousands of jobs, and cede energy dominance to China.

"This isn’t a scalpel, it’s a meat cleaver, and it will hurt us all," added O'Neill, a reference to a comment earlier this year by Republican Mike Johnson of Louisiana, the top elected House official, that the party would "take a scalpel, not a sledgehammer" to IRA provisions.