U.S Senate budget bill retains cuts to solar and wind incentives while extending support for hydropower and nuclear

By Abbas Nazil

A new U.S. Senate draft budget bill has proposed a full phase-out of tax credits for solar and wind energy by 2028, aligning with the Republican-led push to prioritize consistent energy sources such as hydropower, nuclear, and geothermal energy.

The bill, part of a broader Republican budget proposal, extends full tax credit benefits to hydro, nuclear, and geothermal facilities until 2033, with a gradual phase-out through 2036—mirroring the energy preferences of former President Donald Trump’s administration.

The bill, introduced by Senate Finance Committee Chair Mike Crapo, reduces clean energy incentives introduced under the 2022 Inflation Reduction Act during President Biden’s tenure.

Currently, solar and wind credits are set to begin phasing out in 2032, but the Senate bill aims to begin reducing them to 60% by 2026, ending them entirely by 2028.

Although this version includes some concessions compared to the more aggressive House-passed “One Big, Beautiful Bill Act,” industry advocates argue it still poses significant threats to renewable energy progress.

While the Senate’s version allows more time for project developers to qualify for credits by starting construction within specific years instead of requiring service completion by 2028, key stakeholders say the revisions are insufficient.

Abigail Ross Hopper, president of the Solar Energy Industries Association, stated that the bill “does not go far enough to remove the threat to one of the greatest economic success stories in American history.” Shares of solar companies declined following the bill’s release.

The legislation also preserves developers’ ability to sell or transfer tax credits to third parties—a provision aimed at reducing financing burdens, which was slated for phase-out under the House bill.

However, the Senate retains restrictions on tax credit eligibility for projects using equipment or critical minerals from foreign adversaries like China.

Though these restrictions remain, the Senate bill slightly eases them for publicly traded companies and introduces a specific formula to determine if a project has received “material assistance” from such entities.

Clean energy groups had warned that strict sourcing rules would disrupt solar and wind supply chains, which heavily depend on Chinese components.

Energy expert Ari Matusiak, CEO of Rewiring America, criticized the elimination of consumer tax credits for rooftop panels and home energy upgrades, calling it “a profound mistake” that undermines efforts to reduce household energy costs.

The electric utility sector, which previously warned that up to 75 gigawatts of planned renewable generation could be canceled between 2025 and 2032 if the House bill passed unchanged, acknowledged that the Senate’s version offered progress.

Edison Electric Institute interim president Pat Vincent-Collawn noted that the Senate’s modifications to project timelines and transferability marked a “step in the right direction.”

Supporters of hydropower, including National Hydropower Association CEO Malcolm Woolf, praised the extended incentives but expressed concern that the bill failed to cover upgrades for existing facilities needing relicensing.

He urged Congress to include such provisions in future revisions to secure long-term clean energy benefits.

Despite some moderate Republican senators, including Lisa Murkowski of Alaska and John Curtis of Utah, advocating for a softer stance, the bill reflects ongoing partisan divisions over America’s clean energy future.

As negotiations continue, the proposed legislation is likely to remain a point of contention between those seeking to accelerate the energy transition and those favoring traditional baseload sources.