US Clean Energy Industry Faces Major Shake-Up as Tax Credits Cut Under New Bill

Key Impact Points:

• Major clean energy tax credits slashed: Solar and wind incentives phased out starting 2028; EV credits end by September.
• Battery storage and CCS spared: Tax benefits for battery and carbon capture technologies largely preserved until 2032.
• Developers urged to rethink strategy: Without federal subsidies, clean energy firms must prioritize cost efficiency, new revenue streams, and private financing.

US Clean Energy Enters New Era as Federal Support Shrinks

The US clean energy sector is bracing for sharp policy reversals as Congress passes the “One Big, Beautiful Bill,” a sweeping legislative package that curtails many tax credits created under the Inflation Reduction Act (IRA). While some of the most extreme proposals were dropped, the legislation signals a dramatic shift away from federal clean energy incentives—putting pressure on developers to adapt or risk falling behind.

“Standard Chartered is committed to supporting clients in meeting both financial and sustainability goals while managing risks effectively.” – Sandrine Jourdainne, Global Head, Deposits, Liquidity and Escrow Solutions

Solar and Wind Lose Ground

Investment (ITC) and production (PTC) tax credits for solar and wind will begin to phase out for projects not operational before 2028. A previously proposed clause—requiring construction within 60 days of the bill’s enactment—was removed, offering temporary relief. However, developers are on alert as the timeline still accelerates pressure to complete projects.

Bright Spot: Storage and Clean Firm Energy

Battery storage, nuclear, geothermal, and hydro projects remain eligible for tax credits through 2032. Battery developers can claim both 48E (ITC) and 45X (PTC), giving domestically made batteries a key market advantage. Solar and wind projects may adopt storage to counteract intermittency and tap into these extended credits.

EV Credits End Soon; Hydrogen Gets Grace Period

Electric vehicle and charging infrastructure credits will expire by the end of September. Meanwhile, hydrogen tax credits under 45V are extended until 2028—offering blue hydrogen (produced via natural gas and CCS) a longer runway than green hydrogen.

Transfer Market Survives; Foreign Entity Clause Tightens

The bill preserves IRA’s transferability clause, allowing developers to sell tax credits directly—vital for project financing. However, limits on “foreign entities of concern” (FEOCs), primarily targeting China, could block access to credits for projects using certain imported solar and battery components.

Project Economics Must Be Recalibrated

The Inflation Reduction Act once supercharged clean tech investments. Now, with tax credits scaled back, the economics of renewables must stand on their own. While unsubsidized solar and wind are approaching cost parity with gas turbines, intermittency and grid challenges remain.

“This means that more wind and solar projects could be in cost parity with CCGT than shown below.” – ING Research

Power Purchase Agreements (PPAs) Take Center Stage

Developers are expected to lean more heavily on corporate PPAs to ensure revenue. Sustainability-driven companies and AI-fueled power demand from data centers may bolster willingness to pay a premium for renewables, especially solar.

“Despite changing policy dynamics in the US, many corporates remain committed to sustainability targets.” – ING Research

Batteries Hold Cost Advantage (For Now)

With 45X and 48E credits intact, US battery producers maintain a competitive edge through 2032. But tariffs and FEOC restrictions could drive up costs. Long-term viability depends on tech innovation and scaling.

Hydrogen Outlook: Blue Rises, Green Retreats

Even with reduced credits, blue hydrogen remains cost-competitive. Green hydrogen struggles to attract domestic buyers and is increasingly targeting European markets where sustainability standards favor its use.

“The development of blue hydrogen in the US… will continue to be in a more advantageous position.” – ING Research

Carbon Capture Remains Resilient

45Q tax credits for carbon capture and storage (CCS) remain untouched. Reuse incentives have increased, allowing developers to offset costs by selling CO₂ for synthetic fuel production or enhanced oil recovery—though permanent storage remains key for real climate benefit.

“Carbon reselling can be an intermediate solution to expanding the CCS market.” – ING Research

Conclusion: Time to Rethink Strategy

With the rollback of both “carrots” (tax credits) and “sticks” (regulations), clean energy developers must shift from reliance on federal support to resilient business models. Focus areas include increasing revenue through PPAs, integrating storage, securing long-term offtake deals, and exploring innovative financing.

“New market conditions require refreshed ways of thinking and doing business – and this is what can sustain the development of clean energy in the US.” – ING Research