A proposed budget law that is taken in the consideration in the American House of Representatives Ways and Means Committee could hinder the development of future renewable energy in the United States.
Respond to the design -budget consent account released by the US House Ways and Means Committee, Wood Mackenzie Main analyst Sylvia Leyva Martinez said: “Many of the elements in the proposed bill for home would deter the development of renewable projects in the US, while some technologies would be more affected than others, the early phasing of tax credits, the removal of transferability, the requirement for projects being employed to obtain the tax credit and the strict provisions of reliability) Projects in the US ‘.
The account proposes a phased reduction in the investment tax credit (ITC) and production tax (PTC) for solar, wind and storage projects. The credits would remain at full value by 2028 and then fall to 80% in 2029, 60% in 2030, 40% in 2031 and 0% in 2032.
“The proposed changes would have far -reaching implications in the clean energy sector,” said Leyva Martinez. “Although the bill maintains some elements, such as domestic content and adders of energy community, the general prospects for industry seem a challenge.”
Solar Tax Credit Uitvestheid and 45D Removal pose Challenges
According to Wood Mackenzie, the growth of the solar scale can be hindered by the provisions in the proposed account. The residential segment stands for challenges with the proposed elimination of section 25D after 2025, which influence cash and installations funded by the loans. Read more about this.
The production of solar energy in the United States can also be negatively influenced. Although the expansion of 45x to 2031 is positive for manufacturers, FEOC provisions can effectively close the American market for Chinese companies, and the end of tax credit transfer would dramatically hinder US manufacturers that are highly dependent on this mechanism for financing.
“On balance, the proposed bill is more downward risks for our prediction and can lead to a downward revision of our Q1 2025 basic case,” said Leyva Martinez. “However, the complete implications for installations and the answers of stakeholders in the industry still have to be determined.”
Energy storage influenced by IRA tax credit changes, tariff uncertainty
The combination of IRA tax credit restrictions and China rate uncertainty provides a two-two punch of considerable headwinds for the energy storage sector. FEOC restrictions can effectively terminate the ITC for most storage projects that start building construction after 2026.
“In the low case presented in Q1, we adopted a tax credit, from 2028, which made a safe port of four years for projects under construction possible,” said Allison Weis, worldwide head of energy storage for Wood Mackenzie. “The Propose Changes Will Have A Greater Impact on Storage Buildout than Presented in The Low Case. With 97% of LFP Cathode Material Coming From China, Storage Will Be Shut Out Out of ITC Tax Credits for Projects Beginning Construction CELFOSTOUST. In the Coming Negotiations with the Senate, Storage Developers Will Face Hard in-service Deadlines in an Industry Prone to Delays, Higher Costs, and Increased Risk For Lenders. ”
Already limited wind market affected by phase out of early production tax credit
The phasing out of the tax credit would have a heavy influence on the wind supply chain and project pipeline. Early termination of the wind component credit is extra challenges for the segment.
“We project a slight increase in wind installations, driven by the hurry to be eligible for the PTC, similar to the trend that was observed from 2020 to 2022, where installations were on average 14 GW per year,” said Diego Espinosa, senior research analyst at Wood Mackenzie. “The shift in terminology of” start from the construction “to” in service “, however, is expected to tighten the project pipelines, which increases the financial risk and uncertainty.”
The current Onshore Wind Project Pipeline, which is expected to be online between 2025 and 2027, is almost 11 GW. These projects are likely to be confronted with challenges in complying with the suitability criteria for the ITC and PTC.
“The proposed account introduces extra stress in our wind views,” said Espinosa. “Although it encourages a focus on operational readiness and completing the project, it also forms challenges for investments and complicates financing.”
Nuclear investment stimuli, income flows shortened
Investment stimuli and income flows for nuclear would decrease if the proposed account was assumed, but federal support for this technology would continue to stimulate the implementations. Existing nuclear factories will increasingly be connected to the energy prices of the electricity.
“New nuclear will have to run,” said David Brown, research director for Wood Mackenzie. “The ITC with the exception of the ITC, the level rises for nuclear energy with approximately USD $ 40 / MWH in 2040 are increasing in 2040. With the ITC with a sunset, investors and core power developers have to rely on other initiatives. We expect our medium term of the eye on 96 GW of nuclear power in 2035,” ”
Mixed signals for geothermal
Geothermal receives mixed signals from the congress, whereby some supporting policy measures compensate for the negative effects of the budget account.
“For geothermal, the budget consent invoice accelerates the phasing out of the investment tax credit, terminates credit for transferability and ends the foreign ownership of projects financed by the taxpayer,” said Richard Hood, senior research manager at Wood Mackenzie. “A steel wind for geothermal investment is the technology sector. Geothermal is considered one of the few means that are able to meet the growing electricity demand presented by the expansion of data centers, and this does this by Schone, 24/7 Baseload Power.”
Proposed 45V amendment can derail green hydrogen ambitions
The proposed budget change to terminate the clean hydrogen production tax credit threatens to derail the American clean hydrogen ambitions, which means that almost all announced green hydrogen capacity is at risk.
“If adopted, the amendment to eliminate the 45V credit on January 1, 2026, can cause significant changes to the American project pipeline,” said Hector Areola, chief analyst, Wood Mackenzie. “Developers are confronted with a crucial decision: accelerate their projects to achieve the new deadline or run the risk of losing the tax credit completely. The current regulatory uncertainty threatens to stagnate the low -carbon hydrogen industry in the US and can change the landscape for clean hydrogen worldwide.”
The analysis of Wood Mackenzie shows that approximately 0.2 million tonnes per year (MTPA) of hydrogen capacity under construction or in advanced development could still benefit from the 45V credit. However, the prospects for projects outside this phase are less optimistic. Of the 3.4 MTPA of green hydrogen capacity announced in the United States, 95% are at risk, in which developers are confronted with difficult choices to accelerate, postpone or cancel their projects.
CCUS tax credit transferability in danger
“The biggest winner in the proposed house account is carbon collection, use and storage (CCUs), because the 45Q tax credit remains largely unchanged,” said Rohan Digre, research analyst at Wood Mackenzie. “Although the proposal of the Ways and Means committee includes two changes to the 45Q tax credit for carbon deposits, the value and duration of it, attributes that make it one of the most attractive CCUS stimuli in the world, remain intact.”
Tags: energy storage, policy, utility scale
