The federal budget bill signed July 4 will have many impacts on energy efficiency, solar and wind, green building, and electric vehicles (EV) by significantly restricting Inflation Reduction Act (IRA) funding to households, businesses, local and state governments, nonprofits, utilities, and the clean energy industry. An Executive Order signed July 7 further targets large-scale wind, solar, and battery energy storage with prompt restrictions on materials sourced from Foreign Entities of Concern (FEOC), setting thresholds on components primarily from China. Also, tariffs on steel, aluminum (racking), and copper (transmission wire) along with trade instability will contribute to price increases for projects. Given all that, there will be a slow down in the clean energy economy at a time when load growth due to data centers and aging infrastructure require significant investments.
For those planning to upgrade energy efficiency, install solar, or buy a electric vehicle, there’s a short window to act and receive incentives. Here are the programs impacted and the new dates:
The budget bill eliminates residential and business clean energy tax credits (30% credit) for rooftop solar (48E/25D) as well as credits for energy efficiency improvements like weatherization and heat pumps, if not in service by December 31, 2025. It will eliminate tax incentives for energy efficiency in new home construction (45L), commercial buildings (179D), and existing homes (25C), and for residential geothermal and battery storage (25D) . However, Wisconsin has some federal funds in the Focus on Energy efficiency and electrification program available still (see Funding below).
EV and charging tax credits are now set to expire, including the Alternative Fuel Vehicle Property Tax Credit (30C), Commercial Clean Vehicle Credit (45W), New Clean Vehicle Credit (30D), and Used Clean Vehicle Credit (25E). If you were planning to buy a new or used electric vehicle, do so before September 30 when the $7,500 and $4000 tax credits respectively will be discontinued. Yet, the credits for up to $1,000 for an EV charger will end in June of 2026. For questions about filing for EV and charging tax credits, email infrastructure@electrificationcoalition.org.
Direct Pay to fund 30 percent of local government and nonprofit projects was not eliminated. Yet, it will be difficult both to meet the new short timelines for solar and wind projects to start construction and be placed in service (end of 2027) along with the restrictions on supply chain components from China for projects that start construction after December 31, 2025.
Geothermal, battery storage, nuclear and hydropower projects will still be eligible for investment and production tax credits through 2033 before being phased out.
Overall, IRA spurred American manufacturing growth in solar, storage and EVs since 2022. The Solar Energy Industries Association reports that the US now has 56 gigawatts of solar module manufacturing capacity online, which is enough to meet all US solar demand. Access to that domestic supply should help with supply challenges. There are 200 clean energy manufacturing facilities or expansions producing clean energy components across 38 states since 2022 reports the American Clean Power Association.
However, according to an analysis by E2, “$14 billion in investments and 10,000 new jobs in clean energy and clean vehicle factories” were cancelled since January due to business uncertainty. Most sources agree that the cost of energy to customers will continue to rise at a time when customer electricity prices are already more than twice the national inflation rate (June Bureau of Labor Statistics Consumer Price Index). For more information, see E2, NLC, Reuters, and Reuters.
Sherrie Gruder