Congress Passes Trump’s “One Big Beautiful Bill” Act, Slashing Billions in Federal Renewable Subsidies
The Republican-led Congress narrowly passed President Donald Trump's "One Big Beautiful Bill" Act (OBBBA) on July 3, in a move that will abruptly end billions of dollars in federal renewable energy subsidies that were set to last well into the next decade. While the clean energy industry dodged even deeper cuts, the legislation is expected to sharply slow down the sector’s recent explosive growth.
To qualify for lucrative production or investment tax credits under the new law, wind and solar projects must begin construction within 12 months of the bill's enactment or otherwise be placed into service by the end of 2027. This deadline poses a hard cliff for project developers whose major investments hinged on the Biden-era’s gradual phase-out of credits that began around 2032. The short deadline is expected to set in motion a dash among developers to start construction of their projects in order to qualify for the tax credits and a rush among offtakers to lock in lower PPA prices before there’s a drop in new projects.
For as adverse as the bill was for the clean energy industry, there were some bright spots. The bill keeps intact production and investment tax credits for battery storage, clean hydrogen, geothermal plants, and nuclear reactors, with those subsidies set to last until 2036.
Other measures, which would have been even more detrimental to the industry, were also scrapped. For example, a previous proposal required all new projects to be completed by 2027 to get the credit. A previous version also included a controversial tax for wind and solar projects that sourced a certain percentage of materials from foreign countries, like China.
Trump’s bill is a policy whiplash for the industry. Just as the Biden administration's Inflation Reduction Act of 2022 started to spur a dramatic renewable power expansion, this legislation is projected to slash by up to half the amount of solar and wind capacity additions by 2035, according to some analyst forecasts. The gutting of the subsidies not only jeopardizes billions of dollars in clean energy investments, but also comes at a time when grid managers are scrambling for new capacity to meet surging demand from data centers.
In the week following the unveiling of Trump’s legislation on May 20, the market value for PPAs jumped. This trend was evident in the PJM Interconnection market, where in the week following the bill’s introduction, a 10-year, as-generated, solar PPA, starting in 2027, for delivery in PJM’s benchmark Western Hub, reached $84.74/MWh on May 27, a gain of about $3/MWh, according to Pexapark’s PPA data. This comes amid expectations for fewer renewable projects in the market.
Among the other changes include a quicker phase-out of the Advanced Manufacturing Production Credit (45X), which had spurred numerous factory plans. Credits for the production of wind‑related component credits will be eliminated for items produced and sold after 2027. This marks an acceleration from the prior Biden-era law in which credits phased down after2029 on a five‑year schedule. The law also sets strict “Foreign Entity of Concern” rules, barring projects or factories using equipment or inputs from countries like China from receiving certain credits starting in 2026.
The administration has made no secret of its opposition to renewable power. U.S. Energy Secretary Chris Wright has called wind and solar subsidies “wasteful and counterproductive,” noting the maturity of the industry, the intermittent nature of the power sources, and the number of extensions of the subsidies. For his part, Trump, an apparent skeptic of climate change, favors fossil fuels and other dispatchable power sources including nuclear generation.