Editor's Note: A similar version to this story also was posted at EnergyTech.com)
The Inflation Reduction Act, passed by a straight party-line Democrat vote and signed by President Biden three years ago, has undoubtedly incentivized several hundreds of billions of dollars in new and pending clean energy and microgrid investments.
These energized many renewable project supporters but left skeptics wondering if the juice is worth the squeeze.
The future inevitability of IRA lighting the path toward a more decarbonized and decentralized power sector is certainly in doubt, now, as the Republican-led U.S. House of Representatives is crafting a new budget bill to weaken and even kill some aspects of the IRA bundle of tax credits and subsidies for renewable energy, efficiency and distributed power.
The proposed new House funding bill would phase out tax credits and funding for decarbonized energy projects such as electric vehicles and reallocate billions in funding from IRA-supported programs to other, more GOP-favored programs.
An analysis of IRA funding for microgrids, done by project developer and operations firm PowerSecure several years ago, estimated that the tax credits could help cut microgrid upfront costs by 10 to 50%. The Investment Tax Credit (ITC) for microgrid controllers was expanded by 30% under the IRA, according to the report by PowerSecure.
According to multiple news reports, one of the proposed changes to energy funding contained in the new bill include capping the Investment Tax Credit at 6% (compared with current potential increases to 30%). The ITC and the Production Tax Credit, which predated the IRA but were expanded by it, both would be completely phased out by 2032 and 2031, respectively.
The GOP movement, encouraged by President Trump, could curtail years of momentum-creating record installation of solar and battery storage capacity.
Some clean energy groups have urged caution at making sudden changes in policy.
"With energy demand surging, this is not the time for disruption,” Jason Grumet, CEO of advocacy group American Clean Power Association (ACP) said in a statement. “It is possible to phase out incentives for clean energy investment, production, and manufacturing without harming American consumers or businesses — and we stand ready to help. As the legislation moves through the process, we will work with lawmakers to ensure that the final product achieves necessary cost savings while maintaining investment certainty, energy reliability, economic growth, and global competitiveness.”
Some of the transfer provisions with the IRA could be sunset potentially as early as next year, if the House bill is signed into law. Peter DeFazio, managing partner at investor Greenprint Capital, called the GOP bill a “clear shot” at the IRA’s clean energy framework
“For developers, tax equity investors, and manufacturers: this could mean reduced liquidity, less certainty, and higher financing costs—just as IRA-backed project pipelines were gaining traction,” DeFazio wrote in a LinkedIn post outlining some of the House GOP’s more dramatic reversals of IRA funding mechanisms. “Whether this bill passes or not, it sets the stage for a fierce 2025 tax policy fight—and a potential rollback of the most ambitious U.S. climate incentives to date.”
In August 2024, the Biden Administration was still in power and touting its perceived infrastructure-building benefits of the IRA. The bill barely passed the Senate by a 51-50 vote—with then Vice President Kamala Harris casting the tie-breaker—but the Biden White House calculated that the resulting law delivered tax credits that helped more than 250,000 Americans acquire electric vehicles and that led to commercial and industrial clean energy projects totaling $900 billion in reported investments.
The Trump White House, however, has criticized the IRA for relying on intermittent energy resources when the looming industrial load requires baseload power such as natural gas and nuclear generation. Trump went as far as declaring a national energy emergency and temporarily freezing components of the IRA funding for renewable projects.
Either way, the legislative battle promises to be a "fierce policy fight" on both ends, as DeFazio predicted on his LinkedIn post.
