Senate Megabill Stuns the Clean Energy Industry With New Tax on Wind and Solar

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Senate Republicans stunned the power industry over the weekend with a proposed new tax on wind and solar projects, part of a broader push to unravel incentives for renewable energy.

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This weekend, clean energy companies were surprised by the sudden appearance of a tax that they hadn’t realized was under consideration. It would apply to wind and solar projects completed after 2027 if they use a certain percentage of components from China, the industry’s primary supplier of everything from critical minerals to batteries.

“At a basic level it is a fundamental break in the compact between Congress and the private sector,” said Jason Grumet, chief executive of the American Clean Power Association, an industry group. “It is truly unprecedented for Congress to design a punitive tax targeting one aspect of the American economy.”

Elon Musk, whose relationship as a key adviser to the president recently unraveled, called the Senate’s latest version of the bill “utterly insane and destructive” on social media.

“It gives handouts to industries of the past while severely damaging industries of the future,” said Musk, CEO of electric-car maker Tesla.

Wind and solar projects would qualify for tax credits only if placed in service by the end of 2027. The prior version of the bill allowed projects to qualify based on their construction start date.

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Neil Bradley, executive vice president of the U.S. Chamber of Commerce, called it a “strong, pro-growth bill” on X but added, “That said, taxing energy production is never good policy, whether oil & gas or, in this case, renewables. Electricity demand is set to see enormous growth & this tax will increase prices. It should be removed.”

The power industry is grappling with meeting electricity demand that is rising for the first time in a generation. The growth is largely due to the artificial intelligence craze and rush to build huge, electricity-chugging data centers.

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The Senate bill also would end tax credits for the purchase of electric vehicles after September, quicker than the House proposal’s call for eliminating them by the end of the year for most vehicles.

Musk stands to lose because many of Tesla’s customers claim tax credits for EVs, solar panels and home battery systems, and Tesla benefits from battery-storage tax credits.

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Energy Secretary Chris Wright on Friday called wind and solar subsidies “wasteful and counterproductive.”

“Subsidies are meant to drive prices down and boost supply,” he wrote in the New York Post. “But subsidizing wind and solar has done exactly the opposite.”

The Senate bill would continue tax credit support for technologies such as nuclear, geothermal and hydropower. Hydrogen projects would get more time before expiration, too.

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