Business groups and clean-energy developers are apoplectic over a last-minute provision tucked into President Donald Trump’s spending bill that will tax the solar and wind industry, making it much harder to get new, cheap electricity onto the grid.
Senate Republicans revealed an entirely new tax for renewable energy this weekend, in the latest version of a bill that could be passed as early as Monday afternoon. The bill already stripped tax incentives for renewables by 2027 and gave developers stringent requirements to claim them.
The new tax would come at the worst possible time for the American power grid, experts and trade groups say, as demand for more electricity spikes due to new data centers for artificial intelligence coming online.
“This new tax is just a killer to the wind and solar industry,” said Ed Mills, a Washington policy analyst at Raymond James. “You went from taking away a positive for the industry to implementing a negative.”
The tax could change, as the Senate embarks on a marathon day of amendment votes on Monday.
As it’s currently written, the Senate bill will threaten to upend a huge amount of power that was set to come online in the next decade. Wind, solar and long-term storage batteries make up the vast majority of new electricity added to the grid over the past three years. It also encompasses about 85% of what’s currently in the development pipeline, according to Ben King, an analyst at the non-partisan think tank Rhodium Group.
Keeping Biden-era tax credits for wind and solar would have led to between 400 and 1,100 gigawatts of new, clean power being added to the grid by 2035, Rhodium modeling shows. In comparison, the capacity of the largest fossil fuel power plant in the country is close to 4 gigawatts.
“Increasing the price of this stuff that’s actually getting built right now — and just making it harder to build — results in higher prices,” King told CNN. “And (there’s) a greater amount of concern whether the grid can respond.”
That hole in energy capacity these taxes will create will be filled by new natural gas power plants and leaving aging coal plants online longer, and both solutions are more expensive than building wind and solar. Those costs will all but assuredly be passed on to the people who pay electric bills.
The new obstacles for clean energy come as the AI boom is already consuming vast amounts of energy. By 2030, data centers that power AI are projected to consume a whopping 612 terawatt-hours of energy per year – equivalent to what Canada consumes annually, according toresearchfrom Accenture.
The new tax, along with killing the tax credits, could raise taxes on utility-scale solar projects by 18%,according toPrinceton University professor Jesse Jenkins.
Jenkins wrote on X that raising taxes on America’s “most important new sources of electricity supply” is “utter insanity.”
Responding to a post about the new taxes on wind and solar, billionaireElon Musk warnedover the weekend the “latest Senate draft bill will destroy millions of jobs in America and cause immense strategic harm to our country!”
Pointing to the cost of the legislation, Musk added in a separatepostthat polls suggest the legislation will be “political suicide for the Republican Party.”
Even the US Chamber of Commerce, which is broadly supportive of the legislation, came out against the new renewable energy levies.
“Taxing energy production is never good policy, whether oil & gas or, in this case, renewables,” US Chamber of Commerce executive vice president Neil Bradley said in aposton X. “Electricity demand is set to see enormous growth & this tax will increase prices. It should be removed.”
The weekend changes to the bill were blasted by renewables trade groups, who had been pushing lawmakers for a more generous tax credit phaseout timeline for wind and solar projects.
“It is astounding that the Senate would intentionally raise prices on consumers rather than encouraging economic growth and addressing the affordability crisis facing American households,” American Clean Power Association CEO Jason Grumet said in a statement.
Solar Energy Industries Association president Abigail Ross Hopper called the tax an “unprecedented and punitive measure that would raise costs for American consumers” and a “blanket penalty on solar,” in a statement.
The renewable energy tax is part of a broader effort to wean critical US industry off components from China.
“The Trump administration and Congressional Republicans really dislike wind and solar, but apparently they hate China even more,” said Mills, the Raymond James analyst. “We’re trying to get China out of our supply chains.”
However, the tax and restrictions will make the US far less competitive with China on AI and clean energy manufacturing, said Robbie Orvis, Energy Innovation’s senior director of modeling and analysis Energy Innovation.
“This is just a gift to China; they must just be salivating over what’s in this bill,” Orvis said. “They would be very happy to have US energy costs go up so they can take on more of those data centers that might otherwise be located here.”
While being tough on China has bipartisan appeal, many clean energy projects are major employers in purple and red districts. For instance, Texas is not just the leading state for oil and natural gas production, it’s alsoNo. 1 for wind-powered electricity generation.
“Republicans have long supported an all-of-the-above energy policy. With this tax provision, the all-of-the-above policy has an asterisk where wind and solar are no longer included,” Mills said.
Still, Mills added it’s not entirely clear the wind and solar taxes will survive the political sausage-making process.
“Does this ever get implemented? Does it get softened? Does it get repealed? All of those are in the realm of possibility,” he said.
Kevin Hassett, director of the White House’s National Economic Council, told CNBC on Monday that the Trump administration remains focused using “all-of-the-above approaches to get energy production to go through the roof.”
“That means using coal, natural gas, oil, nuclear and, to the extent it passes a market test; these other solar and wind type things can be part of the picture too,” Hassett said. For context, solar, wind and batteries are far cheaper than fossil fuels and nuclear power, because they have no fuel costs and currently cost less to build.
Hassett disagreed with the characterization that lawmakers are not just taking away tax breaks for clean energy, they are also penalizing the industry with new taxes.
“I don’t think that’s the way to think about it. In the end, solar is going to be in people’s grids,” Hassett said.
Even without the new tax, the Republican spending bill will cause household energy bills to rise over the next decade, CNN previously reported.
When combined with the electric vehicle consumer tax credit likely being cut, annual electricity and transportation costs in every state in the continental United States will be higher than they would have if the tax credits stayed intact, analysis from think tank Energy Innovation found.
Red states including Oklahoma, South Carolina and Texas could see up to 18% higher energy costs by 2035 if Trump’s bill passes, compared with a scenario where the bill didn’t pass.