President Trump’s “Big Beautiful Bill,” currently progressing through the US Senate, looks set to incapacitate the country’s renewable energy sector.

The bill, which passed the US House on May 22 on a 215-214 vote, would have a huge impact on renewable projects across the country, rolling back most of the tax credits provided through the Inflation Reduction Act (IRA), which significantly boosted renewable energy development.

The bill, if passed, would impose a 50 percent tax on wind projects and a 30 percent tax on solar projects completed after December 2027, if they cannot prove they haven’t used Chinese components.

For other projects looking to claim clean electricity tax credits, phase-out of the credits would begin for construction beginning after 2032, without regard to emission reduction targets provided by the IRA.

The bill would also end the clean hydrogen production credit for projects starting construction after December 31, 2027, and end the clean fuel production credit after 2029, two years earlier than initially proposed.

While the bill looks to shutter the renewable energy sector, it does provide increased support for the nuclear sector, adding a new definition of “advanced nuclear facilities” to include facilities that have received a construction permit from the Nuclear Regulatory Commission (NRC).

According to the Rhodium Group, the excise tax on wind and solar would increase their cost by 10-20 percent on top of losing the tax credits, with the additional costs likely passed onto consumers. This could lead to up to 4,500 clean energy projects not going ahead, potentially adding billions of dollars to annual energy costs.

The bill, if passed, could lead many of the solar and solar plus storage projects that are expected to enter service over the next three to five years not to move forward. This would threaten a significant shortfall in energy generation, amidst staggering projections of new demand, driven primarily by the data center market. While natural gas has been purported as a solution to this shortfall, the sector is facing significant shortages in gas turbine supply.

Energy Secretary Chris Wright brushed off concerns over the potential loss of generation capacity, stating: “The more we load our grid with intermittent generation, the worse the grid performs during times of maximum demand.

“The One Big Beautiful Bill will help end wasteful subsidies and deliver more reliable energy for the American people!”

To make up the shortfall, the bill will allow coal producers to claim an advanced manufacturing production tax credit, available for critical minerals, that would pay 2.5 percent of costs for the fuel. Earlier this year, President Trump signed a series of executive orders to remove federal regulatory barriers and encourage the utilization of coal to “meet growing domestic energy demands.”

However, coal remains a more expensive and less efficient alternative to renewable energy generation. A 2023 research paper from Energy Innovation indicated that 99 percent of existing US coal plants are more expensive to run than new solar or wind power, with solar at least 30 percent cheaper on average.

If passed in the Senate, the bill will return to the lower House of Representatives to approve the amendments tabled in the Senate.

Opposition and amendments

Several Senate Republicans have pushed back on these provisions, with Senator Joni Ernst introducing an amendment, backed by two other Republicans, which would remove the proposed new tax on wind and solar projects that start after 2027 and make the credits available based on the project’s construction start date instead of when they enter service.

Republican Senator Thom Tillis of North Carolina, who voted against the advancement of the bill, warned that the provisions against the renewable sector could lead to power shortages. “What you have done is create a blip in power service, because there isn’t going to be a gas-fired generator anytime soon,” he said on the floor. He went on to argue that the bill completely ignores the reality of skyrocketing demand from the data center sector.

Elon Musk, Trump’s former bedfellow who previously led the Department of Government Efficiency, before a well-publicized bust-up with the President, also voiced his disapproval of the bill. “This would be incredibly destructive to America!” Musk posted on X, contending that the cuts could hurt the development of AI technology.

Trade unions also came out in opposition, with Sean McGarvey, president of the North America’s Building Trades Unions, stating: “If enacted, this stands to be the biggest job-killing bill in the history of this country. Simply put, it is the equivalent of terminating more than 1,000 Keystone XL pipeline projects.”

Data center implications

The implications upon the data center industry could be considerable, given the significant backing it has given the US renewable energy sector as a crucial offtaker of renewable power through Power Purchase Agreements (PPA).

However, the data center sector has been noticeably quiet in its reaction to the bill. This may be due to the bill also including provisions to prevent states from enacting regulations against AI data center development. In addition, despite data centers being some of the largest corporate purchasers of renewable power, there has been a move towards fossil fuels, especially natural gas, as a key driver of growth within the AI space.

Against the backdrop of the bill, an open letter tabled by the Amazon Employees for Climate Justice, League of Conservation Voters, Public Citizen, and the Sierra Club called on Amazon, Google, Meta, and Microsoft to call on “on utilities to commit to no new gas and zero delayed coal plant retirements to power your data centers.”

However, while data centers are likely to remain the top buyer of renewable power, they seem keen to avoid the ire of President Trump, who has threatened at least one tech baron with jail time if they cross him, and have yet to come out against the provisions.