The draft budget reconciliation bill released by the U.S. House of Representatives introduces sweeping changes that could severely impact the renewable energy sector. Among the most controversial provisions are the phased reductions of the Investment Tax Credit (ITC) and Production Tax Credit (PTC) for solar, wind, and energy storage projects—cornerstones of federal for clean energy, according to Wood Mackenzie. 2i131p

Under the proposal, full tax credit values would remain in place for projects placed in service by the end of 2028. After that, the credits would drop to 80% in 2029, 60% in 2030, 40% in 2031, and be eliminated entirely by 2032.

Industry experts warn of major disruption 571y1v

“Many of the elements in the proposed House budget bill would deter the development of renewable projects in the US,” said Sylvia Leyva Martinez, principal analyst at Wood Mackenzie. “The early phaseout of tax credits, the removal of transferability, and more stringent rules on foreign entities of concern (FEOC) impact the vast majority of clean energy projects.”

While some incentives, like domestic content bonuses and energy community adders, remain, the overall outlook is deeply concerning for stakeholders across the industry.

Solar sector: Threats to deployment and manufacturing 4e133b

Wood Mackenzie. also state that utility-scale solar could experience a slowdown due to the credit phaseout and the proposed elimination of Section 25D for residential solar by the end of 2025. The end of tax credit transferability could also harm U.S. solar manufacturers, many of whom rely on the mechanism for financing.

“The bill presents more downside risk than our current forecast anticipates,” said Martinez, adding that Wood Mackenzie may revise its Q1 2025 base case downward.

Wind industry faces pipeline pressures 2p2k2u

The wind sector, already facing supply chain bottlenecks, is expected to suffer from the early expiration of tax incentives and a new requirement that projects be placed in service—rather than just started—to qualify.

“This shift could squeeze project timelines and increase financial risk,” warned Diego Espinosa, senior research analyst. The current wind pipeline of nearly 11 GW set to come online by 2027 now faces significant uncertainty.

Storage sector hit hard by dual headwinds 4z1m1p

Energy storage faces a double blow: new FEOC restrictions and ongoing tariff uncertainties. Allison Weis, global head of energy storage at Wood Mackenzie, said that 97% of LFP cathode material used in U.S. projects comes from China, meaning most storage projects starting after 2026 would lose eligibility for tax credits under the proposed changes.

“This proposal is harsher than even our worst-case assumptions,” said Weis, noting that hard in-service deadlines could delay or derail many projects.

Geothermal and hydrogen: Mixed prospects 10921

Geothermal power receives mixed messages: while tax credit access may be reduced, increased demand for data center power s long-term growth. Richard Hood of Wood Mackenzie called geothermal “a rare 24/7 clean baseload option” despite facing similar challenges to other technologies.

Hydrogen developers, however, face a more immediate threat. A proposed end to the 45V hydrogen production tax credit in early 2026 could endanger up to 95% of the 3.4 million tonnes per annum of green hydrogen capacity currently announced in the U.S.

“Developers must now race against the clock or risk losing incentives altogether,” said Hector Areola, principal analyst at Wood Mackenzie.

CCUS: The one clear winner 6s6p53

Carbon capture, utilization, and storage (CCUS) emerges as the biggest winner. The 45Q tax credit remains largely untouched, retaining its value and duration.

“Even with two proposed tweaks, CCUS remains one of the most attractive low-carbon investment opportunities globally,” said analyst Rohan Dighe.

As negotiations continue in the Senate, industry leaders are calling for revisions to preserve momentum in the U.S. clean energy transition. Without significant amendments, the proposed bill could stall progress and investment in multiple renewable technologies—at a time when global demand for clean energy is reaching unprecedented levels.