As U.S. senators debate a tax and spending bill that could gut the Inflation Reduction Act, rapidly phasing out some clean energy tax credits, leaders of renewable energy companies are running through what-if scenarios and hoping “good sense” prevails.

“I’m cautiously hopeful. I wouldn’t use the word optimistic just because … things are all over the place now, so we will just have to see what comes out in the next couple of weeks,” Sandhya Ganapathy, CEO of EDP Renewables North America, said June 5 during the American Council on Renewable Energy’s Finance Forum. If the House version of the bill succeeds, “I would say it’s catastrophic for the industry as a whole.”

President Donald Trump wants the so-called “One Big Beautiful Bill,” also known as the reconciliation bill, approved by Congress and on his desk for signature by July 4. However, numerous issues have been raised with the bill, which may ultimately increase the federal debt limit despite its many proposed cuts. The cuts not only impact pure play renewable energy companies. Many traditional oil and gas players are energy companies, having made substantial investments in low-carbon and renewable energy projects as well.

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As it stands now, many clean energy incentives will be eliminated. The legislation includes an accelerated phase out and termination of several energy-related tax credits. The legislation eliminates the IRA’s clean electricity production and investment tax credits, among others, for facilities not under construction within 60 days after Trump signs the bill and in service by the end of 2028. Power plants and battery projects, for example, wanting to claim the technology-neutral tax credits would have to meet the requirements.

Projects that use equipment or critical minerals from or with ties to China, Russia, North Korea or Iran would be ineligible for such tax credits due to foreign entity of concern (FEOC) rules.

The restrictions and shortened start construction timeline could stifle new projects early in the development process at a time of rising energy demand and the continued need for low-cost, reliable energy.

Ganapathy, like others, sees a construction rush ahead in the near term if the legislation remains the same.

“There is going to be a mad rush. I think we are all going to be chasing the same strategy, the same equipment providers, the same sort of avenues,” Ganapathy said. She added, “we are all spending a lot of time talking about FEOC and talking about how unsupportive it is. But if you’re not able to get to the start of construction, then that debate completely goes out the door. To me that is almost like the nail in the coffin.”

‘Double whammy’

Such broad-based provisions make it difficult to get any incremental volumes—especially unfortunate given the demand and appetite to deploy capital, Ganapathy said.

EDP Renewables North America’s more than 11.4 gigawatts (GW) of clean energy span the U.S., Canada and Mexico. The company’s wind, solar and energy storage facilities power the equivalent of more than 3.1 million homes annually, according to its website. Its capital investment in North America is about $16.8 billion.

Jim Murphy, president and cofounder of Invenergy, said the company is being cautiously optimistic that the Senate will fix some of the flaws in the bill.

“If the House version was the final version, well, we need to get going on the start of construction on projects … and also not to be subject to the onerous FEOC provisions that are also in the bill,” he said. “There’s sort of that double whammy.”

In addition to prohibiting specified foreign entities from claiming energy tax credits, FEOC rules also disqualify taxpayers from tax credits who make certain payments—such as licensing fees—to prohibited foreign entities and facilities that receive material assistance from such entities.

“The FEOC was written so broadly down past component to subcomponents in these new terms like material assistance and the payment provisions,” Murphy said. “Certainly, there will need to be guidance. We don’t know what that guidance would look like sitting here today. So, it’s a really an unknown world of what the rules would be. … The supply chain cannot support that and is not probably going to be able to support that for several years. So, it’s just an unworkable provision.”

Privately-held Invenergy is a developer of renewable energy and transmission projects. Earlier this year, the Chicago-based company with international assets inked a deal with Verizon for 640 megawatts of renewable energy. The agreement boosted Verizon’s total procured energy from Invenergy to more than 1 GW.

Meeting demand

Both companies have safe harbored projects. When asked whether the potential construction start rush or FEOC provisions would lead them to prioritize certain projects over others, the executives agreed there was no hierarchy and decisions would be driven by customers.

“We have the pipeline to deliver any of the technologies and so it’ll be a customer decision,” Murphy said.

Ganapathy pointed out that wind installations have fallen but wind commands a premium, while solar is a wider market. “Having said that, there is demand no matter what, and we do have the appetite to deploy and so there is no pecking order.”

Led by solar, renewables generated nearly 25% of U.S. electricity in 2024, according to the U.S. Energy Information Administration, and it continues to grow as costs fall.

Industry players have said all forms of energy will be needed to meet growing demand. Each has a role to play: whether it’s the fast construction completion and start-up times for renewables or the firm, reliable power of natural gas.

“We have a gas development business in addition to renewables and we’re getting a lot of customer inquiries for gas fired as well, mostly peaking, but we can’t deliver that immediately the way we can deliver renewables immediately,” Murphy said. About “95% of what’s in the queue right now is renewable projects and ... gas projects are not going to be ready until the end of the decade here for the most part.”

There will be some installations in the near-term; however, most of the activity being seen today are assets trading hands, not newbuilds coming online, Murphy said. Given challenges that include permitting as well as gas turbine equipment and EPC workforce constraints, he expects more newbuilds online between 2028 and 2030 at the earliest.

Meanwhile, energy demand continues to rise—driven by data center growth, the rise of electrification, an increase in manufacturing activity and a reshoring push.

But Ganapathy pointed out how the U.S.’ reputation of being the best place for investments—a “north star” or “safe haven” of sorts—is changing. Concerns about the reconciliation bill resurfaced along with uncertainty surrounding trade and tariffs impacting not just renewables but everyone.

“In a way, we are in this quagmire and we need to get out of that,” she said. “I’m just hoping that a good sense will prevail and then we will have a better version of the bill than what we have today.”

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