One Big, Ugly Bill: New House Bill Threatens to Sunset Solar Credits
A Sandbar Solar Installer on the job in Scotts Valley, California. Photo: T.Fox
In what might feel like a doomsday prophecy for solar users, professionals, and advocates across the United States, House Republicans are threatening to eliminate clean energy tax credits in a massive tax bill that they passed in a 215-214 vote early on Thursday, May 22, 2025. The new bill, preposterously named the “One Big Beautiful Bill Act” (the title equivalent of putting lipstick on a pig), includes significant rollbacks of clean energy tax incentives re-established under the 2022 Inflation Reduction Act, such as tax credits for qualifying clean energy systems, including solar panels and battery storage.
When Democrats initially passed the Inflation Reduction Act, they intended for its clean energy tax credits to last at least 10 years, through 2032. However, if the new version of the bill becomes law, those credits will largely expire on December 31, 2025. Specifically under threat is the residential clean energy credit, which had previously offered buyers of qualifying clean energy systems (such as solar panels and battery storage) a tax credit worth 30% of the costs. If passed, this bill will give you just 1-2 months to start your solar battery project and still qualify for the 30% federal solar tax credit.
The immediately actionable takeaway of these changes is that if you’re thinking of going solar within the next five years, it would behoove you to start the proposal process immediately, so that you can sneak through the closing window of the 30% residential clean energy tax credit.
The news is fresh and we’re still unraveling its implications in real time, but here’s a rundown of the key implications so far:
Key Implications for New House Budget Bill for Solar Energy Customers
1. Reduction of Solar Tax Credits
The bill accelerates the expiration of the 30% federal Investment Tax Credit (ITC) for residential solar installations, moving the phase-out date from 2032 to 2025. This change eliminates the federal financial incentives for homeowners considering solar panel installations, essentially driving the price of solar and batteries UP 43% unless their system installations occur before 12/31/2025. A well established solar company in California should have a 3.5-4.5 month backlog of work (anyone who can promise an installation in less time than that likely doesn’t have much work on their books, which is a red flag). So effectively, if homeowners don’t sign up for their solar project by late July or mid-August of this year at the latest, they are unlikely to see their project finished this year, and therefore unlikely to receive that precious 30% federal solar incentive.
On the non-residential side, customers must commence construction within 60 days of the bill’s signing to qualify for the tax credit, which should fall in the beginning of September. “Commence construction” is defined as the complete payment and delivery of materials constituting at least 5% of the total value of the project. These projects must be placed in service by the end of 2028.
2. Elimination of Transferability and Direct Pay Options
The legislation removes provisions that allowed for the transferability of tax credits and direct pay options. These mechanisms were crucial for solar developers and startups to finance projects, especially those without sufficient tax liability to utilize the credits directly. Absent these provisions, we can expect greater difficulty for solar businesses to get their paradigm-shifting tech off the ground and onto your roofs.
3. Increased Energy Costs
Analyses suggest that repealing energy tax credits could lead to a 7% increase in residential electricity bills by 2026, translating to an average of $9 more per month for households. Because what everyone needs right now is higher bills!
4. Impact on Solar Leasing Models
The bill removes tax credits for leased residential solar systems, which could discourage third-party ownership models that have been popular in California.
California-Specific Considerations
California, with our robust solar market, stands to be significantly affected by these changes. The reduction in federal incentives may slow our progress toward our renewable energy goals and impact the affordability of solar energy for residents.
Our friends at the California Solar Storage Association (CALSSA) are all over the announcement, and have released the following initial analysis of changes to existing incentives:
“Okay, some basic facts on the House bill based on our initial review:
o The “Foreign Entities of Concern” (FEOC) provisions were moved forward to 1/1/2026 and were not loosened. The essence of this is that no components of any equipment or source materials can come from China or be made by companies controlled by the Chinese government.
o Residential leases and PPAs will not get the tax credit if they are sold after the bill is signed. It is not clear what the exact threshold is for a project to be “sold.” Two alternative interpretations are circulating on the effective date of this provision. It could be the end of this year or the end of last year. We can expect clarification in the Senate.
o Residential customers with cash or loans need to be placed in service by the end of this year. Traditionally “placed in service” has been interpreted as PTO, but there is grey area if the system is fully functional and has not been granted PTO by the utility.”
Next Steps
The bill has now moved to the Senate, where its provisions are under intense debate and modification. Stakeholders in the solar industry and clean energy advocates are closely monitoring the legislative process and advocating for the preservation of key incentives. Call and write your senators today to voice your concern over losing solar incentives, and insist that they vote to defeat this bill.
President Trump has said he wants the bill on his desk by July 4, which may or may not happen, but gives us a rough working timeline. After the Senate passes its version of the budget, it must be reconciled with the House’s version, which will involve significant negotiation that could prolong the process.
For California residents considering solar energy investments, it's advisable to stay informed about these legislative developments and consult with solar energy professionals to understand the potential financial implications.
The Sun Always Rises
Solar providers, users, and advocates must stand together and persevere in the face of setbacks like this new house bill. Building a new future and shifting existing paradigms will always be met with resistance by those who benefit from the old way of doing things, but here at Sandbar Solar, we remain committed to our vision of a clean, affordable, sun-powered future in California and beyond. They may cut off tax credits, but they can’t turn off the sun, and we’ll continue to innovate the best, most efficient ways to bring its power to your homes and businesses.
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