Albuquerque Business First reports on the U.S. Senate passing H.R.1, which would phase out clean energy tax credits. United's Harry Godfrey and Micahel Barrio warn that this will slow advanced energy development in New Mexico and will be a serious setback for consumers and businesses.
Early this morning, the U.S. Senate passed a massive tax and spending bill and, according to New York Times reporting, the U.S. House of Representatives will likely vote on the bill tomorrow. It will then be sent to the President’s desk.
H.R.1, the “One Big Beautiful Bill Act,” has far-reaching implications across sectors, but a key industry affected by the bill is clean energy.
The bill significantly cuts policies instrumental to clean energy deployment, affecting consumer credits for solar, energy efficiency and electric vehicles. These will be phased out by the end of this year, if not the end of the quarter, once the bill goes into effect, according to Harry Godfrey, managing director of Advanced Energy United who leads the organization’s federal priorities team.
It will also accelerate the phase-out of wind and solar resources, potentially raising energy costs, according to Godfrey.
The bill also accelerates the phase-out schedule for wind and solar generating resources, and other more early-stage or advanced resources, inclusive of storage, which have a longer runway as it exists right now. Godfrey explained language in the final bill passed by the Senate provided a bit more time around that but it is expected to reduce the growth of energy supply at a time where we see demand growing as a result of build out of new data centers and other emerging economic development projects.
“This weekend, we saw changes to the bill that would have made that, I think, even more drastic and really would have had cataclysmic impacts," Godfrey said. "I think we've stepped back from the brink there, but that doesn't mean that this won't still cause serious harm for consumers and New Mexicans and New Mexico businesses.”
According to New York Times reporting, two key changes have made the bill more favorable toward solar and wind energy.
- First, companies building wind and solar projects can claim a lucrative tax credit as long as they begin construction within a year of the law’s enactment or come online before the end of 2027. The bill’s previous language required new projects to be completed by 2027, which companies pushed back on claiming there are often project delays out of their control that would hinder their ability to make that timeline, Godfrey explained.
- Second, an excise tax was removed, which was originally for wind and solar projects that have ties to Chinese firms. Some solar manufacturing firms had supported that tax, but developers argued it would only slow projects.
In May, businesses canceled $1.4 billion in new factories and clean energy projects, according to data and analysis on clean energy projects tracked by E2 that, its website reveals, is a national, nonpartisan group of business leaders, investors and others who advocate for policies that benefit the economy and environment, and its partner Clean Economy Tracker.
The May cancellations include battery, electric vehicle and solar panel factories in West Virginia, New York, Alabama, Arizona and Washington, totaling $15.5 billion in projects and 12,000 potential jobs canceled since the beginning on the year, according to E2.
What this means for New Mexico
XGS Energy announced a partnership with Meta in June. Geothermal energy is expected to see a favorable tax treatment into the 2030s under the bill, according to Godfrey, though the energy source is still in the early stage of deployment in many markets.
The New Mexico Energy Transition Act calls for 100% carbon-free power by 2045. The loss of federal tax credits means that utilities may have to revert to gas fired capacity to meet anticipated load growth at a lower capital risk, according to Michael Barrio, senior principal at Advanced Energy United who leads the organization’s engagement in Arizona and New Mexico.
Rural communities in New Mexico could lose out on PILT (payments in lieu of taxes) revenue from solar farms, which according to the U.S. Department of the Interior are federal payments that help local governments offset losses in property taxes.
“We haven't seen any project cancelations, to my knowledge. I think that will change after today,” Barrio said.
In New Mexico, this could impact the planned the Maxeon Solar Technologies Ltd. (NASDAQ: MAXN), which first announced its $1 billion manufacturing plans at Mesa del Sol in August 2023.
Most recently, in November 2024, the company announced a “broad restructuring” of its business portfolio and focus moving forward, according to previous Business First reporting. The Singapore-headquartered company said it has executed a five-year lease of a building in Albuquerque.
The building is located on San Mateo Boulevard Northeast, on a 40-acre site.
A “core element” of the company’s U.S. strategy is to be a part of the creation of a domestic solar panel supply chain, according to a statement from George Guo, Maxeon's CEO.
The project was originally funded through a financing package that relies on a 45X and U.S. Department of Energy loan guarantee, according to Barrio.
The company plans to start with module assembly in the San Mateo Bouldevard location while evaluating its longer-term objective of establishing a solar cell manufacturing capacity and also evaluating options for Mesa Del Sol, according to previous reporting.
Financiers can, can still walk within 30 to 60 days with a federal terms change, according to Godfrey.
Barrio said some projects might move foward at a higher cost, but utilities will likely still see higher rate-based returns or default to gas and corporate buyers.
“Predictability is really what the business community's biggest ask is, is and has always been. Regardless of what the energy source is, I think capital hates policy whiplash,” Barrio said.
The Energy Transition Act and community solar rules help in New Mexico, as far as state policy, according to Barrio. However, state policies cannot replace federal tax equity that covers around 30% of project costs.
The state budget for the upcoming year is about $10.8 billion according to Source New Mexico, and federal credits deliver somewhere around $300 million last year in New Mexico in clean energy investment, according to Barrio.
New Mexico's clean energy sits on three legs, according to Barrio: (1) Federal tax credits, (2) state policy targets, and (3) an abundance of sunshine.
“I think with this vote, that kind of kicks out the first leg, and that leaves us vulnerable as a state,” Barrio said.
Read the full article here.