Senate bill cuts renewable energy tax credits as AI drives power demand

The US Senate passed a budget bill that would eliminate tax credits for wind and solar projects after 2027, potentially jeopardizing hundreds of planned renewable energy projects nationwide. This aggressive rollback comes as artificial intelligence and data centers are driving unprecedented electricity demand, making the timing particularly problematic for grid stability and energy security.

What you should know: The Senate bill forces an end to wind and solar tax credits for projects placed in service after 2027, creating immediate uncertainty for the clean energy pipeline.

• According to energy NGO E2, around $15.5 billion in clean energy investment has already been lost since the start of the year, with more than $9 billion of that in Republican congressional districts.
• The original Senate version was even more extreme, containing a new excise tax on wind and solar that would have essentially “kneecapped both industries” by taxing businesses sourcing materials from countries like China.
• The final version provides some relief for projects that start construction within the next year, allowing them to keep tax credits even if not completed by 2027.

Why this matters: The timing couldn’t be worse as AI and electrification drive massive new power demands, with artificial intelligence projected to comprise nearly 12 percent of US power demand by decade’s end.

• “There is a real need to add clean energy supply to the grid—electrifying our cars, electrifying our homes, electrifying our buildings, electrifying our factories, and the demands from AI are all going to require new clean energy,” says Costa Samaras, a Carnegie Mellon University professor. “What this bill does is make it harder and more expensive.”
• A global backlog in gas turbines means renewable energy serves as a crucial “bridge” to meet immediate demand while larger gas projects take years to come online.

The irony: States like Texas demonstrate how renewables actually strengthen grid stability, even as political opposition intensifies.

• Wind and solar combined make up 42 percent of Texas’s installed generation capacity, more than any other state, helping the grid stay stable during peak summer demand.
• Texas added more solar and battery storage than any other type of energy to its grid last year, crucial for handling “never-before-seen summer demand” from hot temperatures and energy-hungry data centers.
• Yet Energy Secretary Chris Wright claimed in a New York Post op-ed that wind and solar contribute to a “less stable grid.”

What they’re saying: The renewable energy provisions sparked unusual bipartisan criticism and confusion.

• “This is a bill to punish renewables,” Samaras told WIRED.
• Elon Musk called the provisions “utterly insane and destructive,” posting that the bill “will destroy millions of jobs in America and cause immense strategic harm to our country!”
• Several GOP Senators reportedly had no idea who added the excise tax provision, according to NBC reporting.

The bigger picture: The hostility extends beyond Washington, with grassroots movements across the country pushing back against renewable projects.

• Oklahoma, which relies on wind for a third of its energy needs, faces a growing movement to ban renewables altogether.
• Local governments nationwide are responding to grassroots pressure by restricting wind and solar development, often including Democrats in these efforts.
• “It feels like you’ve got a large number of really powerful folks who have just decided, or been convinced—and then had that belief reinforced by algorithms over and over—that somehow, wind and solar are the root of all evil,” says energy analyst Doug Lewin.