Congress' proposed budget objectives for energy sources
In a recent development, the House Energy and Commerce committee has proposed significant cuts to the funding for the Loan Programs Office, a move that could impact the nuclear industry's hopes for financial support. This decision is part of a broader set of proposed changes to energy credits, as outlined in the budget reconciliation debate in the House committees Ways and Means and Energy and Commerce.
The Ways and Means committee, in its draft, has proposed early terminations for several energy efficiency credits, including the alternative fuel infrastructure credit, the clean vehicle credit, and energy efficiency credits under the Inflation Reduction Act. The geothermal industry, in particular, faces unexpected setbacks, with the geothermal credit under Section 48 being phased out and eliminated three years early.
The proposed changes to the biofuels industry could make it easier to qualify for the credit, potentially preventing regulators from considering "indirect land use change" emissions. In contrast, the draft eliminates transferability for electricity generated beyond 2027, which could make it significantly harder for nuclear projects to get financed.
The draft does not extend 45Q, the carbon capture credit, as it did for 45Z, suggesting a potential shift towards blue hydrogen in the U.S. The initial draft out of the House Ways and Means committee has the potential to nullify the 45V tax credit for clean hydrogen, effectively eliminating DOE's $7 billion program to build hydrogen hubs. The hydrogen industry is pushing back against these proposed cuts, with several companies and organizations signing a letter arguing for the preservation of the 45V credit.
The geothermal industry may qualify for tech neutral credits, which have a longer phase-out timeline than initially expected. However, the draft prevents projects that purchase components from places like China from receiving tech neutral tax credits, potentially cutting off the credits in the middle of 2026.
The proposed changes to nuclear power credits could hamper the growth of the clean energy tax credit market. The draft includes a repeal of the 45U nuclear power credit, with phase-out starting in 2029 and full elimination by 2031. The timing of the proposed changes is problematic, as most nuclear facilities aren't expected to come online until after the credits have phased out.
The 45V tax credit for green hydrogen hubs is likely to lead to the hubs not penciling out without the tax credit. The committee proposes giving hydrogen the same treatment as electric vehicles and residential home efficiency, terminating the tax credit for any hydrogen facility that isn't already under construction by the end of this year.
The cuts to hydrogen credits could result in the U.S. ceding renewable hydrogen supply chains to EU and China, potentially affecting energy security. The biofuels industry, on the other hand, may feel like it got the scalpel treatment, with the proposed changes extending 45Z, the credit for clean fuels, for four extra years and making it easier to qualify for the credit.
These proposed changes, which were presented after the House passed budget reconciliation legislation on May 22, 2025, with involvement from Ways and Means Chair and Energy and Commerce Chair Brett Guthrie (R-Ky.), have sparked debate and pushback from various industries. As the discussions continue, it remains to be seen how these changes will impact the future of the US energy sector.
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