Impacts of HR1 on renewable energy tax credits, US electricity markets

The recently enacted House Reconciliation Bill 1 (HR1) has introduced significant changes to the landscape of clean energy investment in the US. Signed into law on July 4, 2025, HR1 revises the eligibility criteria for Production Tax Credits (PTC) and Investment Tax Credits (ITC) for renewable energy projects, particularly by phasing those credits out for solar and wind generation. This article summarizes the key insights from the comprehensive analysis of HR1's implications on clean energy tax credits and the broader energy market dynamics. The S&P Global Commodity Insights report assesses the impact of the phaseout of tax credits, compared to the baseline Market Indicative Power Forecast as of June 30, 2025, which was published prior to the enactment of HR1.

One of the most notable legislative changes under HR1 is the adjustment of timelines for tax credit eligibility. To qualify for PTC and ITC, renewable energy projects must now begin construction by July 4, 2026, one year after enactment, and become operational no later than 2030. This change is forecast to drive a temporary surge in solar capacity, with projections indicating an increase of 35.6 GW of new solar capacity by 2030, compared to the baseline. However, by 2035, both solar and wind capacities are forecast below the baseline, with reductions of 42.1 GW (5.9%) and 51.7 GW (11.3%), respectively. The phaseout of tax credits will also impact the economic viability of these projects, diminishing financial returns despite potential increases in wholesale electricity prices and renewable energy credit (REC) values that may help to offset some of these losses.

The analysis forecasts a surge in solar capacity and output, putting it in the upper right quadrant by 2030; this is reversed by 2035 as the rate of solar capacity additions slows relative to the baseline. Correspondingly, a forecast reduction in generation from natural gas in 2030 reverses and grows significantly by 2035. Coal generation also gains, and notably, gains in fossil generation are forecast to come principally from greater utilization of the existing fleet rather than from deployment of new gas generation.

New battery storage, which retains tax credits for longer under HR1, is forecast to become a more attractive option compared to wind and solar generation, especially in regions experiencing high prices for capacity, such as PJM Interconnection and Midcontinent ISO.

The report also highlights the broader implications for the energy market, particularly the anticipated rise in wholesale electricity prices due to the reduction of zero-variable cost generators. Markets with ambitious renewable portfolio standards (RPS), such as New York and California, are expected to experience the most significant price increases, as solar and wind generation comprise a large and growing proportion of generation in these states under the baseline forecast. Additionally, the dynamics of the US REC markets are projected to shift with higher prices, as developers seek to compensate for lost PTC revenues. Meanwhile, fossil fuel generation, especially from natural gas, is expected to economically improve due to rising energy prices and lower displacement by renewables, although new gas plant construction may be limited by high capital costs. Overall, HR 1 is set to reshape the clean energy investment landscape, affecting both renewable and fossil fuel generation dynamics in the coming years.