One Big Beautiful Bill Act: Clean Energy Tax Credit Guide 2025

The One Big Beautiful Bill Act (OBBBA) is now law, and it will reshape clean energy tax credits in the United States. While OBBA doesn’t cover all aspects of the industry, it will impact many critical market segments -in both negative and positive ways. For instance, relatively unscathed industries are Sustainable or Synthetic Aviation Fuels (SAF), geothermal, water tech, and nuclear. We’re starting with what energy companies, developers, manufacturers, and investors need to know for seven key sectors. We will revisit other more complex sectors in future posts.

Solar and Wind Energy

There is still clarity and guidance needed to define and sort what is happening with the tax credits for renewables. Solar and wind are complex energy sources and markets from consumer or residential solar to offshore wind, not  all areas of the renewables industry are the same. Stakeholders involved in these credits include utilities, policy makers, developers, clean energy investors, and manufacturers.

• Tax credits phase out fast: Projects must begin construction within 12 months (by July 2026) and be in service by end of 2027 to claim the Investment Tax Credit (ITC, Section 48E) or Production Tax Credit (PTC, Section 45Y). New solar and wind projects started after these deadlines are ineligible.

• Stricter domestic content rules: Starting now in July 2025, there will be no tax credits for projects involving foreign entities of concern (FEOC) — especially Chinese-backed firms.

• Executive Action: The President has promised executive action in addition to the OBBBA to make it even harder for solar and wind projects to qualify for tax credits. For instance, the July 7 order directs the Treasury Department to strictly enforce these phaseouts and close loopholes on what counts as “beginning construction.”

• The Residential Clean Energy Credit (Section 25D) ends Dec. 31, 2025. Homeowners must install solar or batteries by then to claim credits, which is just 5 and a half months from now.

Energy Storage and Geothermal

While FEOC restrictions apply to these technologies, the tax credits remain for energy storage and geothermal remain. Viewed as some of the highest growth areas to support the clean energy transition, energy storage and geothermal are poised for explosive growth from both new and existing projects regardless of federal policy shifts. Key things to note for these sectors include:

• Energy storage and geothermal projects are still eligible for technology-neutral credits (Sections 45Y, 48E) if construction starts by end of 2033. Phase-down begins in 2034.

• The advanced manufacturing credit (45X) phases out starting 2031.

• Similar to solar and wind, foreign entity restrictions apply to projects (especially those with significant Chinese involvement).

Carbon Capture

Long seen as a non-starter in the clean energy game, Carbon Capture, Utilization & Storage (CCUS) has withstood skeptics and has a now added tax credit for utilization. CCUS could be a growth opportunity paired with oil and gas sites. It’s important to note that FEOC applies to this market segment as well. Other items worth watching include:

• The OBBBA expanded  the carbon capture credit (45Q) slightly. The credit is now the same for both sequestration and utilization (e.g., enhanced oil recovery). Projects must avoid influence from FEOCs to remain eligible for credits.

Hydropower

Over the past year, we have worked with hydropower and have seen the strengths and the dynamism of this market. To run a plant, means activating a local workforce and that’s attractive to policy makers and investors alike. However, stakeholder engagement and education play an important role in de-risking projects moving forward. Here’s what else you need to know:

• Similar to energy storage, hydroelectric projects stay eligible for technology-neutral tax credits (45Y, 48E) at the full rate if construction begins by the end of 2033. Credits phase down for projects started in 2034 and 2035. The bill designates hydropower as firm baseload energy.

Hydrogen

Wildly popular under the Biden administration, hydrogen is continuing to gett a boost during the current administration. Hydrogen advocates have seen some wins in this round of legislation and secured a slight extension and Investment Tax Credit (ITC) benefits. We’ve long believed that hydrogen holds promise for the United States and look forward to seeing more growth in this industry segment. 

• The Clean hydrogen credit (45V) was slightly extended to Jan. 1, 2028, providing policy stability for ongoing projects.

• The OBBBA also includes a new 30% ITC for linear generators for the next 10 years and offers new life to fuel cell credit eligibility.

Sustainable Aviation Fuel (SAF)

We’re very bullish about this segment of the clean energy transition. We’re in active discussions with Hill offices and hearing about favorable legislation in the pipeline that supports USDA and other regulatory activities. Please reach out to us for more insights and our public affairs team will be pleased to have a dialogue. Other changes in OBBA include: 

• No “double dipping”: Fuel can only earn either the Section 45Z clean fuel credit or other tax credits such as the SAF blender’s tax credit through Dec. 31, 2029 (from 2027).

• OBBBA removes the special rate for Sustainable Aviation Fuel under Section 45Z. It deletes the extra bonus the IRA gave to SAF and simply defines SAF as a jet fuel meeting certain ASTM standards and not derived from palm oil.

• Prohibits use of feedstocks from anywhere but US, Mexico, and Canada starting Jan. 1, 2026.

• Changes emissions rates for eligibility

• Sets prohibitions on foreign entities and foreign-influenced entities applying for the credit.

• The law also extended and modified the 40A credit for small agri-biodiesel producers; the bill significantly strengthens and increases the credits these producers can get.

Nuclear

Nuclear is having a moment in this bill and beyond! We’re watching as companies get closer to key technical milestones and sort through planning, disposal and safety issues. Key changes in OBBA include:

• Fusion: The bill does not specifically address fusion energy, but our work over the past few years in fusion has made us believers. Fusion holds a lot of promise, but it can be viewed by many as a long way from commercialization. The jury is out, but we’re seeing great news on advancements in technology and investments each month. However, this segment of the industry is also reliant on global commerce which could hinder its rapid growth. It’s a wait and see!

• Fission: A new nuclear energy community bonus (45Y) is introduced for regions with strong direct employment related to the advancement of nuclear power. We’re watching the recycling aspect of this legacy tech and see a lot of discussion and news around recycling and repurposing happening.

• No changes to the Zero-Emission Nuclear Power Production Credit (45U): Credit terminates for electricity produced and sold after Dec. 31, 2032.

The clean energy space has proven in the past how well it can adapt to changes in policy and technological advances. Team Silverline will keep enabling companies at the forefront of our industry to meet the moment, and shape the narrative in 2025. For a comprehensive look at energy provisions, please go to the OBBBA. 

Please reach out to us at workwithus@teamsilverline.com for more insights and our public affairs team will be pleased to have a dialogue.