How the IRA repeal could slow clean energy supply chain development
Analysts expect the “One, Big, Beautiful Bill,” the budget reconciliation bill that passed through the US House of Representatives on May 22, to slow down the build-up of clean energy and battery manufacturing supply chains. They also expect it to make them more expensive. This illustrates the potential IRA repeal clean energy impact. The bill, which will be voted on in the US Senate, repeals several Inflation Reduction Act (IRA) incentives. These include incentives for electric vehicles (EVs) and residential energy products. It also restricts or ends earlier than previously announced many other incentives.
This would cause a disruption to the supply chains in the US, according to Fastmarkets’ head of base metals and battery research Will Adams. He noted the IRA repeal will likely have a clean energy impact.
“The IRA has really helped kickstart a local battery supply chain and boost investment in renewable energy projects in the US. It has seen companies that were looking to set up plants in Europe switch to setting up in the US,” he said.
“The phase out of these tax credits will remove some of the incentives that the US has offered. That is likely to slow down the buildout of the local supply chain. This is because it will change the economics of projects,” Adam added. He reflected yet another facet of IRA repeal clean energy impact.
Section 45X phaseout and the IRA repeal clean energy impact
Section 112014 of the One Big Beautiful Bill phases out the Advanced Manufacturing Production Tax Credit(45X.) Under the current law, a tax credit is available for certain inverters, solar energy components, wind energy components, qualified battery components. It also applies to critical minerals produced and sold before 2033.
Mining and processing operations of critical minerals for clean energy technologies, such as lithium, cobalt, nickel and rare earth elements, could also qualify for the 45X under the IRA.
Under the new bill, a phased reduction of Section 45X would begin in 2029. Projects that expect production to occur after 2031 no longer qualify. This is a year earlier than the current law, illustrating the increased IRA repeal impact on clean energy planning. Wind-energy components will not be eligible after 2027.
Investments in critical supply chains could also be affected by another aspect of these changes, according to Adams.
“Also, the upheaval that many of President Donald Trump’s policy changes are causing and the uncertainty of what lies ahead, means companies are likely to think twice about future investments,” he said.
How EV tax credit cuts reshape the US clean energy transition
The termination of a number of tax credits is expected to make EVs in the US more expensive, according to Fastmarkets analyst Andrew Saucer.
The bill terminates both the Clean Vehicle Tax Credit and the Alternative Fuel Refueling Property Tax Credit. These credits could be used for installation of equipment that is used to recharge electric vehicles.
Under the current law, taxpayers may claim a tax credit of up to $7,500 for new EVs. The maximum credit is comprised of two equal parts of $3,750. The first part is based on the source of the critical minerals in the battery. The second part is based on the source of the battery components. Certainly, these cuts will create a significant IRA repeal impact on clean energy incentives.
This credit is currently set to expire on December 31, 2032. However, the new provision accelerates the expiration to December 31, 2025.
It also implements a special rule for the taxable year 2026. This rule only allows vehicles produced by manufacturers who have not sold 200,000 new clean vehicles as of December 31, 2025, to qualify for the credit. Consequently, larger EV manufacturers such as Tesla cannot qualify for this benefit.
The Clean Vehicle Tax Credit “may have served to entice interested buyers,” according to the International Energy Agency’s (IEA) Global EV Outlook 2025 report.
In 2024, EV sales increased by 10% year on year to 1.6 million in the US. This was down from an increase of 40% in 2023. However, it was still a boost for the overall car market, as sales of conventional cars stagnated, according to the IEA report.
End of wind, solar and hydrogen incentives under IRA repeal
Tax credits for wind and solar, as well as clean electricity manufacturing are also being terminated under the proposed bill.
With the exception of some advanced nuclear facilities, the bill will also terminate the Clean Electricity Production Tax Credit. This applies to facilities placed into service after 2028. It also applies to facilities for which construction begins after 60 days from the date of enactment of the bill. Additionally, it will terminate all Clean Hydrogen Production credits.
Special mention is given to “certain foreign entities, facilities that receive material assistance from certain foreign entities, and taxpayers that make certain types of payments to certain foreign entities,” as being “disallowed” tax credits for clean energy, clean hydrogen and advanced manufacturing tax credits. Naturally, the IRA repeal impacts clean energy incentives in this regard substantially.
Due to this, the “One, Big, Beautiful bill” has also caused concern in the international nickel sulfate market. Market participants expect nickel sulfate premium to fall once the bill is enacted. This is because material compliant with IRA standards was attracting a higher premium.
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