This article is based on a May 5th Womble Bond Dickinson webinar featuring Kristina Moore and Veronica Renzi.

The temperature is rising for the Renewable Energy Sector as well as related funding sources, such as green banks. The heat is coming from several sources, including:

• An expansive fight over obligated federal funding.
• Congressional investigations into companies receiving federal financial support.
• The potential elimination of tax incentives augmented under the Inflation Reduction Act (IRA).
• Rising tariffs.

All these issues are significant factors impacting the renewable energy sector. The IRA, passed under the Biden Administration, remains a particular target for Republican lawmakers, who seek to reclaim as much funding as they can.

Congressional Investigations Ramping Up the Temperature

Comparing it to “Gold bars sliding off the side of the Titanic,” Congressional Republicans have voiced strong objections to the rapid pace that IRA renewable energy funds were allocated.

On Jan. 27, the White House ordered the EPA to halt the spending of IRA obligated funds. Then, a little over a month later, the EPA formally referred the alleged financial mismanagement, conflicts of interests, and oversight failures regarding the Greenhouse Gas Reduction Funds to the Office of Inspector General.

In response, several IRA funding recipients have sued the EPA, seeking the release of already allocated funds. A federal judge issued a temporary restraining order barring the EPA from freezing Greenhouse Gas Reduction Fund allocations, at least until a court can consider the dispute.

However, the D.C. Court of Appeals reversed that decision, restoring the freeze to $20 billion in Greenhouse Gas Reduction Fund allocations. Arguments will be heard May 19 about the future of these funds.

On March 20, the House Oversight Committee sent a letter to the EPA indicating its intention to investigation the policies and IRA funding allocation during the Biden Administration. The letter requested a briefing with committee staff.

Various grant recipients have also received letters from Congressional committees requestion answers to questions about the Greenhouse Gas Reduction Fund.

Many have compared the current Congressional oversight climate to the Solyndra investigations in 2011. The Solyndra investigation focused on a $535 million loan guarantee issued by the U.S. Department of Energy to Solyndra, Inc. Led by the House Oversight and Energy and Commerce Committees, the inquiry sought to assess whether the government's decision to approve the loan was warranted and to investigate whether Solyndra's executives had misrepresented the company's financial stability. No one wants to be that next household name because of a Congressional investigation.

Budget Reconciliation Could Change IRA Support for Sustainable Energy

Based on a budget resolution passed by both houses of Congress, Budget Reconciliation is a process by which lawmakers can avoid a Senate filibuster and pass spending measures with just 51 votes—a key tactic in this closely divided Congress.

Such a bill would include President Trump’s top priorities. These include extending the Tax Cuts and Jobs Act, which passed during his first administration and is set to expire this year.

For Congress to move forward with tax cuts, they also must find cost savings. Such offsets could target IRA sustainable energy-related production tax credit (45Y and 48E) and manufacturing tax credits (45X).

However, industries in that sector are pushing back, making their case for keeping these incentives to bolster domestic energy production to meet the rapidly growing needs of AI data centers. They also point to the need for a predictable investment climate. Companies brought jobs and investments to the U.S. based in part on these IRA tax incentives.

Even if these tax credits survive, they are likely to be modified by Congress moving forward. In terms of timeline, President Trump has requested that the Budget Reconciliation bill be on his desk by July 4. That would require the House to finish their work around Memorial Day and for the Senate to complete its steps by the end of June.

What’s Next: Challenges and Opportunities

In light of these developments, the future of renewable energy funding and the associated legislative landscape remains uncertain. The intense scrutiny from Congressional investigations, coupled with potential policy changes through budget reconciliation, has created a precarious environment for green energy stakeholders.

What happens in the coming months could determine the trajectory of renewable energy in the United States for years to come.