Republican Plan to Cut Solar Subsidies Threatens AI Infrastructure Boom

AI data centers need massive amounts of electricity. They consume 20% more power each year as companies race to build artificial intelligence systems. Solar panels and batteries offer the fastest way to add that power to the grid.

Now Senate Republicans want to tax these technologies and end their subsidies by 2027. The move threatens to leave tech companies scrambling for electricity or paying much more for it. Companies like Microsoft, Google, and Amazon have bet billions on clean energy to fuel their AI expansion.

The Senate bill does more than cut subsidies. It adds a new tax on future wind and solar projects that use Chinese components. Since China dominates these supply chains, the tax hits most projects. Meanwhile, the bill creates new subsidies for coal production.

Data Centers Need Clean Power

Tech companies face a simple problem: they need electricity fast, and lots of it. Nuclear plants take decades to build. Natural gas turbines are backordered until the early 2030s. Solar panels and batteries can be installed in months.

This speed matters when data centers are expanding at breakneck pace. Each new AI model requires exponentially more computing power. ChatGPT alone uses as much electricity as a small city.

The Clean Energy Buyers Association, led by tech companies, calls wind and solar "the most readily available sources of electricity" and says they're "essential to winning the artificial intelligence race."

NextEra Energy, which owns the nation's largest fleet of gas plants, puts it bluntly: with no new nuclear plants coming online for years and turbine shortages lasting into the 2030s, "America's only option is to build wind, solar, and battery storage."

What the Bill Actually Does

The Senate bill kills wind and solar tax credits much faster than anyone expected. Earlier drafts gave projects until 2030 if they started construction soon. The new version cuts off all credits by the end of 2027, based on when projects actually start producing electricity.

This tighter deadline makes many planned projects impossible. Developers say they often face delays in permits or equipment that are beyond their control.

The bill goes further by adding a tax on new wind and solar projects completed after 2027 if they use components from China or other "prohibited foreign entities." Since China makes most solar panels and many wind turbine parts, this tax hits nearly everyone.

Energy analysts at Rhodium Group estimate these changes will raise the cost of wind and solar projects by 10 to 20 percent. That's on top of losing the subsidies.

The bill also ends tax credits for electric vehicles by September 30, cuts support for home solar installations, and eliminates manufacturing credits that have attracted billions in investment. At the same time, it creates new tax breaks for coal production.

Even Elon Musk Says It's Crazy

Tesla CEO Elon Musk broke with President Trump to blast the bill on social media. He called it "utterly insane and destructive" and warned it will "destroy millions of jobs in America."

"It gives handouts to industries of the past while severely damaging industries of the future," Musk wrote on X.

Musk has reason to worry. The bill ends tax credits for electric vehicles by September 30. Tesla buyers currently get up to $7,500 off a new car. Without that discount, Tesla will have to cut prices or watch sales drop. The company already faces growing competition from Chinese EV makers.

This puts Musk at odds with Trump, who has pushed hard for the bill and wants it passed by July 4. The split shows how the bill hurts industries that even Trump allies see as vital for America's future.

Several Republican senators are now wavering on the bill. Sen. Thom Tillis of North Carolina said he cannot support it without changes. Sen. Rand Paul of Kentucky has indicated he will likely vote against it. With such a narrow majority, just a few defections could kill the legislation.

Even some conservative groups that wanted to end clean energy subsidies say the Senate bill goes too far. Alex Epstein, who has pushed Republicans to eliminate renewable subsidies, wrote: "I strongly recommend fully desubsidizing solar and wind vs. placing a kind of new tax on them."

The Economics Don't Add Up

The bill threatens more than 500 gigawatts of planned energy projects across the United States. That represents a 42% increase in America's electricity production capacity. Much of this power was meant to serve data centers, factories, and growing cities.

Without these projects, electricity prices will rise. Energy Innovation estimates that red states like Oklahoma, South Carolina, and Texas could see energy costs jump 18% by 2035. Texas alone could face $777 per year in higher household energy bills.

This makes no sense when Texas has shown how solar and batteries improve grid reliability. During the scorching summer of 2023, Texas barely avoided blackouts as demand peaked. This year went much better thanks to new solar farms and battery storage that kicked in during evening hours when the sun went down.

The CEO of ERCOT, Texas's grid operator, credits solar and batteries with dropping the risk of emergency events from over 10% to under 1% during peak hours.

Meanwhile, the bill hands China a massive advantage. China already dominates solar panel and battery manufacturing. If America retreats from these markets, Chinese companies will face less competition and gain more customers worldwide.

The China Advantage

Energy security experts warn the bill gives China exactly what it wants. The organization SAFE calls it "outright energy surrender" that guarantees "Chinese dominance of critical minerals, industrial supply chains, and AI development."

China has spent decades building its clean energy industry with heavy government support. Now that these technologies are becoming profitable, America wants to step back just as the competition heats up.

This timing hurts American companies that have invested billions based on current policy. Qcells, a solar manufacturer with thousands of employees in Georgia, says the bill threatens its ability to compete with Chinese firms. ENGIE, a French company that provides renewable energy in 30 countries, has already cut its planned U.S. investment in half since January.

"There's a lot of questions from our board, from our management — is this the right country to continue to invest in with policy uncertainty?" said ENGIE's chief renewables officer.

Red States Pay the Price

The bill hits Republican states hardest. Three-quarters of clean energy investments since 2022 have gone to Republican-held districts. These projects bring manufacturing jobs and tax revenue to rural areas that often need both.

North Carolina has attracted $16 billion in clean energy investment and 68 facilities thanks to current subsidies. Another $7 billion in projects are planned. Rep. Thom Tillis warns that cutting these programs would force "painful decisions like eliminating Medicaid coverage for hundreds of thousands" as the state loses federal funding.

Will Etheridge runs a solar company in Raleigh that employs dozens of people. He and his colleagues borrowed money from family and took second mortgages to buy out the previous owners last year. They thought the business was solid since consumer tax credits for rooftop solar weren't set to expire until the 2030s.

Now his company may have to lay off 50 to 60 workers. "You cannot have this kind of whiplash," Etheridge said. "If every four years tax policy changes drastically like this, we are not going to be able to build anything great in this country."

Polling shows most Americans agree. Multiple surveys find that only 23% to 38% of voters support the bill, while 42% to 59% oppose it. Even many Republicans in Trump's base oppose the legislation.

Why this matters:

• America risks losing the AI race by making electricity more expensive and less reliable just when data centers need massive amounts of clean power that can be built quickly.

• The bill hands China a competitive advantage in the exact industries — solar, batteries, and electric vehicles — that will define the next economy while forcing American companies to compete against government-subsidized Chinese firms without any support.