Federal lawmakers are contemplating changes to energy tax credits that would likely raise energy and electricity costs for Mainers and stall growth in the state’s expanding renewable energy economy, analysts and industry players say.

Among hundreds of provisions in the 1,000-plus page budget bill approved by the House of Representatives are new, and much more sudden, sunsetting timelines for a bundle of energy credits related to installing solar panels, purchasing and supporting electric vehicles, and developing more energy efficient homes. Programs that in January seemed to have years of life ahead of them now face termination in just a few months.

Those changes face an uncertain future in the Senate, where some Republicans have already voiced opposition to them as written.

Dan Burgess, director of the Governor’s Energy Office, argued they “would lead to increased energy costs for Maine people, prevent investments in our state’s aging and vulnerable energy infrastructure, and threaten thousands of jobs across Maine in fast-growing clean energy fields.

“These credits are vital for Maine’s energy efficiency initiatives and generating more clean energy here at home, in order to strengthen our energy security, control energy costs, and build a more resilient future for our state,” Burgess said in a written statement.

Losing the tax credits, which incentivize electricity producers to expand renewable production and consumers to choose more efficient options, could undermine the state’s ability to keep pace with rising energy demand.

A slowdown in renewable development and increased reliance on fossil fuels for electricity generation would also leave costs vulnerable to the volatile prices of oil and gas, creating the potential for further rate increases down the line.

All told, the tax credit cuts outlined in the House’s bill would drive household electricity prices up by about 4% between 2026 and 2032 for Mainers, according to a May report by Nera Economic Consulting. Natural gas prices were predicted to rise 3.7% for households and 5.4% for businesses, the report said. The rest of the country would see similar increases in electricity and natural gas prices, it said.

A spokesperson for Sen. Susan Collins, R-Maine, said the tax credit issue “is one of many the Senate is going to have to consider as it puts together its reconciliation bill,” but noted that Collins is not a member of the Senate Finance Committee, which has jurisdiction over the energy credits. The office of Sen. Angus King, I-Maine, did not provide a comment.

In their draft of the bill released Monday, Republicans on the Finance Committee kept the early terminations but pegged them to six months after the bill’s enactment, rather than a static date at the end of 2025.

SOLAR INSTALLATION CREDITS 

The House’s bill would terminate a handful of Inflation Reduction Act tax credits that have encouraged solar installation on homes and businesses, including a 30% tax credit for residential installations. That credit had been slated to sunset in 2032, but, under the new proposal, would only apply to projects completed by the end of 2025.

“That’s very concerning,” Dan Clapp, CEO of ReVision Energy, said. “If these (credits) are going away, they have to be responsibly phased down, based on project cycles. You know, businesses need certainty to plan around.”

Residential projects can take three to six months from inception to completion, but that timeline is close to 12-18 months on commercial installations, Clapp said.

Sam Zuckerman, owner of Maine Solar Solutions, said that while some people appreciate the environmental benefits of installing a solar system, the majority of his residential customers are drawn in by the promise in of cheaper electricity and more consistent utility costs.

“We have just consistently seen that people are making efforts to reduce the operating costs of their homes,” Zuckerman said.

The Trump administration has argued that the president’s broader economic and environmental agenda will drive down the cost of fossil fuels and ultimately lower energy and electricity costs across the board. Zuckerman pushed back on that, noting that electricity demand is projected to more than double by 2050.

EFFICIENT VEHICLE AND HOME CREDITS

The clean vehicle credit, which provides up to $7,500 for new electric (and fuel cell) car purchases, is currently slated to expire at the end of 2032. But a provision in the House’s bill would terminate the program six years earlier and limit eligibility after 2025 to manufacturers that have produced fewer than 200,000 electric cars.

That comes as Maine struggles to keep pace with its goal of putting 150,000 electric and plug-in hybrid light-duty vehicles on the road by 2030. In January, there were about 8,700 fully electric and 8,900 plug-in hybrids registered in the state, according to the state’s 2025 Maine Energy Plan.

The House bill also terminates tax incentives for energy efficient homes, which could cover things like heat pump installations, at the end of the year.

Maine leads the nation in heat pump adoption, bolstered by state-sponsored rebates and incentives designed to make their installation more affordable. The state hit 100,000 pump installations in 2023 and now aims to add another 175,000 by 2027.

Mainers can currently qualify for up to $11,600 in rebates when installing a heat pump system, most of which is covered by Efficiency Maine and funded through its own trust. But the federal credit can cover up to $2,600 of the cost of a new system, which could be just enough for some households to afford installing one.

IMPACTS ON CITIES, NONPROFITS

Also at stake is an Inflation Reduction Act provision called “direct pay” or “elective pay,” which allows municipalities, nonprofits and other entities that would not normally be eligible for a tax credit to receive an equivalent payment from the IRS for any covered projects. That encouraged more than 600 state and local governments to pursue new renewable energy projects by March of this year, according to the National League of Cities.

In Maine, those payments have gone toward cities and towns installing solar panels on municipal buildings, public high schools, building EV chargers, and fire departments installing solar and battery storage systems, said Jackie Farwell, spokesperson for the Governor’s Office of Policy Innovation and the Future.

“Through this work, we’ve heard from many other entities planning to utilize Direct Pay credits for solar panels and battery storage, as well as geothermal heating systems and electric vehicle charging infrastructure, over the next few years,” Farwell wrote in an emailed statement.

Recent examples include the city of Ellsworth, which earlier this month announced it would install four EV chargers outside city hall, utilizing a roughly $39,000 direct payment to cover nearly a third of the cost.

In Cape Neddick, the nonprofit Center for Wildlife is in the process of installing a solar array capable of powering its entire operation. Though the project was paid for by an outside donor, nearly a third of its cost will be refunded by the federal government.

Executive Director Kristen Lamb said that credit was an essential part of the calculation, and it marked the first time in the center’s nearly four-decade history that it has received federal funding support. She declined to state the project’s total cost but said it is expected to save the center about $21,000 per year in electricity costs.

“The cost savings means half a staff member at least. So it’s a really big deal to us,” she said.

And while the direct payment provision itself survived the House, it relies on tax credits that would be cut short at the end of the year. So cities and nonprofits that plan to take advantage of the still-new funding opportunity after this year would be forced to reevaluate their options.

Editors Note: This story was updated July 7 to correct a projected increase of electricity prices in Maine, following a correction by the study’s authors. Nera Economic Consulting predicts prices will increase about 4% for households and 5.5% for businesses between 2026 and 2032.