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AES Corporation (NYSE: AES) shares fell 8.2% on Tuesday following the Senate Finance Committee’s proposed budget bill that includes a significant reduction in renewable energy tax credits. The proposal outlines a 60% cut in tax credits for renewable projects by 2026, phasing them out entirely by 2028.
Initially established in the Inflation Reduction Act of 2022, the tax credits were expected to last until 2032. However, the new administration’s policies have led to quicker phaseouts. Despite some adjustments made in the Senate bill—including allowing projects to qualify as long as they begin construction by December 31, 2028—industry executives were dissatisfied, as they anticipated more favorable changes.
Currently, only 52% of AES’s deployed power assets are renewable, with the rest being natural gas and coal. However, AES’s project pipeline is nearly 100% renewable, all scheduled to commence before 2028, allowing some time for management to navigate the changing landscape.
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