The Trump administration’s megabill will have sweeping consequences across many sectors, including energy efficiency. Recent analysis from Energy Innovation shows that the bill “as passed would increase annual energy bills by $20 billion across all American households annually in 2030, swelling to more than $37 billion in higher energy costs by 2035, for a total of $170 billion during the budget window of 2025 to 2034.”  Further data from the National Economic Research Associates shows an 8.3% increase in Virginia electricity bills by 2029 from the loss of tax credits alone. 

As enacted, the megabill sunsets a number of energy efficiency tax credits that were introduced in the 1970s and significantly expanded under the Inflation Reduction Act (IRA). The tax credits sunset on different dates as outlined below: 

• Residential Energy Efficiency Tax Credit (25C)- December 31, 2025 

• New Home Construction (45L) tax credit- June 30, 2026 

• Energy Efficient Commercial Buildings (179D) tax credit- June 30, 2026 

Since the passage of the IRA, these tax credits have driven millions of dollars of investment in Virginia and save homeowners an average of $130 per year on energy bills.   

Additional provisions of the megabill:  

• Rescinds all unobligated funds for the State-Based Training Residential Energy Efficiency Contractor (TREC) program. Virginia TREC funds were not obligated prior to passage of the megabill, therefore the commonwealth will miss out on receiving $3.4M in dedicated funds to expand the energy efficiency workforce. 

• Repeals the Greenhouse Gas Reduction Fund (GGRF), including the National Clean Investment Fund (NCIF), the Clean Communities Investment Accelerator (CCIA), and Solar for All. According to other advocacy groups, this could lead – or even require – EPA to terminate existing contracts. Virginia has already received funding for Solar for All, so it is uncertain how that program will proceed.  

• Rescinds all unobligated funds for the Climate Pollution Reduction Grant (CPRG) program. While state CPRG funds have been received, local and Metropolitan Statistical Area (MSA) projects may be affected.  

• Rescinds unobligated funds for the Green and Resilient Retrofit Program (GRRP), which funds critical upgrades in low-income housing on two projects in Virginia, along with others across the country. It is unclear if the GRRP projects in Hampton Roads have been completed and, as such, would be affected by this bill.  

• Foreign Entity of Concern (FEOC) provisions will limit the use of credits on projects or companies with ties to certain nations, including China. The requirements for this provision are extremely unclear and need further definition by the Treasury and IRS. However, as written, these provisions could cause prices on goods and materials to skyrocket as well as extreme delays in production. FEOC restrictions will take effect on projects started after January 1, 2026 

While these developments will affect some sectors of the energy efficiency industry in Virginia, the following programs are not touched by the megabill at all: 

• Home Energy Rebate Program funds 

• Energy Efficiency Conservation Block Grants (EECBG) 

• Renew America’s Schools, though the effects of the FEOC may present challenges to these projects.  

Update as of 7/9: DOE announced their plan to release $400M in Weatherization Assistance Program funds. These funds are allocated on an annual, formula basis but had not been disbursed to some grantees earlier in the year. While there is no timeline on when providers will receive the money, this announcement is a step in the right direction. However, to align with the President’s earlier Executive Orders, an additional memo removes requirements that WAP energy audits include non-energy impacts regarding the social cost of carbon. This is a provision the provider networks had been pushing for years as it allows for additional improvements to the health and safety of the home.

Regarding the future of Energy STAR, the program is in a better position than initially thought. The Energy STAR program is statutorily required to exist, therefore the likelihood that it will be eliminated is low. The most likely scenarios at this time are for EPA to implement a fee-for-service model, transfer the program to DOE with budget and staff, or privatize the program. Energy STAR is still operating as usual and will continue to do so unless directed otherwise.  

Despite the challenges, the fight is not over. VAEEC Member, the Alliance to Save Energy predicts that there will be another tax package presented to Congress later this year, which will present another opportunity to advocate for the energy efficiency tax credits and other programs. We will continue to provide updates as information becomes available.