Gutting clean energy incentives would drive up electric bills todayheadline

The Trump administration insists that renewables are making energy more expensive and that more fossil-fueled power will reduce utility bills. But those claims are false — and if congressional Republicans succeed in repealing key tax credits supporting the growth of clean energy, Americans will suffer the consequences in higher electric bills.

So finds a report released Thursday by think tank Energy Innovation warning lawmakers of the costs of repealing the clean-energy tax credits created by the 2022 Inflation Reduction Act, the Biden administration’s signature climate law.

The fate of those tax credits remains highly uncertain. Some Republican lawmakers have voiced support for keeping them in place, but others have criticized the incentives, which could channel hundreds of billions of dollars to solar and wind power, batteries, electric vehicles, and other carbon-free technologies over the next decade. President Donald Trump has also vowed to repeal the IRA.

Key members of the Trump administration have disparaged clean energy as a wasteful distraction while praising fossil gas and coal. Last week at an industry event, Energy Secretary Chris Wright said wind and solar have ​“obvious scale and cost problems,” and dismissed their prospects for serving more than a fraction of the country’s power needs.

But Energy Innovation’s report repeats findings from a series of studies over the past months that forecast major downsides to repealing the tax credits, including lost jobs, hundreds of billions of dollars of foregone investment — and significantly more expensive electricity for U.S. businesses and households.

“We looked at a state-by-state level at energy bills as well as jobs and economic growth,” said Robbie Orvis, Energy Innovation’s senior director of modeling and analysis. ​“Across the board, repealing the IRA is going to make it more expensive for the average household — and in some states, dramatically.”

The report modeled electricity costs in two scenarios — one in which current incentives and federal funding are kept in place, and one in which they are repealed this year. Under the ​“repeal” scenario, annual consumer energy bills would be more than $6 billion higher for U.S. households in 2030 and more than $9 billion higher in 2035. Translated to individual households, energy costs would increase by an average of $48 per year in 2030 and $68 per year in 2035, and continue to rise in future years. 

Some states will see relatively low increases, Orvis said. ​“But when you look out over 2035, most households are over $100 per year in energy expenditures.” 

The findings are consistent with other recent studies on the same topic.

Last month, The Brattle Group published a report, commissioned by conservative environmental advocacy group ConservAmerica, that found repeal of the clean energy tax credits would increase residential electric bills nationwide by an average of $83 per year by 2035, and up to $152 per year in California, New England, and much of the upper Midwest.

And NERA Economic Consulting projected in a February report commissioned by the Clean Energy Buyers Association trade group that repealing the tax credits would drive average U.S. electricity prices up nearly 10 percent by 2029, and by more than 30 percent for commercial and industrial electricity customers in certain states.

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Republican leaders have committed to slashing federal spending to pay for the cost of extending the multi-trillion-dollar tax cut passed during the first Trump administration, which primarily benefits corporations and wealthy individuals. Cutting clean energy incentives could be on the chopping block as a result, although they’d only cover a fraction of the tax breaks.

But most of the investment in clean energy facilities and factories spurred by the law has been in states and congressional districts represented by Republicans, potentially making the path to repealing the Inflation Reduction Act’s clean energy incentives more difficult.

Last week, 21 GOP Congress members wrote a letter demanding to preserve those tax credits, saying they’re critical to growing the economy and achieving the Trump administration’s ​“energy dominance” agenda. They also warned that repealing them ​“would increase utility bills the very next day.”

Why clean power is cheaper power

The reason repealing these tax credits would drive up costs is simple, Orvis said. Solar and wind energy can supply U.S. power grids with electricity at lower long-term cost than alternatives such as coal, gas, and nuclear power plants. The more of it that can be built, the more it can supplant those costlier resources.

Over the past decade, solar and wind power have become the cheapest source of new electricity generation across the majority of the world, according to the International Energy Agency. Those cost advantages have been driven primarily by technology improvements and economies of scale of production as well as the deployment of solar panels, lithium-ion batteries, and wind turbines, although government subsidies have played an important role.

In the U.S., newly built solar and wind farms can provide power at a cheaper rate than 99 percent of the country’s remaining coal plants. Even fossil gas, the workhorse of the U.S. grid, struggles to compete with new clean energy. A study from think tank RMI found that portfolios of solar, wind, and batteries paired with utility energy-efficiency investments can serve grid needs at a lower cost than newly built gas-fired power plants.

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What’s more, the cost of solar and wind power isn’t tied to fluctuations in the price of fossil gas, which has driven significant electricity price increases in the past several years, Orvis said. That lack of fuel cost, along with lower operations and maintenance costs, make wind and solar a long-run winner financially.

Energy developers and utilities are following the money. Last year, solar, batteries, and wind made up more than 90 percent of the 56 gigawatts of power capacity built in the U.S. The U.S. Energy Information Administration predicts solar will lead power plant construction and that battery installations will break records again in 2025.

Wind and solar farms do cost more to build than the equivalent gas power plants, however. That makes the pace and scale of their growth more dependent on the cost of capital, which is influenced by interest rates, and on incentives to reduce those up-front costs. In the U.S., the Inflation Reduction Act supercharged federal tax credits that have supported the industry for decades, delivering the law’s single biggest boost to reducing greenhouse gas emissions while helping to finance cheaper electricity.

Cutting off those tax credits would curtail that growth and leave the country more reliant on fossil-fueled power plants that would not only create planet-warming emissions and harmful local air pollution but cost U.S. consumers more money. That would add roughly $20 billion in additional fuel, operations, and maintenance costs to U.S. electricity prices per year in 2030 and 2035, according to Energy Innovation’s analysis. 

An ​‘energy emergency’ — false claims versus real solutions

The Trump administration has moved to undo decades of federal policy seeking to reduce greenhouse gas emissions, fight climate change, and protect the environment. It has also declared a ​“national energy emergency” that casts renewable energy as a threat to grid reliability and calls for expanded use of fossil fuels as the solution.

Energy Secretary Wright, a longtime gas industry executive who has denied that climate change is a crisis, attacked solar and wind power in his keynote address at the CERAWeek by S&P Global conference in Houston last week. ​“Everywhere wind and solar penetration have increased significantly, prices on the grid went up and stability of the grid went down,” he said.

But that assertion is ​“not borne out by the data at all,” Orvis said. Rising risks of grid outages and emergencies are primarily driven by increasingly extreme weather, which is linked to global warming. And while the variability of wind and solar power generation is intimately tied to weather, traditional power plants have proven to be far less reliable than their backers have claimed, particularly during winter cold snaps like those that led to massive grid outages in Texas in 2021 and across the U.S. Southeast in 2022.

As for clean energy’s relationship to rising electricity prices, an Energy Innovation report last year highlighted that surging electric utility costs in recent years are linked not to renewables but other factors, including spikes in fossil gas prices following Russia’s invasion of Ukraine and the increasing cost of expanding and maintaining utility power grids.

A report out last week from think tank Ember reiterated the absence of data to correlate reliance on clean energy and utility electricity costs. ​“Some states with high wind and solar penetration — such as Iowa, South Dakota and Kansas — have some of the lowest electricity prices in the country,” the report notes. 

Other states with aggressive clean-energy mandates, such as California and Massachusetts, also have some of the country’s most expensive electricity, the report says. But those costs are more closely driven by aging infrastructure, ​“expensive imported fossil fuels” in the case of Massachusetts, or in California, ​“natural disaster damage” — namely, the massive costs of wildfires, many caused by utility grid failures, and the investments meant to prevent more of them.

More broadly speaking, the cost of electric utility service is primarily tied to rising investments in utility transmission and distribution grids and the cost of fuel to power their generation, said Paul DeCotis, a senior partner at consultancy West Monroe. And ​“if people are concerned about the high cost of fuel, the federal government has made tax credits available for decades for renewable energy, which brings down the cost of electricity.”

In his speech at CERAWeek, Wright also mocked the idea that wind, solar, and batteries could completely replace fossil fuels for providing reliable round-the-clock generation capacity. But the U.S. isn’t facing that problem in the near term. Instead, it must cheaply and quickly build new capacity to meet the country’s growing power needs — and clean energy and batteries are best positioned to do that, according to energy industry analysts and executives.

The U.S. is experiencing a first-in-decades boom in demand for electricity, driven by new data centers and factories in the short term, and in the longer term by the push to shift from fossil-fueled to electric vehicles and building heating. A number of utilities are proposing to build gigawatts of new gas-fired power plants to meet that demand. But as of today, manufacturers of gas turbines say they’re unable to supply power plants not already in planning until 2028 or 2029.

“If we’re really in this energy security and energy supply scenario this administration has talked about, we’re not going to be able to meet it with gas, because we’re tapped out on building it,” Orvis said.

New solar, wind, and battery projects can be built in roughly half that time, making them a vital near-term solution to rising power demand, NextEra Energy CEO John Ketchum told The New York Times at CERAWeek, adding that ​“if you take renewables and storage off the table, we’re going to force electricity prices to the moon.”