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in two scenarios — one in which current incentives and federal funding are kept in place, and one in which they are repealed this year.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.
Energy Innovation projects that energy costs for U.S. households will rise if key IRA clean energy tax credits are repealed and other federal climate funding disappears. (Energy Innovation)
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% by 2029, and by more than 30% for commercial and industrial electricity customers in certain states.
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% 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.
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.