Dive Brief:

• Households and businesses may pay more for electricity over the next decade if Congress repeals the Inflation Reduction Act’s technology-neutral Section 45Y investment and Section 48E production tax credits for clean electricity, The Brattle Group and NERA Economic Consulting said in reports published this month. 
• By 2029, full repeal of the investment and production tax credits would increase delivered electricity prices nationwide by 7.3% for residential customers and 10.6% for commercial and industrial customers, or 9.2% across all sectors, according to the NERA report that was written for the Clean Energy Buyers Association.
• Full repeal of the 45Y and 48E credits could reduce direct spending in the power sector by $250 billion and a $510 billion decline in U.S. gross domestic product through 2035 compared with current projections, Brattle said in the report for ConservAmerica, a right-of-center environmental advocacy group.

Dive Insight:

Electricity demand is expected to increase by 50% over the next decade due to rising demand from data centers, re-shored manufacturing, electrification of industry and increased oil and gas production, ConservAmerica said on Feb. 20.

Solar, wind and batteries are the resources best-placed to meet demand in the near term, with solar and wind providing the lowest-cost generation option and batteries “[providing] capacity and quick-start capabilities,” according to the Brattle/ConservAmerica report.

“As Congress moves forward, we want to ensure that policymakers have the benefit of real economic data about the impacts of eliminating clean energy credits. Our elected officials should make decisions based on facts, not politically charged emotions,” ConservAmerica President Jeff Kupfer said in a statement.

New thermal generation projects have a longer road to commissioning, Brattle said. Supply chain bottlenecks, rising turbine prices, long permitting processes and “transmission queues and delays” mean unplanned gas-fired generation projects likely won’t come online before 2030, while new nuclear capacity faces “[a] very long lead time,” the report said. 

Following full repeal of the IRA’s technology-neutral investment and production tax-credits, wind and solar deployments would fall about 50% through 2035, “along with some decrease in storage,” according to the report. With limited new gas-fired generation expected to come online before the early 2030s, a “shortfall of supply to meet power need” could develop, potentially holding back industrial growth, Brattle and ConservAmerica said.

Though the Trump administration has pledged federal policy support for gas, nuclear and other firm resources, procurement challenges and worsening project economics led Engie, a French multinational utility, to withdraw a proposed 930-MW gas plant from consideration for low-interest financing from the $5 billion Texas Energy Fund. Texas voters approved the program in 2023 to encourage deployment or expansion of dispatchable resources following widespread power-system failures two years prior during Winter Storm Uri.

Meanwhile, Texas added about 5 GW of battery capacity between the summers of 2023 and 2024, improving the grid’s ability to meet evening peak demand while softening wholesale price spikes, according to analyses by the American Clean Power Association and the Federal Reserve Bank of Dallas.

If Congress fully repeals the investment and production tax credits, the U.S. average delivered electricity price would increase nearly 10% by 2029, according to the NERA/CEBA report. At the state level, the report projects the sharpest increases — up to 21.1% for residential customers and 30.6% for C&I customers — in Midwestern and Western states.

By 2035, repeal would cause a 14% increase in total power generation system costs, with rate impacts disproportionately borne by lower- and middle-income customers, Brattle and ConservAmerica said. U.S. residential customers would see an average annual electric bill increase of $83, increasing to as much as $152 in wind-rich central states like Iowa, Kansas, Oklahoma and the Dakotas, they said.

“The lack of technology-neutral tax incentives has the effect of increasing the electricity prices in both cost-of-service and competitive regions as electricity demand must be met by relatively more expensive generating technologies,” NERA and CEBA said.

Repeal would reduce total cumulative wind and solar capacity additions 168 GW by 2029, relative to a no-repeal scenario, according to the NERA/CEBA report. Brattle and ConservAmerica project a milder decline in wind and solar deployment through 2030 — 116 GW — but a sharp combined decrease of 328 GW between 2031 and 2035. They forecast a 12-GW increase in storage deployments through 2030, followed by a decrease of 18 GW from 2031 to 2035.