The law that President Trump signed on July 4 ending tax incentives for wind and solar projects is expected to drive up electricity bills across the U.S., with some of the sharpest increases in Republican-led states, according to Energy Innovation, a nonpartisan think tank.
Without tax credits, the cost of wind and solar plants will go up. Companies are likely to respond by building fewer of those projects, and those facilities that do come online will have bigger price tags, according to multiple estimates. As that happens, the country is expected to generate more electricity from natural gas plants, which are often more expensive to run than wind and solar projects.
That shift will hit hardest in states that don't have their own policies to drive renewable energy development, says Dan O'Brien, a senior analyst at Energy Innovation. In Oklahoma, for example, homeowners, renters and businesses are likely to see electricity rates shoot up by between 60% and 350% over the next decade, according to Energy Innovation. The firm expects rates to rise by at least 48% in Kentucky, 39% in Missouri and 30% in Kansas. The congressional delegations of those states are overwhelmingly Republican.
"In a world before the bill, you would have a lot of cheap renewables" built regardless of state policies, O'Brien says. "But after the bill, there's nothing making sure those keep coming on, so you're seeing a lot more expensive gas generation."
A White House spokesperson, Taylor Rogers, said in a statement to NPR that Trump has taken steps to boost U.S. energy production.
"The One, Big, Beautiful Bill will turbocharge energy production by streamlining operations for maximum efficiency and expanding domestic production capacity, which will deliver further relief to American families and businesses," Rogers said.
At a Cabinet meeting last week, Trump called wind and solar energy "a blight" on the country. "They hurt our country very badly," he said. "And smart countries don't use it."
Wind and solar industries are in turmoil
Renewable energy was the top source of new electricity generation globally last year, with much of it installed in China, according to the International Energy Agency.
"Chinese leadership does understand how big a problem climate change is. They're getting hurt by climate impacts," says Doug Lewin, an energy consultant in Texas. But, he says, "once you get into it, you're like, 'Oh, wait a minute — this just makes economic sense.'"
The cost of wind and solar projects has fallen dramatically. In the U.S., those industries — like the fossil fuel sector — have also been helped for decades by federal tax incentives.
"Wind is a critical part of our nation's all-of-the-above energy strategy," Sen. Chuck Grassley, an Iowa Republican who calls himself the "father" of the wind-energy tax credit, said several years ago when wind farms became his state's biggest source of electricity. "It creates thousands of jobs, supports economic development, boosts tax receipts, attracts investment in our state and puts extra money in farmers' pockets."
But for years, renewable energy executives and advocates have debated when and how to get off subsidies. Those discussions ramped up when the incentives were threatened by Congress, says Paula Mints, founder and chief analyst at SPV Market Research.
"I think we've become complacent, dependent on these tax credits, and I think we need to finally phase them out," Craig Lawrence, a partner at the investment firm Energy Transition Ventures, said this month as the Senate debated cutting the incentives as part of the tax-and-spending bill.
However, the industry urged lawmakers to unwind the tax credits gradually to give companies time to adjust. What companies have gotten instead is chaos.
"I would characterize this as a high degree of volatility expected over the next year," says Ryan Sweezey, director of North America power and renewables at Wood Mackenzie, an energy research firm. "I mean, the policy situation is still not clear."
Under a deal struck by Republican senators, wind and solar projects are eligible for tax incentives as long as companies start construction within the next year and finish within four. That timeline was in the bill that Trump signed on July 4, setting up a scramble for companies to begin working on as many projects as possible.
But that was upended last week when Trump issued an executive order that directs the Treasury secretary to consider issuing new guidance for what companies have to do to meet the government's "beginning of construction" standard. The goal is to keep companies from circumventing tax laws, according to the order.
Now, companies that build wind and solar projects are trying to figure out whether investors are going to put their deals on hold until they know what the administration will do, says Keith Martin, a lawyer at Norton Rose Fulbright.
"This Trump era is like trying to do business while bouncing up and down on a trampoline," Martin says, adding, "It's very hard to do business in that atmosphere."
The U.S. is expected to burn more natural gas
The moves have thrown America's wind and solar industries into turmoil at a time when electricity demand is expected to increase significantly for the first time in decades. Industry executives and analysts say clean energy projects are crucial to help power new data centers and factories, because the plants can be constructed quickly and produce electricity that is relatively cheap.
Those wind and solar plants will get more expensive when tax incentives disappear, potentially changing companies' investment decisions. New power generation in the U.S. is expected to fall by about a third over the next decade, mainly due to wind and solar projects that won't come online, says O'Brien of Energy Innovation.
While renewables are technically the cheapest source of new power generation, even without government subsidies, that doesn't account for the cost of tying intermittent resources into the power grid. As more wind and solar comes online, investing in things like batteries becomes more important so that electricity can be delivered when it's needed.
At the same time that activity in the renewables market is expected to slow, a shortage of gas turbines will prevent companies from building more natural gas plants than they had already planned to bring online in the next five years, according to Energy Innovation.
"We're already running our cheaper gas generation facilities a lot in the U.S.," O'Brien says. "And we have more capacity. We can dip into that in more hours. But those are the generators that cost more per hour to run."
Operating those plants could get even more expensive as gas demand rises. The U.S. Energy Information Administration already expected prices for the fuel to increase, mainly due to demand from facilities that export liquified natural gas around the world.
"The timing here is not great," says Sweezey of Wood Mackenzie.
Less renewables, more emissions
While electricity rates are expected to skyrocket in some states, Energy Innovation says costs are likely to rise across the country. Nationally, rates will increase by 9% to 18% on average by 2035, the firm says, and the U.S. will lose out on billions of dollars in planned investment and hundreds of thousands of jobs.
Renewable energy manufacturing could get hit especially hard. Companies that have opened U.S. factories to make solar panels and other components have said abruptly unwinding clean energy tax incentives would threaten a decade-long push to onshore manufacturing and challenge China's dominance of the sector. The tax credits that are being eliminated encourage companies that build power plants to buy American-made products, like solar panels and other components.
The U.S. will also cut less of the climate pollution that's contributing to more intense storms, floods and wildfires.
Under Republicans' new tax-and-spending law, U.S. greenhouse gas emissions are expected to fall by 25% by 2035 compared with 2005 levels, according to an analysis by the ZERO Lab at Princeton University and Evolved Energy Research. That's little progress from where the country is now. Last year, emissions were about 20% below 2005 levels, according to the Rhodium Group, a research firm. Under Biden-era policies, emissions would have fallen by at least 40% from 2005 levels by 2035, researchers at the ZERO Lab and Evolved Energy Research said.
"I don't think subsidizing electricity just as a general matter necessarily makes sense," says Noah Kaufman, a senior research scholar at the Center on Global Energy Policy at Columbia University, who served as a senior economist on the Council of Economic Advisers under former President Joe Biden. However, tax incentives for clean energy were extended during the Biden administration "as part of a broader strategy," Kaufman says, "to address climate change and to better prepare the U.S. energy system and economy for the global energy transition."
"Now," Kaufman adds, "I think it's fair to say the Trump administration doesn't share either of those goals."
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