If this GOP bill passes, your electric bills will rise

Electricity prices are soaring, and if Senate Republicans gut the Inflation Reduction Act (IRA) this summer, they’re about to start rising even faster.

On Thursday, House Republicans passed a budget bill that would eliminate several key clean energy incentives from the IRA—including valuable tax credits, such as the federal solar tax credit, for homeowners and businesses.. The bill will likely be voted on in June.

If these incentives are cut, industry analysts predict residential electricity costs will rise by about 7%—that’s roughly $143 more per year in electricity expenses for the average household, according to EnergySage data.

Despite 21 House Republicans writing a letter to the committee chairman this March warning that repealing the tax credits would lead to “drastically higher power bills for American families,” with the increase starting “the very next day,” the House GOP still kept the cuts in this version of their budget bill.

Several studies have confirmed the Republican letter's statement: Eliminating clean energy incentives—specifically the 48E investment and 45Y production tax credits—would increase electric costs for the average American.

A report from the Clean Energy Buyers Association (CEBA) estimates a family’s electric bill could increase by $110 per year on average without these incentives. Another study by The Brattle Group and ConservAmerica says the additional cost would likely be between $83 and $152 in added expenses each year, with families in America’s heartland most likely to pay in the higher end of that range because of their high reliance on wind.

The GOP bill would terminate the 48E and 45Y tax credits, which incentivize businesses to create clean energy facilities like solar and wind farms (excluding nuclear energy). These incentives were scheduled to start phasing out in 2032, but under the new bill, any project that isn’t in service before January 1, 2029, won’t qualify. These are huge projects that take extended periods oftime to get up and running, so the bill also specifies that the projects must begin construction within 60 days of the bill’s enactment to qualify for the credit, putting companies in a difficult time crunch.

Why would cutting clean energy incentives raise your bill?

Without these incentives, developers will be less keen to build clean-energy facilities, which would lead to a heavier reliance on other energy sources and therefore spike prices, according to a new report from the Rhodium Group. The report says increasing demand for natural gas would increase wholesale natural gas prices by 2-7%.

Clean energy—especially solar and onshore wind—is much cheaper than fossil fuels. And, unlike fossil fuels, it isn’t vulnerable to market fluctuations, either. It provides much-needed power to fuel our growing energy demand while providing greater energy independence and long-term affordability for American households.

There are other factors at play, too. Todd Brickhouse, CEO and general manager of Basin Electric Power Cooperative, told the House Energy and Commerce Committee in March that “immediate removal of [tax credits] will not allow utilities to plan for and avoid increased costs, and this will also immediately harm rate payers.”

It also comes at a time when America’s energy demand is nearing “unprecedented levels,” according to economist and fellow Jesse Buchsbaum from Resources for the Future (RFF). He said a big driver are all the new AI data centers—which are are reportedly already putting a strain on household electricity.

“The projected energy demand is enormous, and I think meeting the projected demand is going to be really difficult,” Buschbaum told EnergySage. “It’s going to be a big challenge figuring out what tools are needed, what infrastructure investments are needed, and how to pay for them.”

De-incentivizing the creation of new energy facilities will make it harder for America’s energy supply to meet demand, which could cause even more volatility with electricity pricing.

Not only will the proposed House bill increase energy costs, it will also reduce valuable energy savings for American families.

The bill would also eliminate the Residential Clean Energy Tax Credit (Section 25D) and Energy Efficient Home Improvement Tax Credit (25C). Currently, the average homeowner who qualifies for these tax credits saves roughly 70% on their energy bills annually, or $2,240 per year, according to a recent analysis from Rewiring America.

Once you factor in estimated increases in electricity prices, the report suggests that the average family's savings from 25C and 25D would be $2,590 by 2026.

House Speaker Mike Johnson said he intends to pass the entire package through the House by Memorial Day and have it on the President's desk by the Fourth of July. Right now, there still appears to be some bipartisan support for clean energy tax credits in the Senate, so the current bill may still face some pushback.

In addition to mitigating rises in electricity costs, these tax credits have helped create hundreds of thousands of jobs, increased domestic manufacturing, and given everyday Americans a chance to take control of their household’s energy independence. Terminating IRA tax credits jeopardizes all of this progress towards a clean energy future. 

Republican proponents of this bill are pushing for its swift approval in the Senate. We encourage you to take action now by contacting your representatives directly to share how eliminating the clean energy tax credits would impact you and your community. 

Your voice can make a difference.