November’s election came with a message from voters to do something about rising costs that stressed family budgets nationwide. From groceries to gasoline, Americans felt they paid more for less for too long. Utility bills are another fact of life, and high costs for basic needs like electricity can further squeeze families’ ability to save and spend wisely. As the United States experiences record demand for electricity, lawmakers have an opportunity to keep those costs under control.
Congress recently enacted tax credits to boost American economic growth and energy dominance, including technology-neutral tax credits for production and investment in clean, carbon emissions-free electricity generation. As lawmakers consider further changes to tax and energy policy, it is essential to know that repealing these clean energy tax credits would raise electricity prices and undermine investments.
The investment tax credit helps cover the cost of installing commercial clean energy property, and the production tax credit provides incentives for electricity generated from clean sources. These tax credits do not favor any particular electricity-producing technology. They let the market determine what is best to achieve low-cost, reliable electricity.
How hard would Americans be hit if these technology-neutral tax credits were repealed? A study by NERA Economic Consulting shows that average household electricity prices would rise by 7 percent without these tax credits. The average household utility bill would increase by more than $110 yearly based on that increase. Consumers would likely get hit again when businesses pass along the costs of an expected 10 percent price hike.
Businesses of all sizes need access to low-cost, reliable energy to create jobs, manufacture goods domestically, and contribute to economic growth. Higher energy costs would incentivize companies in cutting-edge industries like artificial intelligence and quantum computing to move abroad. It would make it harder for mom-and-pop businesses — which reported losing more than 125,000 jobs in February — to survive today’s high inflation.
According to the NERA study, the West and Midwest would likely be hit the hardest if the technology-neutral tax credits were repealed. By 2029, household electricity prices would increase in Midwestern and Western states by 12 percent and 10 percent, respectively. Alarmingly, the study estimates significant increases in America’s heartland as soon as 2026 — as much as 30 percent in Wyoming and 15 percent in Kansas, Missouri and South Carolina.
The broader economic stakes are significant. These tech-neutral tax credits are needed to meet the demand for new industries, such as the AI data centers that have been the center of recent private sector investment announcements. In fact, data center growth in Virginia and North Dakota will be particularly large and require a commensurate supply of clean energy for electricity generation.
Enabling these technologies will make America more productive and expand U.S. gross domestic product. The United States can improve the reliability of the power grid by using a variety of energy sources that will help maintain our economic and national security.
The NERA study shows repealing the tech-neutral tax credits would remove 167 gigawatts of electricity generation from the grid. For scale, just one gigawatt is enough to power 750,000 homes.
Repealing these tax credits would mean ceding much of the electricity-dependent future to China. According to the International Energy Agency, China is building infrastructure more than five times faster than the United States. Repealing these energy tax incentives would undermine the objective of national energy dominance and would mean China getting farther ahead on energy security.
As 21 members of Congress recently noted, any changes to these tax credits “that inhibit our ability to deploy new energy production risk sparking an energy crisis in our country, resulting in drastically higher power bills for American families.”
The evidence is clear: Repealing the tech-neutral clean energy tax credits would further increase the cost of living for American households, take away options for important sectors of economic investments, and cede economic advantages to our adversaries. With Congress debating changes to the tax code to protect Americans’ hard-earned incomes, lawmakers can achieve energy dominance by retaining these essential credits.
