Clean-Energy Tax Credits Help Meet Unprecedented Load Growth at Lower Costs to Customers, According to a Brattle Report
Prepared for ConservAmerica
In a new report prepared for ConservAmerica, Brattle experts performed an economic analysis of clean energy tax credits and their effects on US investment, electricity rates, economic growth, and jobs through 2035.
The study captures a surge in artificial intelligence, manufacturing reshoring, and electrification that are projected to expand electric energy usage by 50% and peak demand by 30% over the next decade. Meeting that growth quickly, reliably, and cost-effectively will require the development of a wide array of resources with different development timelines. Large amounts of solar, wind, and storage are already in development and can be deployed relatively quickly; gas-fired generation requires 4-5 year development timelines and faces turbine supply chain limits over the next five years.
Brattle’s analysis explores the economic implications if, within this context, the currently available Clean Electricity Production Tax Credits (§45Y) and Clean Electricity Investment Tax Credits (§48E) were to be discontinued by Congress. The authors simulate the least-cost supply mix to meet demand both with and without tax credits being available for new solar, wind, and storage projects coming online after 2025. They found that, without continued availability of the tax credits, only half as much solar and wind generation capacity would be added between 2025 and 2035.
There would also be several cost implications:
- Nationally, annual generation costs would be $51 billion (+14%) higher annually by 2035
- Average customer rates would be +0.5 c/kWh higher by 2030 and +0.8 c/kWh higher by 2035, adding $83/year to average residential electricity bills on top of the already-rising rates and affordability challenges
- Rate increases would vary regionally, with the highest rate impacts faced by the wind-rich Great Plains states, where residential electricity bills would increase $152/year by 2035
The reduced investments and higher electricity rates would negatively impact economic growth. The authors estimate cumulative impacts from 2025 through 2035 to include a $510 billion reduction in economic growth (GDP); a $270 billion reduction in household consumption as higher electric rates crowd out other expenditures and wages fall from the broader economic contraction; and a $820 billion total impact on economy-wide transaction of goods and services.
The report, “A Wide Array of Resources is Needed to Meet Growing US Energy Demand,” was prepared by Principal Dr. Sam Newell, Managing Energy Associate Dr. Wonjun Chang, Senior Energy Analyst Paige Vincent, and Energy Research Associate Sam Willett.
