by Kevin Killough
Well before their victory in the midterms, Democrats were pushing to restore the Production Tax Credit schedule to be phased out in the One Big Beautiful Bill Act. Now they have the votes to make it happen, and experts say ratepayers will pay the price.
Democrats regained control of Congress on Tuesday, and they’ll likely try to roll back some of the sweeping changes President Donald Trump made to U.S. energy policy.
Besides rescinding a number of Biden-era emissions regulations and anti-fossil fuel policies, Trump’s One Big Beautiful Bill Act scheduled production tax credits (PTC) for renewable energy to end for facilities put into service after Dec. 31, 2027.
The tax credits were originally intended to be a temporary program to incentivize the building out of wind and solar farms by providing a federal tax credit per kilowatt-hour of electricity produced. After more than three decades, new wind and solar farms are still eligible for the tax credits.
Well before Tuesday’s midterms, in which Democrats won control of the House and Senate, some Democratic lawmakers were saying that bringing the credits back would be a top priority to undo Trump’s energy policies should they win in November, and they argue it will bring down electricity rates.
Critics of the PTC, however, argue they are creating perverse incentives that undermine the reliability of the grid and drive up electricity rates.
30-year-old temporary program
Production tax credits were first introduced as part of the Energy Policy Act of 1992. A key champion of the credits was Iowa Republican Sen. Chuck Grassley, and he has said they were never meant to be permanent.
As Isaac Orr and Mitch Rolling, energy analysts with Always On Energy Research, document on their “Energy Bad Boys” Substack, eligibility for the PTC was originally scheduled to end in December 1999. However, it’s been extended 11 times since it was first implemented.
Their chart showing the history of PTC extensions was used in debates on the One Big Beautiful Bill Act, and they were among the critics warning that setting a phaseout date at the end of 2027 was opening the door for the PTC to be extended, as history showed they would be.
Rep. Sean Casten, D-Ill., introduced a bill in March that would restore the credits, called the “Energy Bills Relief Act.” Over 100 of Casten’s fellow Democrats signed onto the bill.
In June, E&E News quoted Democrats saying that they would seek to restore the tax credits if they regained control of Congress in the midterms. Senate Minority Leader Chuck Schumer, D-N.Y., said it would be “one of the very first things” he’d pursue, and House Minority Leader Hakeem Jeffries, D-N.Y., echoed the sentiment. Each is expected to lead their respective chamber when Democrats take over in January.
The publication quoted a number of renewable industry experts saying tax credits aren’t needed for a mature industry, but others want to see the credits returned.
The American Clean Power and the Solar Energy Industries associations have not yet taken a position on restoring the credits, but it’s hard to imagine lobbyists of any industry passing on subsidies, especially if there’s enough support in Congress for them.
Following the midterms, stocks in major European renewable energy companies operating in the U.S. saw a considerable boost, Morningstar reported.
Casten and Sen. Gary Peters, fellow Democrat, told E&E that the main thing they’re hearing from the industry is that the credits, if restored, need to be consistent and predictable.
It’s likely Democrats will try to make any extension as long-term as they can, but whatever they put forth will still need to get past President Donald Trump’s veto power.
Experts dispute affordability claims
Casten and other champions of the Energy Bills Relief Act argue, as the bill’s name implies, that restoring the PTC will bring down electricity rates.
“The Energy Bills Relief Act is a consumer-focused approach that prioritizes expanding access to low-cost, clean energy. It lowers costs, increases reliability, and helps provide a livable planet we can pass to our children and grandchildren,” Casten said in a statement.
However, annual long-term assessments of the nation’s grid by the North American Electric Reliability Corporation, a grid watchdog, has consistently found increased risk of blackouts, which it blames on the retirement of reliable power from coal- and natural gas-fired power plants.
Recent assessments of state-level green-energy policies have found they correlate with higher electricity costs.
An analysis published last month by the National Center for Energy Analytics (NCEA) looked at a number of state policies, including Renewable Portfolio Standards (RPS), which require local utilities to increase the percentage of electricity supplied to consumers with renewable resources, primarily wind and solar generation.
The mandates require utilities to purchase renewable energy credits (REC), which are generated by qualifying renewable energy providers, principally wind and solar generators.
Jonathan Lesser, senior fellow with the NCEA, estimated the cost of RPSs by looking at the costs of states’ RECs.
In Virginia, Lesser estimated, 20% of average retail electricity bills were costs of the RECs. In the District of Columbia, more than 15% of average retail electricity bills were costs of the RECs. Lesser looked at 22 other states, and the percentage of residents' utility bills ranged from less than 1% to over 11%.
The PTCs boost and complement state RPSs, and if the subsidies are restored, consumers will see more of these costs on their utility bills as wind and solar developers build out farms to satisfy states’ renewable standards.
Perverse incentives
The Institute for Energy Research teamed up with Always On Energy Research for a state-by-state analysis of various energy policies that was released last summer. It found that the more of these policies states adopted, which tend to blue states, the higher residents’ electricity bills.
On their Substack, Orr and Rolling have also documented the perverse incentives that the PTC drives. These include wind farm owners refurbishing turbines well before they’re needed because it updates their eligibility for the tax credits.
They also create negative pricing when excessive amounts of wind and solar power are built without the transmission lines to transport the electricity to consumers when there’s a surplus production.
Electricity markets then go negative, which forces coal and nuclear power plants to pay other people to take their power because it is difficult for them to scale back their generation quickly. In some cases where there's nobody to pay to take the electricity, it just exits the market entirely, Orr and Rolling explained in 2024.
Owners of the wind and solar farms selling power at negative prices still turn a profit because the tax credits, which are paid regardless of electricity demand, are higher than what the owners pay to dump electricity onto the market.
Voters’ concerns about the cost of living played a key role in Democrats’ huge success Tuesday, and the GOP’s failure to speak to that concern, Vice President JD Vance said, was likely a mistake that cost them seats in Congress.
Democrats are poised to restore renewable subsidies by speaking to this concern. There is plenty of evidence Republicans opposing another extension of the PTC can present to scrutinize that message.
Kevin Killough
Source: https://justthenews.com/politics-policy/energy/democrats-will-control-congress-and-restoring-renewable-subsidies-tops-their
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