GOP Tax Bill Draws Flack on Energy Provisions from Some Onetime Allies

Yomiuri Shimbun

6 hours ago

The massive tax and immigration bill advancing through Congress could raise energy prices in much of the United States and make it harder for American companies to compete globally on AI and manufacturing as a result of deep cuts to federal support for wind and solar power, batteries and other renewable technologies, a wide range of experts warned on Sunday.
Notably, some conservative voices, including the chief policy officer of the U.S. Chamber of Commerce, fossil fuel advocate Alex Epstein and onetime Trump ally Elon Musk, have vented their frustration about the bill's potential impact on energy prices and American business.
'A massive strategic error is being made right now to damage solar/battery that will leave America extremely vulnerable in the future,' Musk wrote on X on Sunday.
In addition to phasing out tax credits for wind and solar power by 2027, the Senate version of the bill would add a new tax on wind and solar projects built after 2027 that use equipment made in China, which has rankled conservatives who worry it will raise energy prices. The bill also requires the federal government to sell more oil and gas leases and approve more coal production.
Ultimately, power companies may still build many of the same renewable energy projects they were already planning, experts say. Wind and solar are still the fastest-to-build power sources available, while there's a years-long backlog for new natural gas turbines and nuclear plants face major delays. But the cost of building renewable projects will spike as subsidies vanish and cautious lenders demand higher interest rates to finance construction.
'We will still build renewables,' said Doug Lewin, president of the energy consultancy Stoic Energy and author of the Texas Energy and Power newsletter. 'But we're going to build less of them, and what we build will be more expensive.'
Those who have cheered the end of subsidies for renewable power argue they have skewed the market toward less reliable sources of energy that ebb and flow with the weather.
'Ending these federal giveaways will lead to a more market-driven allocation of capital, favoring energy sources that are more economically efficient and better suited to meeting growing demand,' Thomas Pyle, president of the Institute for Energy Research, said in an email Sunday.
The bill 'positions the U.S. more effectively to respond to surging electricity demand,' he added. 'The prior trajectory toward 'net zero' emissions would have constrained capacity expansion and posed reliability risks.'
After a debate and consideration of amendments, senators expect to vote on the bill sometime on Monday. GOP leaders are still scrambling for votes with their razor-thin majority, but if they succeed, the measure will go back to the House for final approval in hopes of meeting President Donald Trump's self-imposed Independence Day deadline. The House passed a version of Trump's agenda in May, with similar cuts to energy spending.
Energy costs expected to rise
Congress is taking up the sweeping legislation as American energy demand is spiking as new data centers and factories devour more electricity – something many in the fossil-fuel industry acknowledge.
'Demand for affordable, reliable energy is increasing across all aspects of the economy, and the growth in AI will require around-the-clock power driven largely by natural gas,' American Petroleum Institute President Mike Sommers wrote in a statement Sunday. 'This bill seizes the opportunity to secure our energy future by unlocking investment, opening lease sales and expanding access to oil and natural gas.'
But power companies won't be able to meet that demand quickly with gas alone, experts say. Amid a global shortage of natural-gas turbines, the wait for new gas-burning power plants is up to seven years, according to S&P Global. New nuclear plants could take even longer. Companies are extending the lives of old coal plants, but they aren't investing in new ones because they're too expensive.
Solar panels, wind turbines and batteries can be built more quickly and already make up more than 90 percent of the new electricity added to American power grids each year. That means power companies will keep building them even without subsidies – they'll just shift the cost onto their customers, experts say.
'We've got this surging energy demand. Our ability to deploy more stuff that's not wind, solar and storage is supply-chain limited. And what Congress wants to do is make it significantly more expensive to build out the stuff we can build,' said Robbie Orvis, senior director for modeling and analysis at the clean-energy think tank Energy Innovation. 'And that means it will make electricity rates more expensive.'
Power companies won't just pass on the cost of their lost tax credits, experts say. They'll also pass on the cost of a new tax on wind and solar equipment built in China, taking effect in 2027, that Senate Republicans included in their version. That tax is paired with funding cuts for American wind and solar manufacturing, making it less likely that power companies could switch from Chinese to U.S. suppliers.
'Electricity demand is set to see enormous growth & this tax will increase prices,' Neil Bradley, chief policy officer of the traditionally GOP-friendly U.S. Chamber of Congress, posted on X on Saturday. 'It should be removed.'
Another risk that industry watchers see: The whipsaw policy changes from former president Joe Biden to Trump have spooked investors, meaning they'll charge higher interest rates when they lend money to energy projects to make up for the risk they're taking, which also raises the price of energy.
'That uncertainty has to be priced into future financial deals for these projects,' Orvis said.
Still, while energy price hikes are expected, they will vary from state to state, according to economic models from policy think tanks including Energy Innovation and the Rhodium Group.
Growth of data centers and manufacturing will slow
Rising energy prices and delays in building new power plants will slow the growth of factories and data centers in the United States, experts say.
'If they can't find the power here, they will go somewhere else to find the power,' said John Hensley, senior vice president for markets and policy analysis for the American Clean Power Association, an industry group representing wind and solar interests. 'You're already starting to see them look at places like Canada, Iceland or the Nordic countries that have surplus electricity available.'
Meanwhile, tech companies urged lawmakers to focus on the implications for artificial intelligence.
Lawmakers should 'deploy an all-of-the-above energy strategy that ensures sufficient generation capacity from a diverse supply of energy sources, including nuclear, geothermal, and solar to support the development of AI,' Janae Washington, a spokesperson for the Information Technology Industry Council, wrote in an email on Sunday.
'We urge the Senate to prioritize a reliable and resilient energy mix that advances AI innovation and growth and reject provisions that will harm the U.S.'s ability to compete in the global race for AI and energy dominance,' Washington wrote.
The bill would also end direct subsidies for making solar panels, wind turbines, batteries and electric cars in the United States. Spooked manufacturers are already canceling planned factories, and the swift end of promised tax credits could doom the brief boom in U.S. manufacturing, which is mostly built on EVs and green energy projects.
Some experts worry that will cede key industries to Chinese firms at the expense of the United States.
'We're undermining the entire infrastructure to onshore those industries, and we're going to make it a lot more expensive for other industries like AI and data centers to move here and to onshore here by making their energy costs go through the roof,' Orvis said.
Meanwhile, North America's Building Trades Unions estimates the bill will eliminate up to 1.75 million construction jobs. 'If enacted, this stands to be the biggest job-killing bill in the history of this country,' the group warned Saturday. 'Simply put, it is the equivalent of terminating more than 1,000 Keystone XL pipeline projects.'
The push to 'electrify everything' will dwindle
Under the Biden administration, green energy advocates imagined a nationwide push to reshape the energy system and 'electrify everything,' switching cars from gas engines to electric motors, homes from gas furnaces to heat pumps, and so on. That push was always going to be an expensive challenge – and a top target for Republicans.
'Even before this legislative shift, the feasibility of fully electrifying transportation, heating, and industrial processes was already in question due to the physical and economic realities of the grid,' wrote Pyle, of the Institute for Energy Research, in his email.
In the long run, the United States is still moving toward replacing some fossil fuel energy sources with electricity – but much more slowly than it seemed a year ago, experts say.
'Based on this legislation and everything else the administration has done so far, there will definitely be a slowdown in the rate of electrification,' Orvis said.
That will have consequences for climate change and air quality, but it may also put the country at a competitive disadvantage in the emerging clean energy industry.
'The rest of the world is going to continue to electrify, and they'll get all the parts and components from China,' said Lewin. 'China is going to be able to wield significant political power in the world because of their lock on the supply chain for electricity.'