Opinion - Renewable subsidies are poisoning the nation's electricity grid

Yahoo

06-04-2025

The Inflation Reduction Act is deeply unpopular among conservative Republicans. Yet a solid bloc of 21 GOP members of Congress recently called for keeping the its lavish tax credits for renewable energy. In a letter to the House Ways and Means Committee, they warned that disrupting the tax credits would 'risk sparking an energy crisis in our country, resulting in drastically higher power bills for American families.'
There is just one problem with that claim. Our country is already facing an energy crisis and steadily rising power bills, precisely because of the Inflation Reduction Act's renewable subsidies. Those subsidies, and the renewable tax credits in particular, are poisoning the economics of the reliable power sources we actually need, namely coal, natural gas and nuclear.
In its latest reliability assessment, the North American Electrical Reliability Corporation warns that America is facing a widening gap between electrical generation capacity and soaring demand.
Coal-fired plants, which provide reliable baseload power, are rapidly retiring. Approximately 15 percent of current U.S. coal-fired generation capacity is expected to retire by 2030. Meanwhile, electricity demand is expected to rise at least that much by then due to the revolution in AI and the push to electrify everything. This equates to a shortfall of about 400 gigawatts — about 30 percent of projected demand.
In a properly functioning electricity market, investment in new baseload plants like natural gas and nuclear would be booming. Instead, investment in such plants has virtually disappeared. In 2024, new natural gas capacity barely offset nuclear retirements, while nearly 9 GW of coal plants retired.
Worse, reliable capacity is being replaced by renewable power that is mostly a dangerous mirage. The grid saw 13 GW of new solar additions, but solar plants are usually rated at around 24 percent of their nominal capacity and can't be counted on to produce even that when needed. In terms of what the North American Electrical Reliability Corporation calls 'projected available power,' the electricity grid is actually shrinking.
Why the paradox? By flooding the market with heavily subsidized renewable energy, the Inflation Reduction Act depresses prices during periods of peak renewable production, forcing baseload generators offline for several hours every day. As a result, they are unable to fully recoup their operating and capital costs, which drives up the prices they have to charge when their power is needed, or drives them out of business altogether.
Naturally, investors prefer the guaranteed profits of the Inflation Reduction Act. They are flooding the grid with far more renewable energy projects than grid operators can handle.
The consequences are apparent. The Midcontinent Independent System Operator, responsible for power across the Midwest, faces 'high risk of electricity shortfalls beginning in Summer 2025.' In terms of projected available power, resource additions are not keeping pace with retirements and rising demand, leaving those states vulnerable to severe blackouts and price spikes.
In Ohio, Pennsylvania, Virginia, and nearby states, winter has become the highest-risk period for blackouts — an unprecedented shift caused by excessive reliance on intermittent renewable power. Electricity rates in the area have already risen between 30 percent and 50 percent since 2021 and will likely rise another 30 percent or more in the next year, if last August's capacity auction is any guide.
Indeed, some Republicans seem to be falling for a new mirage — that heavily subsidized construction of new transmission lines will solve the problem. To be sure, the problem of intermittency is somewhat mitigated by aggregating the pool of available renewables across regions. But as Texas discovered in the deadly Winter Storm Uri, no matter how large the pool, intermittent renewables simply cannot be counted on when they are most needed. And they're no substitute for traditional power plants in providing reliable electricity.
Congressional subsidies create powerful special interests armed with all sorts of reasons why the country urgently needs Congress to keep giving them free money. Those arguments are almost always wrong, but in this case they are dangerously so.
The Inflation Reduction Act is paralyzing the nation's electricity grid at the worst possible time. Those 21 members of Congress should understand why before they take a vote they will live to regret. The Inflation Reduction Act needs to be repealed as soon as possible — starting with the renewable energy tax credits.
Mario Loyola is a professor at Florida International University and a senior fellow at the Heritage Foundation.
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