The Associated Press recently highlighted a study by Energy Innovation claiming that federal energy policy changes will raise energy costs for American families, reduce jobs, and cause massive economic harm. These claims warrant strong skepticism.
When you open up Energy Innovation’s model, the headline conclusions crumble under closer inspection. The study only publicizes increases in electricity costs while ignoring decreases. It also ignores vehicle purchase costs, relies on unrealistic natural gas price projections, and treats taxpayer subsidies as free money.
The study’s own state-level findings show this selective presentation. While the report claims federal policy shifts will raise electricity rates nationwide, the underlying dataset shows that 12 of 48 states actually have lower residential electricity rates under current policy than under the hypothetical counterfactual. These modeled rate drops are significant as Vermont sees a 19% reduction, North Dakota drops 14%, and West Virginia falls 9%. Rather than explaining why these states benefit, the study removed the electricity-rate sentence entirely from those 12 state summaries while keeping it in the 36 states where rates rose. Readers in states like Kansas, Iowa, or West Virginia were told about gasoline and natural gas costs but never told that the study’s model projects lower electricity bills for their homes.
Furthermore, the headline claim that household energy costs will surge is misleading not only because it assumes people must buy EVs, but also because it credits huge fuel savings while ignoring the capital cost of purchasing those vehicles. Of the projected $640 per household additional cost in 2035, home electricity accounts for just $104 in their model; the rest is avoided gasoline costs. The study assumes that EVs reach 68% of new passenger sales nationwide by 2035 and 100% in California. But EV sales are nowhere near those numbers. California’s EV share recently dropped below 18%, and national EV adoption remains under 8%. Energy Innovation’s assumptions conflict with what economists call “revealed preference.” While drivers who buy EVs sometimes save on gasoline, their purchases reveal a strong preference for internal combustion engines rather than EVs, even as decades of policies try to nudge them toward the latter.
To make its baseline scenario look attractive, the study also imposes aggressive natural gas price cuts that defy energy market realities. In its counterfactual, the model forces power-sector natural gas prices down 47.2% from current levels, resulting in 2040 gas prices 31% below 2025 levels. By contrast, the EIA’s current baseline projects power-sector gas prices to rise 37% by 2040. Even the EIA’s most extreme low-price scenario does not project such a large drop. By assuming ultra-cheap natural gas usage, the model artificially penalizes any policy shift away from gas generation.
The model’s economic and fiscal accounting is similarly problematic because it treats tax credits as free money. The study assumes federal clean energy subsidies are financed entirely through deficit spending, with zero tax drag, no inflation impact, and no crowding-out effects on households. Those assumptions fit a worldview in which federal transfer programs to support renewable energy never have downside effects; however, the Joint Committee on Taxation scored the repeal of the energy tax credit at $499 billion in federal savings over ten years, or roughly $3,500 per American household. The model counts higher utility bills from ending those credits but assigns taxpayers zero benefit for saving half a trillion dollars. It also treats subsidy spending as unfinanced stimulus that creates hundreds of thousands of jobs in finance, real estate, and healthcare. Policymakers may widely share those assumptions about subsidy programs, but they are wildly out of step with the historical evidence.
Finally, the report misidentifies what actually drives consumer power bills. Using FERC utility filings, EIA reported that capital spending on distribution drove most increases in electricity spending from 2003 to 2023 (up $31.4 billion, or 160%), while transmission spending nearly tripled to $27.7 billion. Capital spending on the distribution system, the local network that delivers electricity to end users, drove higher electricity spending over the past two decades. Investment in distribution infrastructure increased by $31.4 billion, or 160%, from 2003 to 2023, with more than one-fifth of that growth occurring in a single year. From 2022 to 2023, spending rose $6.5 billion to $50.9 billion. The EIA concluded that utilities used the money to replace and upgrade aging equipment and to install new lines, transformers, and other gear so neighborhood grids could better withstand extreme weather and handle the variability of renewable generation.
Economic modeling can be a useful tool, but much depends on its underlying assumptions. When a study hides rate drops, ignores vehicle purchase costs, relies on unrealistic natural gas price projections, and treats taxpayer subsidies as free money, it stops being an objective economic assessment. If Energy Innovation, and others that promote government support for renewable energy, want to resurrect their subsidy gravy train, they will have to build a better model.
