Fueling The Conversation, Week of July 14th, 2025
After decades of wind and solar tax credits distorting energy markets, raising energy costs, and hurting the reliability of our electric grid, the end is finally near, thanks to the One Big Beautiful Bill Act (OBBB). With wind and solar projects’ eligibility for the production and investment tax credits now depending on a 2027 placed-in-service deadline, Congress has acknowledged that intermittent energy is not sufficient to meet the growing needs of artificial intelligence and electrification and should no longer be subsidized by the American taxpayer.
Of course, the bill is not perfect. The 12-month “under construction” loophole agreed to by the Senate at the last minute will allow projects that commit 5% of the funding within that timeframe to receive a four-year safe harbor to continue receiving tax credits. This is a clear giveaway to wind and solar companies, but it is important to acknowledge victories when they occur.
When the Inflation Reduction Act (IRA) was passed, its generous taxpayer green energy subsidies were sold as investments that would help lower inflation and electricity prices. However, had Congress just looked to other countries already living the green subsidy lie, like Germany, they would have known it was just wishful thinking. As we stated when the IRA was passed, “At a time when energy bills are already soaring thanks to the Biden administration’s war on affordable energy, the taxes and distortions to energy markets in this legislation could not come at a worse time.” Unfortunately, just as we predicted, retail electricity prices have increased faster than the rate of inflation since 2022. Any actual drop in the overall inflation rate has had more to do with higher interest rates, lower oil and gas prices, and the mitigation of supply chain issues than the IRA.
If Republicans failed to pass the OBBB with the changes they made, it would have had drastic consequences for the federal budget and the electric grid. Thankfully, congressional energy champions like Congressman Chip Roy (R-TX), Josh Brecheen (R-OK), and others fought against attempts to institute soft phase-outs by demanding a firm placed-in-service deadline for solar and wind projects.
According to the Cato Institute’s budgetary analysis, maintaining IRA tax credits could have cost $1.97 billion over the next ten years and $4.67 trillion by 2050. One of its most egregious provisions was the phase-out mechanism that required the U.S. electricity sector to reduce greenhouse gas emissions by 75%, based on 2022 levels, before the tax credits would expire. Expecting the electricity sector to achieve these levels was illogical at best, but most likely a cynical attempt to make the tax credits last indefinitely.
The powerful wind and solar lobby is decrying the Big Beautiful Bill, claiming that, by eliminating their lavish federal subsidies, electricity prices will increase. Nothing could be further from the truth. The fact is, higher energy prices are the result of the decades-long subsidization of these resources. By eliminating them, wind and solar will eventually have to compete just like everybody else and will no longer be able to distort energy markets (look for more on this from IER in the near future) and make them less reliable.
The Big Beautiful Bill has taken a tremendous step towards preventing runaway spending by eliminating the emissions provision from the IRA, but the winning doesn’t stop there. The bill also eliminates the federal $7,500 tax credit for new electric vehicle (EV) purchases and the $4,000 tax credit for used EVs. Like the wind and solar subsidies, EV tax credits were another special interest giveaway, ballooning our deficit and making American consumers worse off. As I stated in our press release on the bill, “Eliminating the EV tax credit marks a major win for those of us who have been advocating for years that consumer choice—not government mandates—should shape the American auto market.”
The bill also repeals the IRA’s Greenhouse Gas Reduction fund, supporting EPA Administrator Lee Zeldin’s efforts to claw back the $20 billion in “walking around money” the Biden administration attempted to pass around to politically favored green groups.
Besides cutting the IRA, the Big Beautiful Bill supports reliable energy production by eliminating some of the barriers imposed on natural gas, oil, and coal. It delays the methane emissions tax until 2035, restores royalty rates to their pre-IRA levels, and mandates that at least four million additional acres of federal land be made available for coal mining. By removing red tape and keeping federal lands open to reliable energy production, Congress is giving American energy producers more opportunities to drill, baby, drill.
Projected electricity demand increases and decreasing grid reliability made overturning the IRA more than a simple political win. It was an essential step towards protecting the American people against high energy costs and a failing grid. We should commend Congress for striking back against the green energy agenda while forwarding a policy of energy abundance. Thank you, President Trump and the Congressional Republicans (well, most of them anyway). The Big Beautiful Bill is a big win for American energy and our national security.
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Fueling the Conversation, a weekly column by IER President Tom Pyle, offers a principled take on energy events. Energy underpins all aspects of modern life, so policies that artificially limit production hurt everyday people paying to heat their homes and drive to work. “Green” groups push these policies for ideological reasons, but this column uses economic logic and hard facts to advocate for energy freedom.
