The Hidden Costs of Eliminating Energy Tax Credits
By Tom Falcone
April 28, 2025
Though they may not realize it, the 30 million customers of our country’s largest public power utilities could face significantly higher electric bills if federal energy tax policies change.
Demand for energy is surging. According to an analysis from Brattle Group, the U.S. will need 50% more energy by 2035 to support AI data centers, advanced manufacturing, and electrification. Data centers alone could consume up to a staggering 9% of U.S. electricity generation by 2030, according to the Electric Power Research Institute.
To address the growing need for electricity, members of the Large Public Power Council (LPPC) will invest $69 billion in energy infrastructure over the next five years, enabling some utilities to nearly double their capacity to serve customers. But for this infrastructure investment to happen, public power utilities need access to reliable financing tools like energy tax credits and tax-exempt municipal bonds.
Communities throughout our vast country depend on diverse mixes of energy to power their homes and businesses. Public power utilities choose the types of energy that are most reliable, efficient, and affordable in their given region, which in turn helps keep electricity affordable and reliable for their customers. Energy tax credits play a key role in supporting this all-of-the-above strategy, encouraging investment in a wide range of generation technologies.
A survey of LPPC members reveals that over the next decade, public power companies expect to add 58 gigawatts of generation to meet growing load and replace aging infrastructure. About 25% of that will be natural gas, which is critical to balancing the grid. Half will be wind and solar, taking advantage of local, affordably priced clean energy resources. The remainder includes pumped storage, batteries, hydrogen, natural gas with carbon capture, geothermal, and nuclear.
To make these investments while maintaining affordability for customers, utilities and developers rely on federal tax credits, which drive down the cost to customers in their electric bills by approximately a third. Investment is expensive. For the last few decades, electric loads have been flat, and the country has been largely able to maintain what it had, rather than build new. With rapidly growing demand, that is not the future. These tax credits will reduce the cost to our public power customers by an estimated $34 billion dollars in the next decade alone – costs that otherwise will show up in rapidly rising electric bills.
These credits serve as a powerful engine for economic growth, spurring nearly $5.50 in private investment for every $1 claimed. Without these essential tools, energy infrastructure projects will be more expensive, if they happen at all. One study suggests eliminating federal tax credits could raise future electricity prices for American consumers by 14% and result in an overall economic loss of $820 billion.
Furthermore, tax-exempt municipal bonds are a vital financing tool that enables state and local governments, as well as not-for-profit entities like public power utilities, to fund critical infrastructure projects like roads, bridges, schools, fire stations, and electric infrastructure. Preserving tax-exempt municipal bonds, which have been in place for more than a century, is essential to keeping borrowing costs manageable for public infrastructure projects. Eliminating the tax exemption on municipal bonds would drive up borrowing costs by $823 billion, hitting American households with an extra $6,500 in taxes and higher rates.
These higher costs do more than hit Americans in the pocketbook. Without expanded energy infrastructure, it will be hard to meet the demand for the electricity that’s necessary to power the AI, advanced manufacturing, and electrification projects that are powering our economy, creating jobs, and strengthening America’s global competitiveness.
In this sense, eliminating existing tax credits and curbing access to financing tools isn’t just a policy shift -- it’s a hidden tax on American families and threatens our economic future. Energy projects will slow down, costs will rise, and reliability will suffer.
Congress must protect these critical financing tools that enable energy infrastructure investment.
Tom Falcone is the president of the Large Public Power Council, an advocacy organization that represents 29 of the largest public power systems in America, and the former CEO of the Long Island Power Authority.
Read the full article here
