Colorado utility bills could rise, emissions cuts would be slowed if Trump ends clean energy tax credits

In the seemingly never-ending cascade of federal funds abolished, cut or frozen by the Trump administration, a suite of energy tax credits — including ones for green energy — are garnering support from business and even Colorado Republican congressmen.

There is a lot at stake for Colorado as the tax credits have sparked about $4.4 billion in investment and if cut could, by one estimate, boost annual household and business electric bills over the next five years by as much as $145 a year over the next five years.

There are about 20 energy-related tax credits in the Biden administration’s Inflation Reduction Act, or IRA. President Donald Trump has vowed to repeal the law. Among the key credits are the wind production tax credit and solar investment tax credit.

An analysis by the clean energy think tank Energy Innovation, calculates losing the credits will create a $1 billion financing gap for energy projects in Colorado and along with a few others, like the electric vehicle credit, will raise yearly household and business electricity bills $145 a year by 2030.

Xcel Energy in its electric resource plan for new generation is expecting to harvest $10 billion in tax credits.

“We, along with our industry, are closely monitoring developments in federal climate and energy policy,” Michelle Aguayo, an Xcel Energy spokesperson, said in an email. “It’s premature to comment about any potential impact to our business at this time.”

Colorado’s greenhouse gas emissions targets are at risk

The loss of all these funds could create a challenge for the state to meet its statutory requirements to cut greenhouse gas emissions, said Robbie Orvis, Energy Innovation senior director for modeling and analysis.

“Colorado is a good state to talk about this because it has such ambitious energy policy goals,” Orvis said.

The risk of losing those energy tax credits has galvanized businesses and some Republican legislators —  including U.S. Rep. Gabe Evans from Fort Lupton and U.S. Rep. Jeff Hurd of Grand Junction — who are warning that cuts pose energy and economic risks.

“Both our constituencies and the energy industry alike remain concerned about disruptive changes to our nation’s energy tax structure,” 21 legislators, including Evans and Hurd, said in a letter to Rep. Jason Smith, the Missouri Republican chairing the House Ways and Means Committee, which handles tax legislation.

“Any modifications that inhibit our ability to deploy new energy production risk sparking an energy crisis in our country, resulting in drastically higher power bills for American families,” the letter said.

Evans told The Colorado Sun the goal is to balance the need for new energy, affordability for consumers and promoting fiscal responsibility.

“We are just making sure we have a common-sense, all-of-the above strategy,” Evans said. “My area is forecasting the need for three times as much energy by 2030.”

Vestas Wind Systems, a Danish company that is the largest turbine manufacturer in the world, also has a factory in Evans’ district, in Brighton, employing about 2,000 people. “They have a 50% market share for wind generators,” he said.

Hurd’s district includes the Pueblo wind tower factory of CS Wind, a South Korean company that is expanding its operations and hiring 850 workers. 

Colorado has 51 Inflation Reduction Act projects totaling $4.4 billion, with $806 million in Evans’ district and nearly $2.9 billion in Hurd’s district, according to the Rhodium Group, an energy and economy analyst.

“This is what representatives are supposed to do, champion their districts,” said Heather Reams, president of Citizens for Responsible Energy Solutions, a conservative lobbying group focused on energy and environment. “They stuck their necks out.”

Orvis said “60% of the projects announced from the IRA are in Republican districts and 80% of the dollars. … Those are real jobs in factories in areas that have often been underinvested in.”

A state like Texas, which has no greenhouse gas or energy efficiency standards, but has been a leader in wind and solar installation and has companies interested in other energy tax incentives, would be hard hit, according to Energy Innovation and face a $17 billion funding gap.

Some of the credits, like the wind and solar credits, predated the Inflation Reduction Act but were expanded in it. Different credits have different groups and companies lobbying for them.

For example, ExxonMobil is interested in the hydrogen tax credit and Occidental Petroleum in the carbon sequestration tax credit. The major utility industry groups are lobbying for the wind, solar credits.

“These aren’t political tax credits, they are business tax credits,” Reams said.

The way the wind production tax credit works is that an operator can get a 5-cent credit for every kilowatt-hour generated for 10 years. This can help reduce the cost operations or the developer can sell the tax credits to raise funding.

The investment tax credit allows for deduction equal to 30% of the cost of a project. The Inflation Reduction Act extended the deduction to energy storage, microgrid controllers, biogas,  biomass and geothermal projects.

Consensus is that cutting tax credits will raise electricity bills

Energy Innovation’s modeling projects that the loss of these tax credits would lead to U.S. households’ energy bills being $6 billion higher in 2030 and $9 billion higher in 2035.

Other analyses forecast the same trend, if not the same numbers.

A study done for ConservAmerica, a conservative environmental organization, by the Brattle Group, found that without the tax credits there would be $520 billion less in solar and wind development through 2035.

“Power demand customers would still need generation, but without credits, they would pay higher prices,” the Brattle Group said. “As a result, the average American’s electric bill would increase.”

U.S. residential electric bills would increase by an average of $83 per year, although Colorado appears to be on the low side at about $42 a year, in the analysis.

Another study done for the Clean Energy Buyers Association, a trade group which includes  Amazon, Google and Microsoft, estimated repealing the tax credits would push electricity prices 9% higher by 2029.

So, much like tariffs, where the consensus among economists is that they will raise prices, the assessment is that cutting the tax credits will raise electricity prices.

“Very few people are predicting a full repeal of all the tax credits,” said Reams, the conservative energy lobbyist. “Some have a prevailing wage, or union labor requirements. … We could see something like that cut out.”

“The 45Q tax credit on carbon capture will likely stay. They are popular for oil and gas and in Texas it has a lot of champions,” she said. The credit for purchasing an electrical vehicle, on the other hand, will likely go.

“This is the work that starts this week at Ways and Means. … This is a very complicated process with a lot of stakeholders,” Reams said. “We will have to wait and see what gets in and what gets left out.”