Energy Pragmatism: The Path to Abundance
A bipartisan deal on permitting reform and a measured phaseout of tax credits would lower consumer bills, boost the U.S. economy, and give America a leg up in the AI race
President Trump promised to cut electricity bills by 50% in his first year. We’re now past the halfway mark, and prices aren’t falling — they’re trending higher. Current policy changes risk pushing them much higher still.
The administration and Congress set out to hurt solar and wind developers by ending clean energy tax credits. But their attempt to abruptly end these credits — with no phaseout — coupled with new federal restrictions on renewable projects (even on private land) will do serious harm to consumers of all sizes.
This is ideology over pragmatism, and consumers will literally pay the price.
Modeling from Energy Innovation shows the impact clearly: Texas manufacturers and grid-connected oil and gas producers are expected to see a 54% increase in power costs from the new federal budget law that passed last month. Residential consumers — about half of whom are already struggling to pay their bills — will see a 20% increase.
Republican Pushback
Some Republican senators are objecting, rightfully worried that their constituents and the economy will be harmed. Senator Chuck Grassley (R-Iowa) and Senator John Curtis (R-Utah) are delaying confirmation of Treasury Department nominees until they, as Grassley put it, give assurances they will “adhere to the law and congressional intent” and award tax credits to projects that begin construction this year.
Grassley and others point out that the president’s own “energy dominance” agenda will be undermined if America’s fastest-growing energy sources are held back. “Congressional intent is clear,” said Senator Curtis. “We need every electron we can get from every source. And that best meets President Trump's energy agenda.”
AI infrastructure needs vast amounts of power and will pay whatever it costs. But many Americans can’t afford electricity at any price. Renewables won’t disappear — they’re still the cheapest new generation source even without subsidies, and demand for them is growing. But restricting them will raise costs across the board.
Senator Mike Rounds (R-South Dakota) was blunt: “Our energy needs will outstrip our ability to produce energy unless we include wind.” And Nevada Governor Joe Lombardo (R) wrote a letter to the administration asking them to unfreeze solar, noting that solar power is needed “to support important and burgeoning sectors of the State’s economy.”
Trouble with Treasury
A key sticking point is how the administration is preparing to implement the new law.
Congress had agreed to a brief wind-down period for clean energy tax credits to soften the impact on bills and the economy. But just three days after signing the budget bill, President Trump issued an executive order directing the Treasury Secretary to issue “new and revised guidance” to restrict the use of credits for projects that begin construction in 2025 — even though the law explicitly allows them.
The bill’s language is clear: the “safe harbor” provisions in “IRS Notice 2013-29 and Notice 2018-59… as in effect on January 1, 2025” apply to projects starting construction in 2025, as long as they’re placed in service within four years. IRS guidance says “begin construction” can mean incurring 5% of project costs (see page 14 here).
By attempting to override that, the administration would be nullifying a congressional compromise after the fact.
Prices Rising — and Policy is Making it Worse
Power prices have climbed in recent years mostly because of two main factors:
Lower-cost generation from renewables and cheap gas (in 2023 and 2024) helped offset these pressures. Now they’re both in danger.
The immediate removal of tax credits, along with new permitting barriers, will limit the largest source of new supply: over 90% of Texas’ new generation capacity in the last four years have been wind, solar, and storage. Demand has risen 6% per year.
The math isn’t terribly complicated; it’s basic economics: higher demand plus less supply equals higher prices.
But it gets worse. Restricting renewables will also push more customers toward gas-fired power, increasing demand — and prices — for natural gas. Expanding LNG exports will add further upward pressure; the Energy Information Administration included this in its latest Short Term Energy Outlook: “We expect natural gas prices will rise in the coming months as the United States exports more LNG…”
Consumers in red states like Texas, where electricity use is growing rapidly, would be among the hardest hit — unless something changes.
There is a better way.
Bipartisanship Can Work — Recent History Proves It
Almost exactly 20 years ago, Congress passed the Energy Policy Act of 2005 — opening new areas to oil and gas drilling while creating the solar Investment Tax Credit. It passed a Republican-controlled Congress and was signed by a Republican president, with bipartisan Senate support (75 votes) including a majority of both the Republican and Democratic caucuses.
A decade later, in 2015, Republicans held both chambers. Congress extended renewable tax credits and opened oil exports in the same bill. It passed with 65 votes, again including a majority of both parties, and was signed into law by President Obama.
Bipartisan energy deals are possible even in polarized times — and they create durable policy that survives changes in political control.
The Path Forward
We need that same pragmatism now. If nothing changes, Democrats will put the tax credits back in place when they next have power. This whipsaw policymaking creates uncertainty and adds costs to all kinds of energy development, as John Arnold rightly pointed out:
Republicans in the Senate could secure a bipartisan agreement on an end date for tax credits and finally win permitting reform. Democrats could lock in faster buildouts of energy infrastructure. And American consumers — all American consumers — would benefit from stable, affordable energy.
Congress should:
Gradually and durably phase out renewable tax credits so the market can adjust.
Pass permitting reform to speed up all energy projects — a long-standing Republican goal that has so far eluded Congress.
Provide regulatory certainty so energy developers and markets can plan ahead, protecting consumers from price shocks.
Senator John Barrasso’s (R-Wyoming) permitting bill with then-Senator Joe Manchin passed the Energy Committee on a strong bipartisan 15-4 vote last year but moved no further.
This is a golden opportunity to corral 60 votes for that goal. It can only happen if both parties embrace pragmatism and agree to compromise for the good of American workers and consumers.
Lasting Changes Require Bipartisan Buy-In
If there’s no course correction, voters will face higher prices and a weaker, less competitive economy — and they’ll know who to blame.
But this isn’t just about the political stakes. Constantly reversing energy policy creates uncertainty that drives up costs for everyone. Durable, bipartisan agreements can end the whipsaw and give markets the stability they need.
The choice is clear: sclerotic, partisan policymaking that leads to scarcity and high prices — or pragmatic, bipartisan policymaking that delivers energy abundance and economic growth.
The path forward should be obvious.
Thank you for reading. This post is free to read but not free to produce. Please become a paid subscriber to support this newsletter and the Energy Capital Podcast. Thank you!