Overview:
-The repeal of Inflation Reduction Act tax credits for wind and solar developments as well as battery storage will result in 8%-15% spike in energy rates, analysis finds.
-"Virtually all of the solar" built in recent years in Michigan used tax credits, energy consultant tells Planet Detroit.
-The federal budget bill will reduce new energy production in Michigan by 4.4 gigawatts by 2035, says climate policy think tank Energy Innovation.
The “One Big Beautiful Bill” signed by President Donald Trump will undermine relatively low-cost renewable energy, costing the average Michigan utility customer $320 annually by 2035, a new analysis shows.
The legislation repeals Inflation Reduction Act tax credits for wind and solar developments as well as battery storage, which will dramatically increase wholesale power costs, resulting in an 8%-15% spike in energy rates for residential, commercial, and industrial customers, according to a report from Energy Innovation, a climate policy think tank.
Michigan will lose out on crucial increases in its generation capacity at a time of growing electricity demand, the group’s research finds. Natural gas may struggle to make up for production from cheaper renewable sources, and increasingly expensive electricity could add costs for Michigan manufacturers that will also be hit by changes from the budget bill, resulting in $26 billion in economic losses by 2035.
U.S. Energy Secretary Chris Wright railed against clean energy in a New York Post op-ed last month, writing, “more wind and solar brings us the worst of two worlds: less reliable energy delivery and higher electric bills.”
Yet wind and solar generation are much less expensive than gas or coal, according to research from the financial services company Lazard.
In Texas, rapid buildout of solar helped the state weather record high energy demand in the summer of 2024, the New York Times reported that year.
Federal budget bill adds electricity costs
The budget bill will reduce the amount of new energy production in Michigan by 4.4 gigawatts by 2035, roughly equivalent to four nuclear power plants, the analysis said. Wholesale energy costs will increase 33% over today’s cost structure during the same time frame, according to Energy Innovation.
The legislation will add roughly 25% to the cost of building new solar and wind developments, Douglas Jester, a consultant with 5 Lakes Energy, told Planet Detroit. He added that “virtually all of the solar” built in Michigan over the last few years had taken advantage of the IRA tax credits.
There’s uncertainty over how tariffs and reduced demand could affect the cost of wind and solar, he said.
Dan O’Brien, senior modeling analyst at Energy Innovation, said utilities will still be incentivized to build relatively low-cost renewable energy.
Michigan’s 2023 climate law mandates 100% clean energy by 2040, although utilities could seek to meet some of this target with nuclear power or natural gas generation with carbon capture.
A shortage of gas turbines will prevent more natural gas generation from being built in the near term, O’Brien said.
“There is no ability for developers to add more gas generation to the grid now than they already have planned,” he said.
If they’re unable to build new gas plants, utilities may lean on generation from gas peaker plants, which usually only operate during periods of high demand. The facilities can be dirtier and less efficient than other gas plants.
“You’ll see more pollution from those plants, but also just higher costs being passed on to consumers,” O’Brien said. He added that increasing gas generation could outstrip the budget bill’s allowance for more gas extraction on federal land and further increase prices.
Rising energy prices could collide with growing electricity demand, O’Brien said, adding that demand is being driven by things like increasing use of air conditioning, electric vehicles, and data centers.
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Budget bill could cost Michigan 19,000 jobs
Michigan’s manufacturing sector may be hit hard by the increase in energy costs and the budget bill’s changes to tax credits for the production of certain solar, wind, and battery components, including the elimination of credits for wind turbine components sold after 2027. The legislation also eliminates federal tax credits for the purchase of electric vehicles.
The state is poised to lose 19,000 jobs by 2035, with a corresponding $3.3 billion annual reduction in gross domestic product, the Energy Innovation report said. Manufacturing accounts for about 16% of Michigan’s economic output, according to the National Association of Manufacturers.
In addition to eliminating tax incentives, O’Brien said the federal law will have the secondary effect of reducing the domestic demand for solar cells and other renewable energy components, making companies less likely to build manufacturing facilities in the country.
Industrial customers will also see a big hit from an increase in generation costs, which make up a larger portion of their energy bills than for other customers, he said
“Manufacturers are going to see the greatest impact on their power prices of any consumer,” O’Brien said.