Electrify This!

Congress Repealed Federal Clean Energy Incentives! How to Act Before It’s Too Late

• Sara Baldwin, Energy Innovation, LLC • Season 5 • Episode 4

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The One Big Beautiful Bill is a big bad deal for U.S. households, businesses, and the climate. The law repealed numerous clean energy, efficiency, climate, and electrification incentives and funding, among other major changes. Energy Innovation’s modeling shows that the law will result in the U.S. foregoing 340 gigawatts of new electricity capacity by 2035, and an increase in wholesale electricity prices by 74 percent by 2035.  America will also lose $980 billion in cumulative GDP and around 760,000 jobs by 2030. Two experts from Advanced Energy United discuss the law, its impacts on clean energy companies and consumers, and what people and businesses can do to take advantage of expiring tax credits before they’re gone. 

Guest Bios: 

Harry Godfrey, Managing Director, leads Advanced Energy United’s Federal Priorities team, which serves as the focal point for our engagement with lawmakers on Capitol Hill and policymakers in the Administration. With experience in industry, federal government, and academia, Harry played a pivotal role in the passage of the Virginia Clean Economy Act. Before arriving at Advanced Energy United, Harry worked at Invenergy and Opower, where he developed expertise in renewable generation and energy efficiency. He previously held positions in the White House Office of Legislative Affairs and the Office of Majority Whip James E. Clyburn.

Sarah Steinberg, Director, leads Advanced Energy United's building decarbonization and the natural gas transition work, developing advocacy strategies and educating key decision-makers across state houses, administrations, and agencies to accelerate the transition to 100% clean energy in the built environment. Previously, Sarah led portfolios of work in Nevada and Indiana, which focused on utility resource planning, transportation electrification, distributed energy resources, and wholesale markets. Before joining Advanced Energy United, Sarah worked as legislative staff to a State Representative in the Massachusetts State House.  

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Sara Baldwin: I am your host, Sara Baldwin, Senior Director of Electrification with Energy Innovation. Welcome to another episode of Electrify This, a podcast focused on electrification as a tool to cut climate pollution and invigorate our economy. Each episode, I connect with experts to explore the policy and market issues underpinning the shift to electrified transportation, buildings, and industry, all powered by a clean electricity grid.

Today's episode, Congress repealed federal clean energy incentives, how to act before it's too late.

As many of you are likely aware, earlier this month on July 4th, president Trump signed into law the “One Big Beautiful Bill Act” following its very narrow passage by the House and Senate by a mere four votes in the house and one vote in the Senate with Vice President JD Vance, casting the tie breaking vote. The expansive, nearly 900-page budget reconciliation law includes a wide range of provisions, including the modification or appeal of many clean energy efficiency, climate and electrification, incentives and funding, and a number of things impacting healthcare, social services, immigration, and more.

Energy Innovation’s modeling and analysis team analyzed the impacts of the final version of the law. Due to the laws very stringent and nearly immediate repeal of several clean energy tax credits, the US is going to lose out on 340 gigawatts of new electricity capacity by 2035. We also expect to see wholesale electricity prices increase by 25% by 2030 and 74% by 2035, and that's going to increase electricity rates – between nine and 18% by 2035. 

The analysis shows that America's going to lose $980 billion in cumulative GDP and around 760,000 jobs by 2030. In a nutshell, the big, beautiful bill is a big bad deal for American households, businesses, and the climate. On today's episode, we're going to learn more about what the law does and how it'll impact clean energy companies consumers and households.

We’ll also discuss what people and businesses can still do to take advantage of expiring tax credits, the law's implications for states, and what states and local governments can do to keep momentum going. 

My guests are both from a great organization called Advanced Energy United, a national industry association representing businesses that provide the full range of advanced energy and transportation solutions.

First we have Harry Godfrey. The managing director who leads advanced Energy United's Federal Priorities team. He has experience in industry, federal government, academia, and he's played a pivotal role in the passage of Virginia Clean Economy Act. In addition, he's worked for the private sector as well as the White House Office of Legislative Affairs. Welcome to the show, Harry! 

Harry Godfrey: Glad to be here!  

Sara Baldwin: Really glad to have you. And next we have Sarah Steinberg, director with United who leads the building, decarbonization and natural gas transition work, working to accelerate the transition to a hundred percent clean energy in the built environment. Sarah has experience in utility resource planning, transportation, electrification, distributed energy resources, and wholesale markets, and has previously worked as legislative staff to a state representative in. Massachusetts among other policy roles. Welcome to the show, Sarah! 

Sarah Steinberg: Good to be with you.

Sara Baldwin: It is great to have you both here. I will start with you, Harry, if you could just maybe introduce yourself to our listeners and let us know what you're currently focused on at Advanced Energy United. 

Harry Godfrey: I lead federal priorities at United focused around tax policy and the reconciliation package, permitting reform and telling the larger story of advanced energy and its role in achieving American energy, abundance, energy leadership, at the federal level. 

Sara Baldwin: No doubt you have been very busy the past few months as so much has been happening in that space.

Sarah, what about you? Tell us a little bit more about what you do and what you're focused on right now. 

Sarah Steinberg: I lead Advanced Energy United's enabling building electrification team where we work across the country at state legislatures and public utility commissions on three primary goals. First, to create and modernize the way we regulate gas distribution utilities considering changing trends and the energy transition. Second, to ensure that the electric distribution grid is ready for the task of electrification. And third, to improve the customer economics and experience of electrification.

Sara Baldwin: That's the three-legged stool for getting all this stuff done. Wonderful. So we're going to start with the One Big Beautiful Bill Act. It's now law, and we are now in the process of really starting to digest what this law is going to do for energy affordability, clean air, and businesses.

I want to run through some of the main provisions that touch on energy. Harry, let's first start with the provisions that relate to clean electricity and transmission deployment. 

Harry Godfrey: Thanks, Sara. I think it's helpful to start this conversation with what we had pre-HR 1 (that is the legal name of the bill), under the Inflation Reduction Act (IRA). We had the investment tax credit (ITC) and the production tax credit (PTC), and these foundational credits undergird financing for clean energy were made tech-neutral with the IRA. That meant that practically any clean generation or storage project—wind, solar, geothermal, advanced nuclear battery storage, hydro, and others—could qualify for these credits. That's just the sort of tech agnostic policy that United is all about.

HR-1 split that treatment in two. Many of those technologies (hydro, geothermal, advanced nuclear storage) are going to continue being eligible for the full ITC and PTC provided that they start construction by 2033. There's a ramp down for the years thereafter, and they must meet restrictive and complex rules that restrict ownership and the content in those projects by foreign entities of concern (aka FEOC). 

But for wind and solar, they imposed a much shorter runway for credit eligibility. Wind and solar projects not only have to meet those FEOC restrictions as well, but they either have to start construction within 12 months (by July 4th, 2026), or they have to be placed in service by the end of 2027.

There's no two ways about it. These timelines are going to destroy projects, kill jobs, strand investments, and ultimately raise electric prices. Here's why. This fundamentally is changing the rules in the middle of the game.

Project development requires several years of development before construction. The financing is built in at the front end, and there was an expectation of having those credits in place. This is going to force those projects back to the drawing board. Some those projects will die. Others are going to get built on a delayed timeline, but at a higher price. We're in this period of fast rising demand driven by manufacturing new data centers, and electrification. These are projects that would've brought new supply to meet that demand in 2028/29 and the early 2030s. Earlier than a new natural gas plant could be built, let alone more cutting edge, innovative resources that we don't realistically see coming online at scale until the early to mid 2030s. And even that might be an aggressive timeline. 

Basic recipe. We have new and fast rising demand, we have less new supply. The result rising prices and in the worst case, energy scarcity. This is the antithesis of abundance. 

Sara Baldwin: How are clean energy developers reacting to this law?

Harry Godfrey: They are looking across their portfolios to find projects that can clear the final hurdles and commence construction so they can meet that window. For those who can't meet that 12-month window, the placed-in-service deadline at the end of 2027 is a project killer in no small part because project developers don't have control over factors like permitting and interconnection delays. Financiers who help support those projects may pull their financing, and that kills projects. 

So there is this intense process going on right now internally amongst many of our developers trying to figure out if they can meet the commence construction deadline. That's assuming the commence construction guidance holds true.

The President's executive order on July 7th may fundamentally upend that too, so that injects further uncertainty, let alone the Department of the Interior memo on July 14th, which is going to slow project development. So, there is just layer after layer of uncertainty  being loaded onto them. It's not a positive picture. 

Sara Baldwin: No, it is not. And you said it earlier, but so many jobs will be lost. So many people who need to support their families will now face uncertainty and economic challenges. These are people at the end of the day. So that's, very disappointing.

Let's pivot to talk a little bit more about some of the other provisions, building efficiency, electrification and this decarbonization of buildings. There were many provisions in there. What are the biggest ones that you'd call out that affect primarily US households and businesses? 

Harry Godfrey:  This is one of the bitter ironies because this bill is going to raise energy prices for all the reasons I just discussed, and it also ends credits that are helping families and small businesses manage their own energy bills. It ends residential energy efficiency and clean energy credits at the end of this year. Those are credits that folks would use to help finance buying a heat pump or install rooftop solar. New home builders and commercial properties doing energy efficiency measures have until July of 2026 to start those efficiency upgrades. A little bit more time, but still not a lot. 

Consumers should still be able to get rooftop solar leases through the end of 2027 because those deals are actually utilizing the ITC that I talked about before, but they will also be subject to FEOC restrictions. Across the board, this bill pulls back tax policies for building efficiency, electrification, and distributed energy resources. 

Sara Baldwin: Yeah. And many of those provisions, energy efficiency especially, have been around for decades because they are smart policy because they reduce the overall cost of energy for everyone. 

What about for electric vehicles (EVs) and charging? Tell us where we landed with those and talk a little bit more about the impacts you're seeing in the US auto industry. 

Harry Godfrey: Yeah, I feel like I'm going from bad to worse to worst in these explanations. HR-1 terminates the credits for consumers to buy new and used EVs, as well as for fleet operators to get light-, medium-, and heavy-duty EVs at the end of this quarter (September 30th). Folks who are installing EV chargers have until the end of June 2026 to place those in service. 

When you think about the timeline and delays to interconnect that stuff, you can't just start construction by that day. You have to actually finish it and be fully interconnected in order to get that credit. Really across the board, this is a pullback on transportation electrification.

I think to sound a slightly more optimistic note, we still see the economics of transportation, electrification, particularly in the light duty vehicle sector, steadily continuing to improve. This wave of transportation electrification is coming. This bill may slow it, but it's not going to stop it.

Sara Baldwin: Yes, I agree. Unfortunately, in the meantime, I think there are going to be a lot of automakers that pivot away from the US markets to sell in new emerging markets, which are growing very quickly around the world and doubling down on where they're already very strong. So again, competitiveness, lost. Jobs lost. Opportunity to really put ourselves firmly in the 21st century, missed the mark on that one. 

Harry Godfrey: It also points American automakers serving the domestic market in the wrong direction. This is as if folks are moving towards the horseless carriage and we're trying to double down on making the best carriages and breeding the best horses. It doesn't make sense. 

Sara Baldwin: Thank you for that recap, Harry. We're going to turn back later to talk a little bit more about what people can do to take advantage of the credits while they still last. But before we do that, I want pivot to you, Sarah. Can you zoom out and add some context around some of the trends in electrification and the clean energy space. Let's start first with heat pump markets.

Sarah Steinberg: There is so much more to the electrification story than just HR-1. Reconciliation was an earthquake, but the foundations of energy policy have always existed both above the federal government at that “macroeconomic trends” level and below it in the states and regions. The heat pump market is entering this period in good shape. It's seen year-over-year growth in the U.S., gaining on the old school furnace equivalents.

Heat pumps for space heating currently sit at about 56% of market share and electric water heaters, which include heat pumps, have a 55% market share. The states with the highest share of heat pumps for space heating include South Carolina, Alabama, North Carolina, Tennessee, Florida. Affordable heat pumps are especially well-suited to those warm climates where your predominant needs are efficient air conditioning with some occasional heating. There's no real reason to expect that will change soon.

Data is a little harder to find on the ground source market, but in the past, shipments have been strongest to states like Florida, Illinois, Indiana, Michigan, Minnesota, Missouri, Ohio, Pennsylvania; and 60% of those ground source heat pump installations are commercial or institutional—market segments not affected by the repeal of the residential home energy tax credits.

Sara Baldwin: What about the flip side of that coin, the gas side. Can you talk a little bit about gas delivery, cost growth, price volatility, and anything else noteworthy? 

Sarah Steinberg:  So, gas heating bills are in bad shape. Gas supply has been particularly volatile over the last several years. The Energy Information Administration projects prices to average about $3.70 per MMBtu this year and $4.40 per MMBtu next year. By comparison, in 2023, they averaged about $2.50 per MMBtu in 2023 and $2.19 per MMBtu in 2024. So that is a marked increase. And those increases are passed a hundred percent onto customers. 

Delivery prices are also trending up—delivery prices reflect the cost to your local gas utility for providing the pipelines that carry gas into homes and businesses. Gas distribution spending has climbed rapidly over the last decade reaching $28 billion annually, as many of the pipes beneath our feet reach 50-years, 60-years, even 80-years old in some places, and need replacement.

Over a quarter of gas mains in 13 states are over 60-years old. Those states include California, Maryland, West Virginia, Oklahoma, Pennsylvania, and Nebraska. This spending is translating directly into customer bill increases. 

My team has been compiling reports of this, and here are just a few examples. New York State Electric and Gas just requested a 33.5% increase to delivery charges for its gas customers. That would be about $34 extra per month per customer. Utility customers in Arkansas will pay an extra $15 per month. New Jersey Natural Gas customers will pay about $24 extra per month. Connecticut Yankee Gas just requested an increase to bills by nearly $47 per month. This trend is hitting everyone across the country.

Sometimes it's death by a thousand cuts year-over-year. Other times it's hard and fast and all at once. The gas system remains an unaffordable alternative, and this problem will only get worse over time. The status quo is barreling towards this heating affordability crisis that we haven't really started talking about in earnest.

States can do things today to help rebalance those economics, and we can explore that in a little bit. But the final point I'll make here is that our energy affordability problem is partially driven by the fact that we're spending exorbitant amounts of money on two massive energy systems. The electric and gas system both are aging, both are facing the need for billions of dollars of reinvestment. 

The electric system underpins our lives and our economy. The gas system is facing significant competition and ultimately declines—the timing and speed of which are uncertain. But that decline is starting to happen today in several states, so it something to watch out for. 

Sara Baldwin: Can you talk more about the state economic factors at play right now impacting electrification trends and clean energy deployment?

Sarah Steinberg: Sure. State funding is constrained on all levels. State budgets are going to have to be absorbing impacts of these federal cuts in healthcare, in energy, and across the board. And they also might be facing an economic downturn. There is not a ton of room right now for states to create new programs. Meanwhile, the utility rate base is full, which is to say folks are feeling maxed out each month when they receive their energy bills. 

Now we know that's largely not the fault of clean energy and near-term increases are likely to be the result of federal action promoting dirtier more expensive energy generation, while also constricting supply growth. Regardless, new programs will face even more scrutiny to be cost-effective and have a real downward impact on rates in the near-term.

It was always going to be an imperative to find new, affordable ways to move this transition forward that work to bring down electric prices today and for decades to come to boost the economics of electrification.

Sara Baldwin: Indeed. Hopefully state policymakers and regulators will be taking a closer look at the requests coming in the door from both energy systems, the electric and gas utilities, and doing some robust prudence reviews on utility expenditures.

So, with tax credits and funding expiring quickly, and communities across the country reeling from the uncertainty around federal funding, it seems everyone is in a similar boat of asking “what now?” What can we do? Harry, I'd love for you to talk us through what people, businesses, local governments, schools, state agencies, can do to take advantage of what's left before it’s too late. 

Harry Godfrey: Let's start at the state government level. We're urging governors and public utility commissions (PUCs) to engage with the clean energy industry and take a close look at projects ready to commence construction in the months ahead. What can they do swiftly as executives to clear those regulatory barriers and get these projects into construction? That's essential if these projects are going to be eligible to get the credits. That's step one, particularly for big projects that are in active development and nearing construction.

Two local governments, schools, nonprofits. If you were thinking about going solar or making upgrades, getting that ground source heat pump, do not wait. It's worth noting that this bill left in place the direct pay provision, which lets entities without a tax liability still take advantage of the credits as long as the credits last. Those entities should also be communicating that to the governors, PUCs and legislators to clear any hurdles. We're looking at about the next two and a half years because those projects might be able to slide in under the placed in service deadline. 

Consumers, you need to move and need to move fast. Thinking about getting an EV? Great, you have two months to utilize the credits, if you want to buy or lease. Energy efficiency and electrification upgrades to your home need to be done by the end of this year. If you’re buying rooftop solar, you need to purchase that by the end of this year. My understanding is if you do the install next year, but you're still claiming on this year's credit taxes, you can still get that credit. The only sort of saving grace of that if you are leasing solar or storage, you have until the end of 2027. 

Sara Baldwin: In a nutshell, act fast, act now. Do not delay. Call today. And of course there will be immense pressure on the workforce that is responsible for getting these projects done. You’re going to be the queue if you don't act quickly.

Sarah, how do you see this law really impacting states and local governments that have climate and clean energy goals? Those who are committed to doing what they can within their jurisdiction to reduce emissions, to reduce pollution, and move us in the right direction. 

Sarah Steinberg: Yeah, it doesn't help. But here's where I'll be a bit of an optimist. I encourage folks to not see this as the end of the world. The headwinds in front of us are stronger.

Our pace is going to slow down a little bit, but we can still move forward. And on the other end, we'll be stronger for it.  Building electrification and transportation electrification offer so much potential. These are new tools in the Swiss Army knife for electric utilities. Load growth isn't going away, and if utilities can't build to it, they're going to need to get super crafty about using their existing resources and existing infrastructure better and getting more out of what they already have. Electric home appliances and electric cars can be made to be flexible, while also achieving comfort and function at the lowest cost to the customer, making the grid more efficient and pushing rates down for everyone. 

Sara Baldwin: I would add that building codes are another really important tool to continue to make progress and sustain momentum, while also ensuring our buildings better equipped for more extreme heat cold and potential outages. You can have a very smart building if you're building smart from the start. 

Where do states go from here?

Sarah Steinberg: Our first imperative is to get costs in check and contain costs on both our electric and gas system.

On the gas side, the first step is to end gas pipeline expansion subsidy programs. This year we've seen progress on that in Maryland, New York, New Mexico, and Minnesota. For New York, this change is going to immediately end $200 million of spending a year.

More states can do this to contain heating cost growth. It's just rebalancing the playing field towards neutral. Then we can be looking at all the non-emergency pipe projects and asking if there's a lower cost intervention that can meet the same need (aka a non-pipeline alternative). For example, Xcel Colorado put together the largest non-pipeline alternative in the country earlier this year, proposing to forego a traditional gas capacity expansion project in the Colorado Rockies. This utility is going to rely on a portfolio of lower cost solutions, that includes electrification, demand response programs, and some temporary compressed and liquified natural gas facilities. The cleaner portfolio is set to cost $155 million, the traditional fossil one $328 million.

In addition, moving towards integrated gas and electric planning will help us identify where we're overbuilding and overspending customer dollars, then figure out how to optimize our limited dollars across the energy system.

Create programs where technologies can be paired together for greater impact, like a heat pump with a battery integrated into it. Smart planning and programs can make pumps and EVs grid assets that really mitigate system growth and spread costs over more kilowatt hours sold. They work beautifully in concert with other advanced energy technologies and products. 

I really think state should become obsessed with grid flexibility and energy waste reduction in this moment. How can we get more out of the system that exists today? So that's flexibility targets virtual power plant programs, appliance incentives tied to critical peak pricing in time of use rates, EV fleet batteries as mobile grid assets. 

Rate design is going to be a big and obvious piece of this. States like Massachusetts have really taken on this problem this year, especially considering findings that heat pump customers are routinely overcharged for their demand on the grid. This hopefully becomes a model or at least a signal or encouragement to other states that they can and should engage in that work.

Another way to create more headroom, which is the difference between your system's capacity and its peak needs, is to go big on energy efficiency. To back down on our energy efficiency work is to condemn ourselves to higher. grid costs in the future, and that is not a sacrifice we should be willing to make right now. There are no easy answers here. But I'd also love to see states exploring how to finance these investments differently.

Sara Baldwin: Agreed. We have our work cut out for us. I want to end on silver linings or beacons of hope. Harry, I'll start with you. 

Harry Godfrey: Thanks, Sara. For all the doom and gloom I articulated before, let me also say this: anyone  writing the obituary for the advanced energy industry right now should put their pens down. And I say that for two reasons. First because HR-1 wasn't a wholesale repeal of the IRA. For advanced energy technologies other than wind and solar, the ITC and PTC remain in place, well into the 2030s. That’s not going to meet our near-term energy needs or resolve immediate affordability issues, but it's good news for spurring long-term innovation for exciting technologies like enhanced geothermal, advanced nuclear, and other clean energy resources in the decades ahead.

The bill also keeps in place the manufacturing production tax credit, which has been an important catalyst for reshoring advanced energy manufacturing in the US. HR-1 does shrink the domestic market for those products, so we're likely going to see some announced manufacturing projects disappear and the pace of investment slow.

I'm still cautiously optimistic that the manufacturing PTC, the supply side support, gives a toe hold to folks, particularly in the energy storage and solar sectors here in the us. 

The second reason more fundamentally, is that we've been here before as an industry at a time when our technology was less commercially competitive, when we were smaller and less mature as an industry, and when we didn't have some of the drivers that Sarah articulated that really make clean energy technologies appealing.

We used to have lower energy costs. We had flat, we're declining load growth. Now, we have higher energy and natural gas costs. We have more strain on the grid. We have rising demand. All of these things are really important drivers for demonstrating the value of affordable, flexible, and electrified technologies here.

HR-1 is a setback, but it's far from a death knell for advanced energy. 

Sara Baldwin: Great. I love to hear that. Sarah, what about you? Silver linings. 

Sarah Steinberg: I'll make two points as silver linings. I am hopeful that the next era of electrification policy will be especially durable given the constraints that we're going to have to build it under today. Hopefully we come out strong. And second, there's still so much work we can do in the states and regions, which we were going to have to do anyway to make progress towards this goal of a hundred percent clean energy. We have the playbook, and we just have to go implement it. That was always going to be challenging but also an opportunity to make progress. So, we keep moving forward. 

Sara Baldwin That is the only way. 

It's been a real pleasure, thank you for taking time to speak with me today. I hope you have lovely summer vacations ahead. 

Harry Godfrey: Thank you!

Sarah Steinberg: Thanks, Sara!  

Electrify This! Is an Energy Innovation original podcast. Energy innovation is a non-partisan energy and climate policy think tank. We provide customized research and analysis to decision makers to support policy design to reduce emissions at the speed and scale required for a safe climate future.

 his transcript is based on the conversation but is not verbatim. Some sections have been shortened or deleted for space and efficiency. Please refer to the original podcast for the full conversation. 

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