REGIONAL — The rapid phaseout of clean energy tax credits, included in the so-called One Big Beautiful Bill Act, are expected to slow the ability of Minnesota utilities to meet growing demand for electrical power, and that is likely to mean substantial rate hikes over the next decade.
That’s the conclusion of an analysis conducted by the non-partisan think tank Energy Innovation, which is examining the impact of the energy policy changes included in the legislation, which was signed into law on July 4. Their analysis was included in a recent press statement from the Citizens Utility Board, a Minnesota-based nonprofit advocating for affordable residential power rates.
The OBBBA repeals multiple federal policies, funding programs, and tax credits that have been driving American energy manufacturing and deployment. It eliminates clean energy tax credits that reduce the cost of electricity to ratepayers and have generated billions of dollars in investment in Minnesota. The bill also claws back unobligated funding, expands new oil and gas leasing, and changes and eliminates existing energy and manufacturing tax credits.
The phaseout of the tax credits is expected to dramatically slow the installation of new electrical production capacity in Minnesota during a time when the state is likely to face significant growth in demand. Over the next five years, that is expected to lead to a two-gigawatt reduction in new electrical capacity in Minnesota, with a 3.9-gigawatt shortfall in new capacity within ten years, compared to what would have occurred with the previous policies in place.
At the same time, total U.S. demand is forecasted to increase by 128 gigawatts or 16 percent over the next ten years, an increase fueled largely by the spread of gigantic data centers. According to Energy Innovation’s analysis, the mismatch between rising demand and limited supply growth is expected to raise electricity costs in Minnesota by 28 percent for residential customers and 46 percent for commercial and industrial customers over the next ten years.
In part thanks to energy tax credits, clean sources of power have been dominating the growth within the energy sector, with wind and solar accounting for more than 90 percent of all new capacity installed in the U.S. last year. When factoring in available tax credits, wind and solar are now the cheapest forms of new power capacity, and they have increasingly been paired with industrial-sized batteries for continuous power even when the sun doesn’t shine or the wind doesn’t blow.
Without the investment in new wind and solar capacity, utilities are expected to turn to natural gas and nuclear, but the prospect for bringing substantial new capacity online with those technologies remains very uncertain. The cost of natural gas turbines, essential to an expansion of capacity, have jumped sharply in the past two years and supply shortages mean utilities are now facing years-long delays in obtaining these critical components.
While a new generation of nuclear is supposedly on the threshold of commercial viability, and both the Biden and Trump administrations have backed expansion of nuclear power, the planning horizon for nuclear facilities is several years at a minimum and upfront costs are often prohibitive, even for large utilities.
What’s more, these more traditional forms of energy all come with high fuel costs, which will increase operating costs for utilities that currently benefit from the savings from wind and solar, which have no fuel costs and enjoy very low maintenance costs.
Advocates for affordable electricity fear the impact of the new legislation could be dire.
“Congress has decided to kneecap utilities’ ability to build new generation capacity to meet demand and impose billions in new energy costs on households and businesses,” stated Robbie Orvis, senior director of modeling and analysis for Energy Innovation. “The country is teetering on a recession, and this bill will cost jobs and cancel manufacturing – it couldn’t come at a worse time for our communities.”
 Energy Innovation’s analysis found the bill will:
• Increase Minnesota household electricity bills by $240 million in 2030, swelling to more than $750 million by 2035. Between 2025-2034, the bill will add a cumulative $2.7 billion to Minnesotans’ household energy costs.
• Reduce Minnesota’s GDP by $2.3 billion in 2030 and $4.3 billion in 2035. Between 2025-2034, cumulative state GDP would shrink by $22 billion.
• Cut Minnesota employment, costing over 14,400 jobs in 2030 and nearly 22,900 jobs in 2035.
• Slow the deployment of electricity generation in Minnesota by more than 25 percent (nearly 4 gigawatts of power) by 2035 – at a time when electricity demand growth is projected to increase dramatically.
 Energy Innovation’s analysis can be found at https://energyinnovation.org/report/one-big-beautiful-bill-act/, and the Minnesota-specific analysis is available at https://energyinnovation.org/wp-content/uploads/Impacts-Of-The-One-Big-Beautiful-Bill-On-Minnesota-Energy-Costs-Jobs-Health-And-Emissions_FINAL.pdf.