While Trump promises low electricity costs, some states are trying to undermine him

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Disclaimer: The article may include the author's opinions.

President-elect Donald Trump campaigned on a promise to lower electricity bills for Americans, but a new report by the Heartland Institute reveals that utilities may have financial motivations to embrace green energy, even if it conflicts with lowering costs. In addition, various state-level mandates could ensure utilities stay committed to a net-zero trajectory, regardless of Trump’s actions.

Trump has made it clear that he intends to pursue American energy dominance and his cabinet selections, which include strong advocates for the energy sector, suggest he will push forward with an energy policy favorable to oil and gas. However, his plans may face significant political and economic challenges. If Rep. Lee Zeldin, Trump’s pick for EPA head, is confirmed, he may look to dismantle the EPA’s power plant rule, which seeks to phase out coal-fired power plants and limit the construction of new natural gas plants. Critics argue that this rule could jeopardize electricity reliability and affordability, as it would further depend on intermittent wind and solar energy, potentially leading to higher electricity costs.

Proponents of renewable energy claim it is the cheapest energy source, but when factoring in the costs of converting intermittent wind and solar power into reliable, consistent energy, the reality is that these sources are often more expensive. As coal plants are decommissioned, electricity rates have increased.

While utilities generally seek to keep customer rates low, they may be driven to invest in wind and solar projects, even at the expense of coal and natural gas energy, due to financial incentives. According to Heartland’s “Utilities Are Going All-In On Leftist Net-Zero Agenda” report, utilities are authorized to collect a return on equity (typically 9-11%) for investments in projects like wind and solar farms. This means that a utility could earn significant profits from building a multi-billion-dollar wind farm, even if it replaces a functioning coal power plant.

Renewable Portfolio Standards, which require utilities to produce a specific proportion of their electricity from renewable sources, are implemented by states. According to H. Sterling Burnett, director of the Arthur B. Robinson Center for Climate and Environmental Policy at the Heartland Institute, these mandates may force utilities to give renewable energy a priority, even if it means paying more. Burnett contends that many utilities might not have made any investments in renewable energy at all in the absence of such regulations.

Big energy players like Duke Energy and American Electric Power have already committed to net-zero goals. Duke Energy’s President and CEO, Lynn Good, proudly announced in 2022 that the company is leading the nation’s clean energy transition, with a substantial portion of its $63 billion five-year capital plan directed towards renewable energy projects. American Electric Power, which serves millions of customers across multiple states, also pledged to achieve net-zero emissions in line with the Biden administration’s climate goals.

Federal tax incentives further support the expansion of wind and solar energy, even when there is no immediate need for the electricity produced. Wind farms, for example, receive a $26 per megawatt-hour tax credit, making them profitable even when electricity prices fall below zero, as demand fails to keep pace with the supply of wind energy. This is particularly evident in the Great Plains, where negative pricing is most frequent.

Critics, including Burnett, argue that the continued reliance on taxpayer subsidies for renewable energy suggests that these sources are not as economically viable as their proponents claim. The tax credits initially intended to help the wind and solar industries establish themselves, have been in place for over 40 years, raising questions about their necessity.

While the U.S. has set a course towards net-zero emissions, the complex web of local, state, and federal programs aimed at achieving this transition makes it unlikely that a change in administration will undo these policies shortly. As utilities and politicians navigate these financial incentives and regulations, the promise of lower electricity bills may prove to be more complicated than originally anticipated.

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