Dive Brief:
- Three-quarters of the clean electricity capacity that would have been added to the United States’ grid thanks to the Inflation Reduction Act is still likely to come online, despite One Big Beautiful Bill Act’s tax credit phaseouts, according to a new study released by the Massachusetts Institute of Technology.
- The report compared clean electricity, fossil electricity and emissions reductions under the IRA trajectory to the new scenario introduced by the One Big Beautiful Bill Act, which phased out some tax credits, as well as rollbacks to Environmental Protection Agency regulations. It concluded that on average, over 2025 to 2035 and relative to 2021, the OBBBA preserves 67–74% of the clean energy and emissions reductions benefits the IRA would have delivered.
- Of all the affected technologies, onshore wind is most impacted by the Trump administration’s policies, with only 52% of the generation and 47% of the capacity expected under the IRA preserved, according to the report. This is because onshore wind is the most sensitive to the loss of tax credits, the report said, adding that “utility-scale solar and battery storage have a more modest setback, with at least 80% preserved in the OBBBA scenario over 2025 [through] 2035.”
Dive Insight:
The One Big Beautiful Bill Act impacted the Inflation Reduction Act in several ways, including moving up the phaseout deadlines for wind and solar facilities to qualify for the 48E investment tax credit and the 45Y production tax credit.
Wind and solar facilities needed to commence construction by July 4 to safe harbor projects to qualify for the credits, or face a placed-in-service deadline of December 31, 2027. Other technologies, like battery and geothermal, can continue to qualify for 100% of those credits until 2034. Some analysts said they anticipate a rise in pricing for wind and solar power purchase agreements now that the deadline has passed, to compensate for the lack of tax credits.
The MIT report was authored by Lily Bermel, a former research associate with MIT’s Center for Energy and Environmental Policy Research and a current visiting fellow at the Columbia Center on Global Energy Policy.
Bermel concluded that the gap between the OBBBA and IRA scenarios is “inherently limited” because the impact is largely to the demand side through changes to tax credits, and both scenarios have the same supply-side ceiling “on how fast clean energy can be permitted, sited, built, and interconnected.”
While fossil capacity “barely diverges between scenarios,” fossil generation is 19% higher under the OBBBA scenario, the report said, as utilization of existing plants is expected to increase. “Coal retires more slowly than it would have under the IRA trajectory's regulations, while gas capacity is actually 3% higher under the IRA trajectory,” it said.
The report concluded that even if the IRA trajectory had continued, “transmission and other supply-side barriers made its projections unlikely to be fully realized.”
“In the near term, a coordinated set of executive-branch actions — permitting freezes, stop-work orders, investigations, tariffs, and impoundments — pushes real deployment below the OBBBA scenario,” it said. “The OBBBA–IRA gap is inherently limited: both scenarios have the same ceiling on how fast clean energy can be permitted, sited, built, and interconnected. Alleviating supply-side barriers — primarily through permitting reform and transmission buildout — would lift that ceiling, rapidly increasing deployment speed and lowering costs.”
Permitting reform talks have continually stalled in Congress, and some Democratic lawmakers have moved to obstruct bipartisan permitting reform in response to the Trump administration’s obstruction of renewable energy projects such as offshore wind farms.
Offshore wind has not been as impacted by the OBBBA as onshore wind, the report said, because it has “limited sensitivity to the credit change, as deployment is driven by other forces.”
For solar, “falling module costs and strong underlying cost competitiveness absorb most of the policy change shock, suggesting that solar is credit-sensitive but not credit-dependent,” the report said. “Battery storage retains tax credit access in the OBBBA scenario and maintains 83% of the IRA trajectory’s capacity buildout as reduced solar deployment shrinks the market opportunity.”
“Alleviating supply-side barriers — primarily through permitting reform and transmission buildout — would lift that ceiling, rapidly increasing deployment speed and lowering costs,” the report said. “Restoring the wind and solar tax credits 2 would only recover about 2.5 years of lost solar and storage deployment each year, moving deployment toward its existing ceiling rather than raising it.”
In either scenario, Bermel’s model sees essentially “no new nuclear, geothermal or hydropower. In both scenarios, wind, solar, and storage account for all of the new clean capacity — and therefore all of the shortfall.”
