Economists predict Texas electricity prices will rise and renewable energy development will slow following rollbacks to clean energy tax credits in the One Big Beautiful Bill signed by President Trump on July 4, 2025, according to analyses from research institutions including Energy Innovation Policy and Technology and Princeton University.
Projected Impact on Texas
The policy changes are expected to result in 54 fewer gigawatts of solar capacity and 23 fewer gigawatts of wind capacity in Texas by 2035, according to Energy Innovation’s analysis. One gigawatt can power approximately 250,000 Texas homes during high demand.
Texas electricity bills are projected to increase by 5% by 2035, with the state losing an estimated 61,100 jobs in 2030 and 121,600 jobs in 2035. Annual household energy spending will rise by $320 in 2030 and $780 in 2035. Between 2025 and 2034, cumulative GDP in Texas will shrink by $87 billion.
Tax Credit Changes
The One Big Beautiful Bill ends clean energy investment and production tax credits for wind and solar projects in 2027. Projects must be under construction by July 4, 2026 or placed in service by the end of 2027 to qualify for subsidies.
The original Inflation Reduction Act provided 30% tax credits for investing in, building, and operating energy production facilities. Without these credits, a utility-scale solar facility requiring $350 million in investment will cost $126 million more in 2027 than today.
Consumer tax credits—including a 30% deduction for rooftop solar installation costs—will end at the end of 2025.
Market Response
Investment bank Jefferies reported a “large increase in Texas renewables development cancellations” in April and May 2025, with approximately 4 gigawatts of battery projects and 3.5 gigawatts of solar projects canceled. May was described as “the worst month in years for new development.”
“The ambiguity locks up the market and that’s the more problematic piece,” said Mark Rostafin, co-CEO of Irving-based renewable energy developer Vesper Energy. “Once we know the rules, the industry will go. We’ll go do the best we can with what we have in front of us.”
Texas Clean Energy Boom
Since passage of the Inflation Reduction Act in 2022, companies invested over $62 billion in clean energy projects across Texas. An additional $128 billion in planned investment for over 650 facilities was announced, expected to create close to 132,000 jobs.
Utility-scale solar capacity in Texas jumped from 5 gigawatts in 2020 to 27.5 gigawatts by the end of 2024, according to Columbia Business School. Solar and battery storage helped the Electric Reliability Council of Texas avoid conservation calls during record heat in summer 2024, according to the Federal Reserve Bank of Dallas.
ERCOT projects the grid will need to provide 145,000 megawatts of power on peak summer days in 2031, compared to 86,000 megawatts in 2025. Economic and population growth, along with new data centers, are driving demand.
Grid Reliability Concerns
“For Texas, where you’re really relying on these types of new generation facilities to meet surging demand and to keep prices low, as well as increase reliability, it’s going to be tough,” said Shane Londigan, climate and energy senior policy adviser at think tank Third Way. “Those cost increases are going to be felt.”
With fewer renewable projects, gas plants will need to run more hours to meet demand, driving gas prices higher and pushing electricity prices up. The Energy Innovation analysis projects greenhouse gas emissions will increase by 9.7 million metric tons of carbon dioxide equivalent in 2030 and over 91 million metric tons in 2035.
Additional Permitting Restrictions
The Interior Department is implementing additional restrictions requiring federal approvals that the industry has described as creating a permitting bottleneck for projects attempting to qualify for tax credits before they expire.
