NERA was commissioned by the Clean Energy Buyers Association (CEBA) to evaluate the impacts of technology-neutral tax incentives under the Inflation Reduction Act (IRA) on delivered electricity prices in the lower 48 US states for the residential, commercial, and industrial ratepayer classes. The tax incentives analyzed in this study include the production tax credit (PTC) and the investment tax credit (ITC) that support the deployment of clean energy generating technologies—biomass, offshore and onshore wind, solar photovoltaic (PV) and solar thermal, geothermal, conventional hydropower, landfill gas, and nuclear.

The study evaluated electricity market impacts under outlooks with and without the tax incentives that incorporated incremental electricity demand from increased data center deployment. NERA employed a detailed bottom-up dispatch and capacity expansion model with unit-level information on electricity generators in the US and Canada (NewERA electricity model) and a rate model (NewERA rate model) that was designed to estimate delivered electricity prices by state and for different ratepayers. The rate model considers state-specific electricity market structures: competitive or cost-of-service (COS) and changes in electricity price components such as wholesale prices, renewable energy credit prices, capacity prices, and other costs that are specific to the market structure.

The study found the deployment of qualifying clean energy technologies, particularly solar PV and wind resources, is lower in the absence of tax incentives as it becomes more expensive to deploy, trading off with higher capacity factors and capacity additions for natural gas-fired generation. Across the lower 48 US states in 2029, the increase in average delivered electricity price across all ratepayers is projected to range from 1.1% (0.3¢/kWh) to 29.2% (2.7¢/kWh) in the absence of the tax incentives, with the overall increase in generation costs and higher renewable credit prices contributing to this increase and the North Central region projected to experience the largest increase in average delivered electricity prices of about 12% in 2029. The variation in the electricity price impacts across states depends upon the competitiveness of clean energy technologies versus other generation types, clean energy capacity deployed, and electricity market structure. A key caveat for the study is that it does not account for fuel price and demand feedback, which is an area for future investigation.