There Is No Such Thing as an Unsubsidized Kilowatt, and the people who tell you otherwise are hoping you won’t check.
There’s a talking point that never seems to die, no matter how many times the facts kill it. It goes like this: renewable energy companies are getting an unfair advantage through federal tax incentives. The Production Tax Credit and the Investment Tax Credit are windfalls for wind and solar developers. They’re picking winners and losers. They’re distorting the market.
It sounds reasonable if you don’t look too hard. But the moment you start pulling the thread, the whole argument unravels — because it is built on a premise that does not exist.
The premise is that there is a “free market” baseline in American energy against which renewable incentives represent an unfair deviation. There is not. There never has been. Every energy technology in America operates inside a tax code that has been shaped, bent, and carved to support it. The question has never been subsidized versus unsubsidized. The question is: who gets what, for how long, and who benefits?
Let’s answer that honestly.
The Tax Code Has Subsidized Fossil Fuels Since Before Your Grandparents Were Born
The expensing of intangible drilling costs — wages, fuel, site preparation, drilling mud, and other costs associated with developing oil and gas wells — has been a feature of the federal tax code since 1913. That is not a typo. Oil and gas companies have been able to immediately deduct these costs from taxable income for over a century.
Percentage depletion was codified in 1926, originally allowing oil and gas producers to deduct 27.5% of gross revenue from their taxes — a figure that, by the sponsoring senator’s own admission, was chosen not through rigorous analysis but because it was large and the odd number “made it appear as though it was scientifically arrived at.” The rate has since been reduced to 15% for independent producers, but the provision remains in the code and continues to cost the federal government roughly $1.2 billion per year on average.
Together, the three largest federal tax expenditures for fossil fuels — intangible drilling cost expensing, percentage depletion, and the publicly traded partnership exception — have been estimated by the Joint Committee on Taxation and the U.S. Treasury to reduce federal revenue by approximately $12.9 billion over a five-year window. Conservative estimates from multiple sources put direct annual federal subsidies to the fossil fuel industry at roughly $20 billion per year.
And here is the important part: the OBBBA did not touch any of these provisions. The One Big Beautiful Bill Act, signed into law on July 4, 2025, dramatically accelerated the phase-out of clean energy tax credits while leaving every major fossil fuel tax preference intact. In fact, the OBBBA added a new manufacturing production tax credit for metallurgical coal and enhanced parity for the 45Q carbon capture credit when used for enhanced oil recovery — which is, for those keeping score, a tax credit for pumping more oil.
So when someone tells you that the PTC and ITC represent an unfair advantage for renewables, the honest follow-up question is: compared to what? Compared to an industry that has received continuous, uninterrupted federal tax support for 113 years?
The Incentives Don’t Stay with Developers. They Flow to Consumers.
This is the part that critics either don’t understand or hope you won’t.
There is a concept in economics called tax incidence — it describes who actually bears the burden of a tax or, in reverse, who actually captures the benefit of a subsidy. The statutory recipient is not necessarily the economic beneficiary. In competitive markets, the benefit is passed through.
Here’s how it works in practice. When a utility like Entergy issues a request for proposals for new generation capacity, it may receive 15 or 20 bids from solar, wind, or storage developers. Every one of those bidders has access to the same PTC or ITC. They are competing against each other, and competition forces them to price the value of the credit into their offer. The result is a lower power purchase agreement price for the utility — which means lower costs for the ratepayer.
The developer does not pocket the credit as a windfall. The market does not allow it. The competitive dynamics of power procurement ensure that the economic benefit of the credit flows through the developer and lands on the consumer’s electric bill in the form of cheaper power.
This is not theoretical. A study by NERA Economic Consulting, commissioned by the Clean Energy Buyers Association, found that repealing the technology-neutral ITC and PTC (Sections 48E and 45Y) would raise average U.S. residential electricity prices by nearly 7% — more than $110 per year for the average household — and increase business electricity costs by roughly 10%. Midwestern and Western states would be hit hardest, with residential price increases of approximately 12% and 10%, respectively.
A separate study by The Brattle Group, commissioned by ConservAmerica, projected that eliminating these credits would halve anticipated growth in solar and wind capacity, reduce clean energy investment by $520 billion, and cost approximately 3.8 million job-years — disproportionately in rural communities.
Read that again: eliminating these incentives does not save consumers money. It costs them money. The “windfall” that critics want to take away from developers is, in economic reality, a cost reduction that belongs to the American electricity consumer.
The “Level Playing Field” Argument Is a Mirage
The fossil fuel industry and its allies have been remarkably effective at framing energy tax incentives as something that only benefits renewables. This framing requires you to ignore the $20 billion in annual direct federal subsidies to fossil fuels. It requires you to ignore the century of preferential tax treatment baked into the Internal Revenue Code. It requires you to ignore Louisiana’s Industrial Tax Exemption Program, Texas’s Chapter 313 successor incentives, and the long history of state-level property tax abatements for refineries, LNG terminals, and petrochemical facilities.
It also requires you to ignore the OBBBA’s own internal logic. The same legislation that accelerated the phase-out of clean energy credits extended the clean fuel production credit (Section 45Z) through 2029 and expanded the 45Q carbon capture credit to achieve parity for enhanced oil recovery. It created a new manufacturing tax credit for metallurgical coal producers. And it left every legacy fossil fuel tax provision untouched.
There is no level playing field. There never was. What there was — until last July — was a set of technology-neutral tax credits that applied to any zero-emission electricity source: wind, solar, nuclear, geothermal, and hydropower.
The 45Y and 48E credits were not renewable energy subsidies. They were all clean energy subsidies. They included nuclear. They included geothermal. They were available to any technology that could generate electricity without greenhouse gas emissions.
The OBBBA replaced technology neutrality with technology favoritism — longer runways for nuclear and geothermal (credits available through 2033 with gradual phase-out through 2035), but a hard construction-start deadline of July 4, 2026, for wind and solar, with a placed-in-service deadline of December 31, 2027. That is not leveling the playing field. That is choosing favorites.
This Is a Consumer Protection Issue
At the Advanced Power Alliance, we represent developers across every generation technology — wind, solar, natural gas, energy storage, nuclear, and emerging technologies. We are not in the business of picking winners. We are in the business of building power plants. And we can tell you what the data tells everyone who looks at it honestly:
Wind and solar, paired with energy storage, are now the cheapest forms of new electricity generation available in the United States. That is not because of subsidies. That is because of technology maturation, manufacturing scale, and relentless private-sector innovation. The tax credits accelerate deployment and reduce the all-in cost to consumers — but the underlying economics are competitive on their own merits.
America is facing the largest surge in electricity demand in a generation. Data centers, advanced manufacturing, AI infrastructure, industrial reshoring, LNG expansion, and electrification are driving multi-gigawatt load growth across every region of the country. MISO projects significant load growth in Louisiana and East Texas alone. ERCOT is forecasting a 75% increase in peak load by 2035.
We need every megawatt we can build — gas, solar, wind, nuclear, storage, and technologies that haven’t been invented yet. Raising the cost of the cheapest available resources by eliminating their tax credits did not help consumers. It did not help reliability. It did not help American competitiveness. It helped exactly one group of people: the competitors who would prefer that the cheapest option was a little more expensive.