Many thanks to Pavan Venkatakrishnan, James Hewett, and Alex Turnbull for their thoughtful contributions to this piece.

Introduction

The House Ways and Means Committee has proposed rescinding hundreds of billions of dollars in energy tax credits established by the Inflation Reduction Act (IRA). One critical — and largely overlooked — casualty of these proposed rollbacks: the effect of natural gas prices on your wallet. Diversifying electricity generation is critical to hedging against natural gas price volatility, stemming both from liquefied natural gas (LNG) exports and the data centers at the heart of the artificial intelligence (AI) boom. Without the IRA’s concerted support for low-cost, non-gas power, expanded LNG exports could further strain electricity price inflation.

At first glance, the link between repealing these energy incentives and higher electricity prices might not be intuitive. Natural gas prices shape electricity price inflation across the country. Yet amidst a rise in LNG export capacity and a surge in energy demand for data centers, natural gas prices have been on the rise and are exhibiting higher volatility than they did throughout the 2010s. Expanded LNG exports link U.S. natural gas prices to global benchmark prices, which are structurally higher. US benchmark natural gas prices more than doubled from September 2024 to March 2025.

Benchmark natural gas prices have predictably strong effects on electricity prices across the country. 

As export capacity and domestic data center demand grows, prices can spike and inflate domestic electricity rates. Simply put, the United States cannot act as both a major gas exporter and a low-cost electricity provider without the IRA. Rapidly expanding and diversifying into low-cost, non-gas sources of power generation is a critical ingredient to keeping electricity prices on stable footing amidst powerful LNG- and AI-led dynamics

LNG Exports Are Strategically Valuable

The strategic rationale for U.S. LNG exports is firmly established. They generate good-paying jobs all the way from Texas to Pennsylvania, and bolster the energy security of allies by crowding out supply from geopolitical rivals like Russia. Since the first major terminal at Sabine Pass opened in 2016, LNG exports have risen from less than 0.5 billion cubic feet per day (Bcf/d) to nearly 12 Bcf/d in 2024. The United States now accounts for nearly 45% of global LNG supply at marine terminals. If all currently planned infrastructure comes online, capacity could reach almost 25 Bcf/d by 2028 — cementing America’s role as the world’s dominant LNG supplier.

This rapid expansion, however, episodically links domestic gas markets to volatile international price dynamics. U.S. natural gas is now a globally traded commodity, and with that comes a loss of insulation: if Europe or Asia faces a supply crunch, U.S. prices are more likely  to rise. That dynamic is manageable — but only if the U.S. electricity system can add low-cost capacity to serve as a hedge as natural gas prices rise. That will require a rapid buildout of low-cost non-gas capacity, which the IRA directly promotes. 

The Political Risk: Exposing US Consumers to Global Price Volatility

This vulnerability is not theoretical. Electricity markets across the country remain heavily reliant on gas-fired generation, especially during peak demand. LNG exports tighten the margin of available gas supply — and when global prices rise, domestic generators are either priced out or forced to pay spot rates linked to benchmark prices. The result is increased wholesale power price volatility and downstream inflationary pressures. 

Additionally, gas fuel supply has traditionally been less expensive in the power sector because investor-owned utilities (IOUs) could sign non-firm or “interruptible” offtake agreements rather than the more expensive firm contracts signed by industrial customers. The increased interdependence of the gas and power sector would necessitate more firm contracts by IOUs while the capital expenditures for combined-cycle gas turbines rapidly increases. However, even with more firm contracts the interoperability of the gas and power system in extreme weather still means supply could see shortfalls. These costs would be passed on to American consumers, while being lower-margin and less geopolitically advantageous than LNG.

Australia offers a cautionary case study: its LNG export regime contributed to domestic electricity price spikes. East-coast spot gas peaked above AU$45/GJ in 2022, three times higher than 2019 levels. Labor was able to pass a price cap in 2023. It was a major issue in the most recent election with the Liberal party pledging export caps and the Labor party pledging to use emergency powers if necessary to halt exports.

A successful LNG export and energy policy should limit the need for such measures. Tamping down on exports purely to meet domestic demand should only be considered in true emergencies, but that can only be certain if the US has a well-diversified system for generating electricity. American consumers, from manufacturers to households, could grow intolerant of a system where domestic energy prices are subordinated to global markets. The political backlash could be equally swift — particularly as power-hungry AI data centers, electrified manufacturing, and general demand growth strain local grids.

The IRA Mitigates This Risk by Expanding Low-Cost Non-Gas Supply

The IRA’s energy production and investment tax credits should be understood as a hedge against volatility in commodity markets like natural gas. One of the most important contributions of the Inflation Reduction Act is its acceleration of low-to-zero-gas energy deployment—particularly wind and solar. These resources, once built, can generate electricity without the same scale of ongoing fuel costs, unlike coal or natural gas plants that must purchase fuel to operate (that doesn’t include the cost to deliver power). 

That means wind and solar are dispatched first and offer power at essentially zero cost per additional unit of generation. This suppresses wholesale prices during periods of high renewable output—and reduces the demand for natural gas, particularly during shoulder and base load periods. The IRA’s tax credits, including the technology-neutral 45Y and 48E provisions, have sharply improved the economics of solar and wind projects. Utility-scale solar and onshore wind, once built out, lower the reliance on natural gas for electricity generation and can prove superior on cost relative to what new gas combined-cycle plants can average. These cost advantages are already reshaping the grid. In 2023, solar and wind made up more than 15% of total U.S. generation, with states like Texas seeing wind contribute over 20% and solar approaching 10% of supply during peak hours. More than 75 gigawatts of new wind and solar capacity are expected in the next two years alone. By displacing marginal gas-fired generation, these zero-marginal-cost resources help stabilize domestic gas demand—and by extension, insulate U.S. power markets from the price shocks and supply squeezes that rising LNG exports might otherwise amplify.

Beyond renewables, the IRA also plays a critical role in catalyzing capital formation for next-generation firm energy sources—technologies that can provide reliable, dispatchable power, including advanced nuclear, enhanced geothermal systems, and long-duration energy storage. These firm resources are essential complements to wind and solar: while renewables can supply low-cost power during optimal conditions, they cannot fully replace the reliability functions currently served by natural gas. Without firm alternatives, grid operators must maintain gas plants as backup, even if they run infrequently—an expensive proposition. The IRA tackles this challenge directly. It offers a full 10-year investment and production tax credit to qualifying firm technologies, leveling the playing field for nascent options that historically struggled to attract private investment due to high capital costs and technology risk. Already, this has sparked renewed momentum: several advanced nuclear projects have secured early-stage financing, geothermal developers are expanding exploratory drilling, and storage manufacturers are scaling up domestic production of novel chemistries. These technologies are not theoretical—projects like the Natrium advanced reactor in Wyoming and advanced geothermal initiatives in Utah and Nevada are under active development. As they come online, they will reduce the grid’s reliance on gas during peak and firming hours, enabling the U.S. to decouple power system stability from commodity price volatility. 

IRA Rollback Could Have Harmful Macroeconomic Effects

From a macroeconomic perspective, the Inflation Reduction Act functions as a hedge against steeper electricity price spikes. Electricity prices are a high-frequency, high-salience component of inflation — and they carry significant passthrough effects to both core goods and services. Because electricity underpins everything from manufacturing to household consumption, sustained increases in power prices can ripple through the broader economy and contribute to stickier inflation. The recent experience in Europe offers an instructive example of what happens in the absence of holistic energy security and diversification efforts. As the Federal Reserve has recently acknowledged, inflation risks have risen. That is likelier if energy shocks become more frequent or persistent. We have already seen in the past few years that natural gas prices are no longer as low and stable as they were in the 2010s. In this context, gutting the IRA would exacerbate inflationary pressures by increasing the economy’s exposure to global natural gas volatility.

In short, the IRA is a macroeconomic imperative for reducing energy price volatility, anchoring inflation, and building capacity buffers that insulate U.S. households and producers from global fuel price shocks. Weakening it would increase the likelihood of domestic political backlash to LNG exports and undermine one of the most important domestic industries for promoting global economic and geopolitical stability. 

Conclusion

The U.S. is uniquely positioned to serve as both a global LNG superpower and a low-cost electricity economy. But doing so requires intentional capacity addition — and the IRA is the only legislative instrument currently operating at sufficient scale to make that vision tenable. Gutting it would amount to cutting the brake lines on a system already under increasing strain.

If Congress wants to maintain American LNG leadership, it must ensure that the collateral effects to prices and electricity bills are minimized. That means making complementary investments to mitigate the inflationary effects of export-linked volatility. The IRA achieves exactly that — and abandoning it would undermine one of the most economically and geopolitically significant energy achievements in decades.