The pendulum of federal climate policy is swinging back hard under U.S. President Donald Trump. Among many other steps, he has used his executive powers to block permitting for wind farms, has fast-tracked oil and gas projects, and has been trying to freeze funds for clean energy from the Inflation Reduction Act (IRA), signed into law by his predecessor.
What Trump fails to see is that the IRA is an effective and popular piece of legislation with significant bipartisan support in and out of Congress. Since its passage in 2022, around three-fourths of clean energy investments have been made in Republican states, fueling job creation in regions that have historically depended on oil and gas.
The clean energy transition isn’t so much a part of a political agenda as an economic reality, with red and blue states alike leveraging federal and state incentives to attract investment and modernize infrastructure.
That creates some competition among states, which may well undermine cooperation best coordinated at the federal level. The competition itself, though, will also come with advantages.
State-level incentives and market structures play a key role in determining solar attractiveness
Federal incentives like investment and production tax credits have helped accelerate investments, including in domestic solar manufacturing. However, state-level policies and market structures have ultimately shaped the economic case for solar deployment.
Incentives like tax credits, rebates, and renewable energy certificates (RECs) help lower up-front costs and provide additional revenue streams for project developers. Higher electricity rates and a strong metering system maximize savings and ensure fair compensation for excess energy fed back to the grid. For those considering solar projects, commercial solar marketplace SolarKal grades states’ solar attractiveness based on state incentives, electricity rates, net metering policies, and solar irradiation.
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Take New Jersey as an example. Despite having less solar irradiation than a sunny state like Florida or California, the payback period for a solar project in New Jersey can now be cut in as much as half thanks to the state’s robust solar market, including RECs and favorable net metering policies.
Meanwhile, Illinois has taken a slightly different approach, taking aim at energy equity and green jobs. Far from a leading state — it places 11th in the National Solar Capacity Ranking, according to SEIA — Illinois has nonetheless made considerable progress in the solar sector, going from 80 MW of total installed capacity in 2017 to 5,400 MW in 2024. This growth coincides with the state’s 2017 Future Energy Jobs Act and its 2021 Climate and Equitable Jobs Act. On February 7, Illinois continued to build its energy legislation body and introduced the Clean and Reliable Grid Affordability Act, which focuses on transmission buildout, energy storage, and, like the earlier legislation, equitable access to efficient and affordable energy.
The Texas Model: Streamlined permitting and deregulated markets
What about states that, unlike Democrat-led New Jersey and Illinois, are not exactly known for climate-friendly policies? Look no further than Texas. Despite offering minimal state incentives, the state has surged ahead of former solar leader California, reaching 27.5 GW of utility-scale capacity in 2024 — approximately one-fifth of the country’s total.
Texas’ power grid is defined by its deregulated, electricity-only pricing model: few rules or regulations and no capacity market. Prices fluctuate in real time, reflecting supply and demand at any given time.
There are problems aplenty, including the grid’s almost unique vulnerability to storms and wildfires due to systemic underinvestment. Real-time electricity pricing would have clear advantages were it not for the lack of a proactive demand response system.
But Texas’ free-market free-for-all means one thing: the cheapest and ultimately most profitable source of electricity will win out. That has resulted in a veritable solar boom that began long before the passage of the IRA and appears to have no end in sight.
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Learn more about Columbia Business School’s Climate Knowledge Initiative: Solar
Texas’ streamlined permitting and interconnection processes enable solar projects to become operational notoriously fast. As a result, 2024 saw more capacity additions to the Texas grid from solar and battery storage than any other energy source. In the first week of March 2025, Texas set the record for the most solar generation, wind production, and energy storage discharge.
The state has successfully framed renewable energy as an economic opportunity rather than an environmental mandate. In doing so, it demonstrates how today, economics — not politics — is ever more important to driving the clean energy transition.
Faced with federal policy uncertainty, states will lead the clean energy transition
Texas offers a roadmap in a world where federal support for clean energy is not guaranteed. Faced with federal uncertainty, states will continue to shape the clean energy landscape over the next four years.
The good news is that key drivers of Texas’ success — streamlined project approvals and market deregulation — are popular policies among Republicans. In fact, infrastructure permitting reform is shaping up to be a priority for U.S. governors this year.
Republican-led Florida took second place for utility-scale solar additions in 2024, thanks in large part to its developer-friendly permitting policies. The Sunshine State’s Power Plant Siting Act simplifies the process and exempts any projects smaller than 75 MW.
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Learn more about Columbia Business School’s Climate Knowledge Initiative: Solar
Some warn that we’re starting to see a wave of anti-renewables legislature hit states like Florida, Oklahoma, and Arizona. But, at best, these attempts could only marginally slow down growth; they are no match for the fundamental dynamics of technological change already at play.
While the Trump administration will try to roll back support, it can’t stop the momentum that’s behind clean energy and unfolding in the very states that delivered its electoral victory.
Read more about Columbia Business School’s Climate Knowledge Initiative
