President Donald Trump’s ‘One Big Beautiful Bill’ (OBBB), signed into law on 4 July, has sent shockwaves through the US energy sector, with tax credits for low-carbon generation being phased out, restricted, or abolished entirely. Simultaneously, an executive order titled ‘Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources’ made the administration’s stance on energy policy unmistakably clear. Against this backdrop of policy upheaval, US power demand is climbing steeply for the first time in decades, driven by factors such as the acceleration of artificial intelligence and the advent of onshoring. A report by Wood Mackenzie, ‘Gridlock: The Demand Dilemma Facing the US Power Industry’, estimates demand growth to be between 4 and 15 percent through to 2029. This unprecedented confluence of policy change and demand growth presents a complex challenge for infrastructure managers.
The increased demand for power has led to a surge in the value of existing generation assets, irrespective of whether they are thermal or renewable. Chris Ortega, managing director and head of Americas at Morgan Stanley Infrastructure Partners, notes that this is evident in transaction values and power purchase agreement (PPA) pricing. For new renewable development, recent Treasury guidance on the OBBB has brought some clarity. Ortega advises that projects beginning construction by the first half of next year and operating within four years will still be eligible for tax credits, making them even more valuable due to the five-year window. However, projects unable to meet these timelines may face difficulties.
Jennifer Gandin, principal and co-head of infrastructure and impact at CIM Group, agrees that increased power demand is mitigating some of the OBBB’s effects. She points to upward pricing pressure for power and supply backlogs, particularly in thermal generation, which have left renewables as the only viable option in many cases. This has increased the value of near-term renewable products.
Antin Infrastructure Partners, with investments in both US thermal energy and renewables, believes that while the OBBB has created short-term complexities, the increased visibility it provides is beneficial. Guillaume Friedel, senior partner at Antin, explains that the OBBB has established rules for an unsubsidised environment for renewables post-2030, which is positive for the sector’s long-term outlook. Antin is focusing on advancing its pipeline to bring as much power online as possible by 2029, capitalising on the increased value of projects that can be completed within the allocated window.
The interplay between federal and state policies adds another layer of complexity. While the OBBB is having a profound impact on the US energy ecosystem, state-level politics have historically influenced the country’s energy transition. Friedel notes that district energy is experiencing tailwinds due to its efficiency, with some states and cities offering extra support for carbon-neutral goals. In California, CIM’s primary focus, the state’s decarbonisation agenda continues to drive demand for renewables, regardless of federal policy.
Offshore wind is one area feeling the federal government’s impact, with permitting requirements posing significant challenges. Ortega notes that even permitted projects are facing difficulties due to the federal government’s stance on the sector.
The growing demand for power, driven in part by the proliferation of data centres and the advent of AI, is having a dramatic impact on price and supply. Research from Goldman Sachs suggests that global power demand from data centres will increase by 50 percent by 2027 and by as much as 165 percent by the end of the decade. Gandin highlights three ways data centres are impacting power dynamics: competing with other industrial users and utilities for power, and bidding up the supply chain through behind-the-meter energy sources.
This energy policy shift and demand growth dynamic will likely accelerate the transition to a more decentralised and diversified energy mix. Infrastructure managers will need to navigate these changes carefully, balancing the need to meet growing demand with the challenges posed by evolving policy landscapes. The coming years will be pivotal in shaping the future of the US energy sector, with the interplay between federal and state policies, the growth of renewables, and the impact of data centres all contributing to a complex and rapidly evolving energy ecosystem. The sector’s response to these challenges will determine the trajectory of the US energy transition in the years to come.