Breakingviews - Trump's big bill shrinks America's energy future

Reuters

09-07-2025

NEW YORK, July 9 (Reuters Breakingviews) - One fact dominates the U.S. economy: it needs more power. After a long period in which demand for electrons flatlined, it is now rising again. Beyond gigantic data centers essential to artificial intelligence, the rise of battery technology, factory robots and more means that everything from transportation to industrial production will increasingly be electrified. This surge has, in large part, been fed by renewables like solar and wind. Yet President Donald Trump's recently passed 'Big, Beautiful Bill' may vaporize construction of a vast sum of green power that looked set to be built under previous policy, equivalent in capacity to every nuclear plant in the country. Trying to substitute in fossil fuels or atom-splitting is impractical and expensive.
Slowing population growth, increased efficiency and a pair of recessions in the 2000s halted once-steady expansion of electricity generation in developed economies like the United States and the European Union.
That's now over. Industries that show the most transformative promise – AI, autonomous vehicles, robots – are electricity hogs. Demand is increasing by about 2% annually and is projected to rise by 50% by 2050, according to the National Electrical Manufacturers Association, opens new tab. Failing to meet substantial growth can be disastrous, resulting in blackouts.
Power providers, regulators and investors are rushing to oblige. Aggregate investment by 47 U.S. electric utilities should reach $212 billion this year, according to S&P Global. That's up 50% from 2022 and is expected to rise yet further.
This binge was nurtured not just by the vast hunger of companies like ChatGPT developer OpenAI, whose Stargate project aims to build data centers consuming as much power as about 8 million homes, but also government intervention. The Inflation Reduction Act, passed in 2022 under President Joe Biden, offered tax credits for building carbon-free electricity generation and storage, as well as domestic production of solar panels, batteries, wind turbines, and components for nuclear and geothermal plants. These were substantial fillips: new solar farms, for instance, received either credits worth up to 30% of their required investment, or subsidies per watt of power generated.
In turn, this begat a manufacturing boom, with investments in clean technology rising five-fold to $33 billion annually, according to tracker Clean Investment Monitor. Much of this went to an industry that will be placing yet more demand on the grid: electric vehicles.
Ultimately, though the United States is a colossal extractor of fossil fuels, many of these extra electrons are coming from the sun or the breeze. The U.S. Energy Information Administration estimates that over half of all utility-scale generation added this year will be solar power, while a further 12% will come from wind. With subsidies, they are the cheapest source of new generation for utilities and their customers, according to Lazard, opens new tab.
Trump's signature tax-and-spending legislation kicks out much of this support. Subsidies remain, for the moment, but will be cut years before they were scheduled to expire, beginning next year. Granted, those for nuclear, geothermal and batteries remain, but solar is the biggest chunk of growth on the grid and will be pummeled.
Beyond spending cuts, unpredictable regulatory enforcement can stymie investment. The White House has promised new restrictions on green power. Whether a project qualifies as having begun before any subsidy cut-off date is open to some interpretation. Trade restrictions could bite: just look at batteries, which – starting in 2026 – become ineligible for financial support if over 45% of their content comes from China. The People's Republic is overwhelmingly the world's dominant supplier. This is particularly important because storing energy is a crucial complement to intermittent renewables, which wane when the sun sets or the wind stills. U.S. utilities are expected to add 18 gigawatts of batteries in 2025, equivalent at peak discharge to about 18 nuclear reactors and 80% above 2024's sum, according to the EIA.
The alternative might seem simple: build new natural gas generation instead. While it's more costly than solar in most locations, it's consistent. Snag is, if you're in line to set up a new plant, you'll be waiting until 2030 or later. Manufacturers of gas turbines, an essential component, say they are sold out. Even when they become available, high demand has pushed up prices, as well as the cost of labor to install them. Utility NextEra Energy (NEE.N), opens new tab said this year that the cost of building new gas-fired plants has tripled over the past three years.
Nuclear – an early favorite of technologists like OpenAI boss Sam Altman – promises the ultimate in steady power without interruption. Yet it is exceptionally expensive, prone to spectacular cost overruns, and takes years to build even before inevitable delays are factored in. Other sources, like geothermal, are simply too speculative at any meaningful scale.
What this all means is that power producers, facing down subsidy-starved options, will probably just build less. Existing fossil-fuel plants would therefore be run harder, which means employing older technologies with higher marginal costs.
According to the REPEAT Project at Princeton University, this will result in losing 820 terawatt-hours of new generation by 2035, more than all current nuclear capacity, costing consumers and businesses some $50 billion in higher bills over that span. What has been done can be undone, and this is not set in stone. For now, though, the U.S. is set to burn more and build less.
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