Trump's One Big Beautiful Bill Act Reshapes US Energy Landscape

President Trump's One Big Beautiful Bill Act (OBBBA) represents a dramatic shift that will fundamentally reshape US energy markets. US power policy must adapt beyond OBBBA to ensure power supply growth across the US. Without these actions, the US risks losing its competitive edge in the global AI race.

The comprehensive legislation introduces new restrictions for renewable power investments, establishes clear emerging technology winners, and makes upstream oil and gas a major priority, introducing significant policy uncertainty that could impact long-term investment decisions in assets with 30-year-plus lifespans.

Power Supply Uncertainty Threatens AI Race
"With such dramatic uncertainty facing new power supply investments, thermal retirements are likely to be deferred, power prices will rise and large loads will be delayed," said David Brown, Director, Energy Transition Research for Wood Mackenzie. "Without permitting reform, new large load tariffs, and domestic technology innovation, the US will risk the edge it has in the global AI race.

“The early sunset of manufacturing tax credits will lower future energy demand from clean energy manufacturing, while delays to new supply could slow data center rollouts nationwide as facilities compete for scarce grid capacity.”

Renewable Energy Faces Headwinds
The OBBBA significantly narrows the window for full-value tax credit eligibility for wind and solar projects, requiring placement in service by December 31, 2027. However, projects beginning construction within 12 months of enactment can maintain eligibility through mid-2030, creating a crucial "safe harbor" period.

Solar installations are expected to increase in 2025-2026 as developers rush to meet deadlines, while wind activity will remain robust through 2029 as grandfathered projects reach completion. Permitted projects are well-positioned, but unpermitted developments face growing uncertainty as permitting bottlenecks threaten to push completion dates outside eligibility windows.

As a result, the long-term outlook for renewables faces a downward trajectory. For solar, Wood Mackenzie projects 10-year installations could decrease 17%, reaching volumes as low as 375 GWac, with the removal of the tax credits. Wind 10-year installations will decrease by around 20% with further uncertainty ahead.

New restrictions escalate from 40% to 60% compliance thresholds through 2030, penalizing reliance on Chinese-backed manufacturers.

On 7 July, President Trump issued an executive order, Ending Market-Distorting Subsidies for Unreliable Foreign-Controlled Energy Sources, which could further undermine the economics of solar and wind projects, particularly when viewed alongside the OBBBA.  

Energy Storage Faces Supply Chain Challenges 
While maintaining Investment Tax Credit eligibility through 2030, storage faces onerous Foreign Entity of Concern (FEOC) restrictions that likely preclude purchasing Chinese cells. The risks and costs of supply chain shifts will put downward pressure on storage growth, despite being one of the few resources that can be added quickly to support growing demand.

Electric Vehicles Take Major Hit
EV incentives have been eliminated, reducing Wood Mackenzie's US battery electric vehicle market share forecast for 2030 from 23% to 18%. Most EV growth will now come from companies with established supply chains or non-domestic players using BEVs to enter premium markets.

Emerging Technologies See Mixed Results

• Green Hydrogen Pipeline at Risk: Approximately 75% of the US green hydrogen pipeline is unlikely to qualify for Section 45V tax credits due to the accelerated 2027 expiration deadline.
• CCUS Gets Boost: Carbon capture developers benefit from expanded 45Q credits, with enhanced oil recovery (EOR) now receiving the same value as geological sequestration, making EOR more attractive as an end destination for captured CO2. This particularly benefits operators with existing CCUS-EOR infrastructure
• Nuclear and Geothermal Maintain Support: Both sectors retain primary Inflation Reduction Act (IRA) incentives. Nuclear receives additional support through revamped SMR funding, while geothermal benefits from mandated annual lease sales replacing the previous biennial schedule.

Upstream Sector Wins Big

The OBBBA provides a big boost to the upstream industry, as it:

• Mandates quarterly lease sales in nine western states
• Adds 30 Gulf of America lease sales over 15 years
• Reduces onshore royalty rates from 16.67% to 12.5%
• Reopens Alaska's Arctic National Wildlife Refuge for competitive leasing
• Delays methane fee until 2035
• Allows full deduction of intangible drilling costs
• Extends massive bonus depreciation to production real property through 2031

Coal: no domestic coal resurgence even with larger incentives
The Department of Interior has opened a minimum of four million new acres of federal lands for coal leasing across the lower 48 states and Alaska.

In isolation, Wood Mackenzie does not see the OBBBA spurring any incremental greenfield thermal coal mine projects. In theory, the sale of new federal coal leases is expected to offset lower royalty revenue. However, falling coal demand will offset any expected lease sales gains.

Global Market Implications
“The policy prescriptions increase the likelihood of Wood Mackenzie's delayed energy transition scenario for the US,” said Brown. “The legislation serves as a harbinger of central challenges facing energy investors – managing political whiplash when investing in assets with 30-year-plus lifespans amid dramatic policy swings every election cycle.”

The elimination of EV tax credits could shrink the global lithium-ion battery market by 6-8% in 2030, reducing demand for lithium, nickel, cobalt, and graphite, though domestic producers may benefit from new provisions.

Carbon Markets and Methane Regulations Shift
Direct air capture paired with enhanced oil recovery will now receive the same $180/tCO₂ tax credit as geological sequestration, potentially redirecting captured carbon toward oil recovery rather than permanent storage. The 10-year delay of methane waste emissions charges to 2034 will slow reduction efforts among operators in the world's third-largest methane emitter.