GOP Tax Bill's Clean Energy Cuts Raise Alarms For Industry Facing Power Crisis

The One Big Beautiful Bill Act is raising concerns from leaders in the data center industry that a proposed phase-out of clean energy tax credits could exacerbate the sector’s power shortage. 

Tech giants like Microsoft, Google, Amazon and Meta are the world’s largest buyers of renewable energy. The data center sector has driven a wave of low-carbon energy projects like solar and wind farms across the U.S. as the skyrocketing energy requirements of the artificial intelligence building boom have collided with Big Tech’s carbon reduction goals.

But measures within the massive GOP tax bill moving through Congress would eliminate tax credits that have been integral to the development of these clean energy projects. 

The loss of these clean energy tax credits would create headwinds for an industry already struggling to meet its ballooning energy needs, developers and industry groups tell Bisnow. Beyond simply impeding Big Tech’s progress toward its sustainability goals, phasing out green energy incentives is expected to worsen power constraints and increase costs in key data center markets. 

In response to this threat, the tech industry has reportedly been lobbying Congress in recent weeks to save the clean energy subsidies.

With the Senate aiming to vote on the legislation by early July, the fate of these subsidies in the bill’s final draft remains uncertain. But the sentiment across the data center ecosystem is that the bill is likely to make building new solar and wind projects significantly harder at a time when data centers, and the country, need all the power they can get. Abandoning renewables, industry leaders say, undermines the Trump administration’s stated goal of leveraging energy production to stay ahead of China in the AI arms race. 

“People want to talk about AI dominance and energy abundance and energy dominance, and not ceding everything to China — well, the surefire way to cede everything to China is to think that gas and coal plants are going to solve the problem, because they're not,” said Ali Fenn, president of energy-focused AI data center developer Lancium.

“This needs an all-of-the-above strategy. It's too important to curtail or slow down the resources that are most cost-effective and readily available for deployment.”

The world’s largest data center users have been integral to the buildout of renewable energy infrastructure in the U.S. in recent years. Data center users led corporate clean energy procurement efforts in 2024, securing 17 gigawatts primarily through direct third-party power purchase agreements, according to S&P Global. Microsoft, Google and Meta were the top buyers, bringing the industry’s total green energy procurement close to 100 gigawatts. 

Already this year, Meta has signed a 1.1-gigawatt nuclear energy deal in Illinois, inked a pair of solar PPAs totaling 650 MW in Texas and Kansas, and secured a 150 MW geothermal PPA in New Mexico. 

Big Tech’s investment in renewable energy exploded following the 2022 passage of the Inflation Reduction Act, a climate bill championed by the Biden administration. While there were previous tax credits in place for the development of renewables like wind and solar, the IRA made them significantly more lucrative, sparking more than $841B in clean energy investment — more than half of it solar — since the bill’s passage. 

The GOP’s Big Beautiful Bill aims to eliminate or roll back these incentives.

Just how sudden and dramatic those measures will be remains to be seen, but even with revisions to the bill likely, many renewables projects in development have already been paused with the future of their funding uncertain, the Wall Street Journal reported last week.

The House version of the bill aimed to cut clean energy tax credits almost immediately. To receive credits, renewables projects would have to start construction within two months of the bill’s passage and be complete by 2028, a nearly impossible task thanks to new restrictions on components acquired overseas. The Senate draft of the bill relaxes these timelines somewhat, giving solar and wind firms six months to start projects and receive the full tax break and a tiered phase-out that allows firms to receive at least 20% of the credit through 2027. 

The Senate bill only mandates the rapid removal of credits for solar and wind, so-called intermittent renewables that produce varying amounts of power based on weather and environmental conditions. Unlike the House bill, the latest draft retains credits for renewables that provide constant “baseload” power through 2033, sources like nuclear, geothermal and hydroelectric, as well as battery storage. 

The changes between the House and Senate bills followed vocal bipartisan pushback from lawmakers and aggressive lobbying efforts from tech and data center trade groups like the Data Center Coalition and the Clean Energy Buyers Association.

But while industry advocates say the longer timelines and retained firm power subsidies are steps in the right direction, many expressed disappointment that subsidies for wind and solar remain on the chopping block.

There’s no reason for the bill to pick winners and losers when it comes to which kinds of green energy to subsidize, said Clean Energy Buyers Association CEO Rich Powell, particularly when wind and solar are by far the most readily available to be deployed today. 

“It was a real breakthrough that we had a technology-neutral tax credit that allowed the market to select which technologies it was going to deploy rather than individual incentives for different things. It’s a shame that we're walking away from that,” Powell said.

Losing federal tax credits could increase the price tag of some renewables projects by as much as 40%, according to Powell, a spike in cost he says will lead to a smaller pipeline of new generation and cause some planned projects to drop out of interconnection queues.

Even if the final version of the bill retains credits for low-carbon baseload generation, technologies like small modular nuclear reactors or geothermal are years away from commercial viability. Until then, Powell said there is a significant risk that the power constraints already crippling key data center markets will worsen, with fossil fuel solutions like natural gas often carrying longer lead times than solar and other renewables. 

Power constraints created by the loss of renewables projects in certain markets could reshape the development landscape, with significant consequences for developers that made real estate decisions based on a pathway to power that no longer exists as clean power projects are canceled. 

“We're really concerned about simple access to electricity in a lot of these regions if the incentives that folks had built business models around go away,” Powell said.  “And even if the projects still get built, we’re significantly concerned about the costs in all this.” 

A CEBA-commissioned study published last week suggests that the loss of clean energy tax credits would drive higher electricity costs in key data center markets.

In Virginia, commercial and industrial electricity prices could jump 9.2% by next year and 12.7% by 2029. Arizona could see a 20% price increase by 2029, while North Carolina could see a 21.7% rate hike as soon as next year. 

Still, some industry leaders say that even if clean energy tax credits disappear, there is a chance that hyperscale end users will be willing to stomach significantly higher development costs and power prices to sign deals that drive the buildout of new renewables projects. Studies indicate hyperscalers are willing to pay significantly more than market rate — and significantly more than they pay today — to access low-carbon power in critical markets as they balance their need for electricity with carbon reduction targets. 

This willingness to pay a premium for free power was on display earlier this month when Meta signed a deal for 1.1 gigawatts from an aging Illinois nuclear power plant with Constellation Energy. The power station was originally set to close in 2017 due to financial losses but received a lifeline that year in the form of a state clean energy subsidy. With that subsidy set to expire in 2027, Meta is effectively replacing it by paying a higher-than-market rate to keep the plant online. 

“It's the trillion-dollar question: How much does that price increase deter people from saying they need this new generation?” Lancium’s Fenn said. “Prices rise, but people still have to keep their foot on the gas.” 

Provident Data Centers Principal Strategist Jack Backes said that while he believes credits for solar and wind are being phased out too quickly in the Senate bill, in the long term the industry’s sustained growth will require carbon-free baseload power like nuclear and geothermal becoming viable at scale. 

Intermittent renewables like wind and solar are widely regarded as a poor match for data centers, which consume a relatively constant amount of power at all times. Matching data center demand growth with intermittent renewables can be a recipe for grid instability — a problem grid operators in markets like Texas have been navigating.

But widely deployable carbon-free firm power generation like small modular nuclear reactors and battery storage isn't yet ready for prime time, and it may be years before it can be deployed at scale. Backes is hopeful that focusing subsidies on these technologies can help derisk adoption and get them over the hump faster.

“For solar and wind, that risk is already taken out of the equation. We shouldn't have anything that we're just funding forever and giving tax credits to forever,” Backes said. “If we're shifting that over to nuclear, hydropower, geothermal and battery storage by 2028 then that's great, because those are better, less fragile power sources, and that's good for data centers, good for our grid stability and good for everybody.”