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The OBBBA Has Passed. What's Next for Energy Transition?

Cleantech Insights — July 1, 2025

It’s been a big month.

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The passage of President Trump’s One Big Beautiful Bill Act left the clean energy industry scrambling. Wind, solar, and EVs were especially hard hit. Advocates had hoped to convince Congress to preserve at least some of the historic IRA incentives; in the end, the OBBBA gutted many of them, though the final bill wasn’t as bad as some had feared.

Electric vehicles fared the worst, with tax credits worth up to $7,500 disappearing by September 30, 2025 — seven years early. The bill also delivered a blow to the solar industry, eliminating residential solar credits by the end of this year.

The final version does preserve commercial incentives for wind and solar until 2027 — including tax credit transferability — which could give residential installers some flexibility to structure lease agreements with customers. On the other hand, meeting the December 31, 2027 incentive deadline will be difficult, if not impossible, for many commercial projects.

One bright spot: tax credits for utility-scale battery storage — critical for reliability — were preserved until 2036. The final bill also removed a Senate provision that would have taxed new wind and solar projects, potentially costing the industry $7 billion.

While it’s true that the implications of the OBBBA are serious, it’s important not to lose sight of other factors and larger trends. There are good reasons to remain confident that the energy transition will continue, especially internationally, but also domestically.

However, there are also many open questions that clean energy innovators will need to think about in order to best position themselves at this inflection point.

Here are just a few topics that are on my mind.

What’s Next for the EV Industry?

Eliminating the EV tax credit will reduce the number of EVs on the road; fewer people driving EVs means Americans will pay more for fuel, even as higher electricity prices make charging EVs more expensive.

Luxury EV manufacturers have responded to the coming end of the federal tax credit with big discounts, which should help move inventory in the short term. After that, the outlook is less certain.

Still, industry experts predict that the EV market will remain resilient, accounting for around 37% of new car sales in 2030 (down from 48%). Globally, the market is likely to remain strong.

Can the Falling Price of Solar Offset the Loss of Federal Incentives?

Solar power is currently the cheapest and most easily deployed form of new generation. At what point does the industry reach a tipping point where economic gravity outweighs political resistance?

Many analysts say that eliminating incentives for solar and wind will cause energy prices to go up, especially as demand increases.

At the same time, the cost of solar energy keeps falling. Between 1975 and 2012, the price per watt of solar photovoltaic panels dropped by 99% (from around $130 to $1.06) globally. Since then, it’s fallen by an additional two-thirds, to around $0.31 in 2023.

Just how low can the cost of solar go? We have no idea. As Josh Dorfmann of the Supercool newsletter puts it,

For decades, no one—not even the most optimistic forecasters—predicted solar’s astonishing price decline … Everyone assumed the magic would wear off. But it didn’t. The cost kept falling—steadily, predictably, almost eerily—like a law of physics no one fully understands … if that curve holds for another decade—and there’s no compelling reason it won’t—we’re headed for a world of trivially cheap energy. Solar so cheap it could power our species into a fundamentally different chapter of life.

Of course, the price of the panel is only a fraction of the total cost of a solar installation. “Soft” costs — labor, permitting, overhead, customer acquisition — account for close to 90% of the price, which is how rooftop solar in Australia can cost a third per watt what it does in the United States, as Michael Thomas, Gavin Mooney, and others have pointed out.

Then there’s intermittency. Cheap solar is great, but solar utility hits limits without demand flexibility and storage. While battery prices have also seen dramatic declines over the past decade, the cost of storage isn’t falling as fast as solar panels.

The good news is that soft costs, in theory, can be controlled by cutting red tape, scaling processes, and innovating business models. And there is one small silver lining in the new law: tax credits for utility-scale battery storage — which make solar more valuable — are continuing (at least for the moment).

How Will Utilities Deal With the Data Center Boom?

Utilities are under tremendous pressure to prepare for massive demand from data centers, with executives at utilities and RTOs like PJM Interconnection sounding increasingly loud alarms. At the same time, ratepayer advocates are afraid that ordinary citizens will bear the brunt of necessary infrastructure upgrades.

Tech companies, meanwhile, are considering every avenue to secure needed supply, including controversial moves like reopening old nuclear power plants and building their own sources of power using unpermitted natural gas generators — an approach which, not surprisingly, is generating controversy and drawing legal challenges.

Against this backdrop, solar + storage facilities are more than holding their own. Projects like Ampt in California and the 300MW Orsted/SRP facility in Arizona are just a couple of examples that prove this point. There are plenty of reasons to believe that clean energy will be competitive, if not dominate, in the data center energy race.

What Role Will Distributed Energy Resources (DERs), Demand Flexibility, and Virtual Power Plants Play?

There are only so many decommissioned nuclear power plants that can be brought back on line, and new fossil fuel generation has its own problems, including a severe shortage of natural gas turbines. Recently, costs for turbines have more than doubled, and wait times for delivery are between five and seven years.

Grid infrastructure is an additional challenge. The administration claims that it is cutting red tape to accelerate infrastructure improvements, but their regulatory actions are at best ad hoc, at worst capricious.

All of this means that utilities may need to do more with less, at least in the short term.

Demand flexibility and virtual power plants aggregate distributed energy resources (rooftop solar, home batteries, smart thermostats, EV chargers, demand response, efficiency) to reduce energy use during peak times. In theory, demand flexibility and virtual power plants can work as procurable resources, on par with traditional supply-side generation. Companies that can offer measurable load shifting or facilitate time- and location-specific reductions in demand will become increasingly important, enabling utilities to manage grid stress and defer costly infrastructure upgrades.

There are many different innovative approaches to squeezing more from existing resources. These include demand-side analytics that help optimize distributed grid resources, advanced measurement and verification that can certify time and locational carbon savings, advanced transmission software that increases the usable capacity of transmission grids, and microgrid solutions that allow facilities to generate, store, and manage their power on-site.

It will be interesting to see how solutions like these can work together to optimize existing resources as we move forward.

Additional Reading

That’s it for today. Thanks for reading, and please forward this newsletter to anyone who might find it useful!

As always, I’m curious to hear your thoughts on how we can navigate the next phase of energy transition.

Until next time,