How the “One Big Beautiful Bill Act” Could Reshape the Energy Markets
On July 4, 2025, the U.S. government passed the One Big Beautiful Bill Act (OBBBA), marking a major shift in federal energy priorities. The legislation rolls back many clean energy incentives previously established under the Inflation Reduction Act (IRA), while increasing federal support for fossil fuel development. While the full impact may not be immediately apparent to most energy users, the policy changes introduced by OBBBA are set to influence electricity and natural gas prices—as well as long-term grid reliability costs—for years to come.
One of the most significant shifts is the phaseout of federal tax credits for battery energy storage systems. Previously, commercial developers could rely on a 30 percent tax credit. Under OBBBA, that benefit will be reduced to 22.5 percent in 2034, drop further to 15 percent in 2035, and be eliminated entirely in 2036. This change will likely undermine the financial viability of grid-scale storage projects, which are essential for balancing supply and demand during peak periods. Without sufficient investment in storage infrastructure, strain on the grid will increase—driving up capacity and ancillary service charges.
Solar and wind projects face new limitations as well. Under the new act, renewable energy projects must begin construction by July 4, 2026, or be operational by December 31, 2027, to qualify for 30% tax credits. These accelerated timelines could pressure developers to fast-track construction, increasing the risk of permitting delays, cost overruns, and compromised quality. More critically, if renewable development slows, the energy mix could shift—impacting wholesale electricity pricing and increasing volatility. In 2024, wind and solar supplied about 17% of U.S. electricity—enough to power over 70 million homes. Total renewable generation, including hydro and others, reached 21%. Reducing support for renewables threatens grid reliability by slowing the growth of clean, distributed energy sources.
Alongside these federal rollbacks, many states still have Renewable Portfolio Standards (RPS)—laws that require electricity suppliers to get a certain percentage of their power from clean sources like solar, wind, or hydro. But with fewer renewable projects coming online, it will become increasingly difficult for suppliers to meet those targets. This supply crunch will likely drive up demand for Renewable Energy Certificates (RECs)—tradable credits that verify electricity was generated from renewable sources. As REC prices rise, suppliers may face higher costs to comply with state rules or risk paying penalties. These added costs are often passed on to commercial and industrial customers through increased electricity prices.
At the same time, continued federal tariffs on imported metals are another hidden cost. New 50% tariffs on steel and aluminum (effective June 4, 2025) and on copper (starting August 1, 2025) are driving up prices of essential materials used to build grid infrastructure—such as transmission towers, cables, transformers, substation parts, and battery systems. These tariffs are expected to add roughly $50 billion in costs to U.S. metal imports. Manufacturers are unlikely to absorb these costs, which will flow through to energy developers, grid operators, and power suppliers. Ultimately, commercial and industrial energy users will likely see these costs reflected in higher delivery charges and less efficient infrastructure upgrades.
Where Are Prices Headed?
While we can’t predict the future with certainty, everything we’re seeing suggests electricity prices are on an upward trajectory. The combination of reduced federal incentives, rising infrastructure costs, and supply constraints all point in one direction. Based on current trends and policy signals, we believe higher prices are far more likely than lower ones—but of course, unexpected shifts can always occur.
One area that deserves even more attention in this outlook is the role of extreme weather. As the pace of emissions continues unchecked and policies move away from decarbonization, climate-related disruptions are becoming more common—and more expensive. These aren’t theoretical risks. They’re real, growing financial burdens that will increasingly show up in energy markets, insurance rates, and long-term planning costs.
The Growing Financial Toll of Extreme Weather
The last ten years have shown a clear pattern: climate conditions are becoming more unstable, and the economic consequences are escalating. Scientists agree that the increase in extreme weather is largely driven by human activities, especially greenhouse gas emissions. Temperatures have risen consistently over the past decade, with 2023 standing out as the hottest year ever recorded. That heat has intensified wildfires, droughts, and heatwaves around the globe. Stronger and longer-lasting storms are now more common, fueled by warmer ocean temperatures. Coastal regions in the U.S. are especially vulnerable, with hurricanes and tropical systems causing widespread damage and prolonged outages. Flood risks have also grown. More frequent and intense downpours are overwhelming storm systems and driving up recovery costs in both cities and rural areas. At the same time, prolonged droughts—especially in the Western U.S., parts of Europe, and Australia—have created ideal conditions for historic wildfire seasons, destroying homes, infrastructure, and entire ecosystems. Meanwhile, rising sea levels caused by accelerated glacial and polar ice melt are threatening coastlines, increasing the risk of flooding and long-term displacement. The Intergovernmental Panel on Climate Change (IPCC) has made it clear: without serious efforts to reduce emissions and adapt our infrastructure, these risks will keep growing. And so will the costs—on energy systems, on businesses, and on everyday consumers.
Bottom Line:
The OBBBA signals a retreat from policies aimed at reducing carbon emissions and modernizing the grid. As clean energy incentives shrink, infrastructure costs rise, and extreme weather worsens, businesses can expect increasing volatility and higher energy bills. Eventually, someone will pay for the consequences of inaction—and we’d prefer it not be our customers.
Proactive risk management, guided by experienced energy advisors, will be critical in navigating this new era. Now more than ever, energy strategy needs to go beyond short-term savings and focus on long-term resilience.
