Future US Power Supply Redefined by Elements of US Budget and an Executive Order

It might be the dog days of summer, but July was a busy time in D.C.

Projections for the utility and power sectors were upended by the recently passed One Big Beautiful Bill Act and an executive order (EO) directed at energy sources. In combination, they introduced accelerated phase-outs for, and potentially stricter rules around, tax credits for solar and wind energy projects associated with the Inflation Reduction Act of 2022 (IRA).

For an industry that was projected by S&P Global to draw 50% of its power from renewable energy by 2030 (from 29% in 2022), the changes have significant implications for US power capacity.[1]

Not the worst-case scenario…

In a sector bookended by old and new economy pressures, the 2025 legislation did provide much-needed near-term certainty for the utility and power industries. For example, solar and wind projects that are completed by 2027 (potentially even longer-dated) are safe from new tax credit rules. In my view, by providing more clarity the budget allows the renewables market to adjust its economics (e.g., power purchase price agreements) on future projects.

But not the best

The reprieve from uncertainty was short-lived. An EO signed on 7 July threw cold water on the utility and power sectors.[2] It gave discretion to the Treasury Department to modify the rules that govern the eligibility of projects to receive tax credits beyond 2027.

The most likely to be scrutinized is the “safe harboring” provision. Safe harboring refers to measuring a project’s degree of completion as a factor in claiming certain tax credits. Under current rules, as long as a project meets at least a 5% completion hurdle prior to 2027, then the project is eligible to benefit from IRA tax credits—even if it’s not fully completed until after 2027. The EO provided the Treasury with 45 days to examine the current rules and announce any modifications.

Takeaways: Supply, prices, earnings and capacity mix

Supply growth derailed: Based on forecasts from S&P and BloombergNEF, the US is expected to add approximately 500 gigawatts of solar/wind/battery storage capacity through 2030 compared to the total current installed capacity of roughly 1,200 gigawatts. The new legislation represents a material change for that growth trajectory and has implications for infrastructure investments across the spectrum, including utility and power transmission and distribution assets as well as the burgeoning domestic renewable manufacturing sector (e.g., solar panels).

Source: S&P Capital IQ, data as of 25 July 2025.

Future capacity is based on actual planned/under construction projects, and not based on any projections of unreported new developments or retirements. S&P Global Market Intelligence uses the best available data to estimate the power market region for each power plant unit and electric utility. Estimates are based on ownership, purchase power agreements, interconnected utilities, membership lists (load serving or transmission owning), and geographically based public information. Power plant units which belong to more than one power market region are allocated on a percentage basis of their operating capacity. Companies which belong to more than one power market region will be wholly placed into each region to which they are assigned.

Some or all of the information shown may be dated, and, therefore, should not be the basis to purchase or sell any securities. The information is not intended to represent any actual portfolio managed by Loomis Sayles.

Higher consumer prices: Electricity demand is showing no signs of decelerating. Solar and wind are the only new sources of power that can come online in the near term to help keep markets balanced. Tax credits were the tool used to accelerate construction while keeping consumer bills as low as possible.

Earnings more difficult to project: We suspect utility and power management teams will take a cautious view of updating the market with firm plans until the Treasury provides new rule guidance. Vertically integrated utilities with large renewable project pipelines should be impacted to a lesser degree (or at least less directly) with customer costs/affordability the key item, in our view.

Uncertain path for US power mix: We could see coal power plant retirements moderate further. A rollback of regulations, plus higher power prices, may incentivize more coal plants to remain open and continue to be in the overall capacity mix going forward. This would likely have implications for consumer prices and ESG/sustainability.

What we are watching

A mix of factors will likely configure supply and demand in the utilities and power supply industries. In our view, the three most important factors to watch will be:

• The implications of potential rule changes put in place by the Treasury after its evaluation period;
• New or modified EPA regulations directed toward keeping coal plants operating longer than current regulations would dictate; and
• The outlook for US power demand, which is heavily reliant on investments in technology/artificial intelligence.

[1] S&P Global, as of 25 July 2025. Renewables include solar, water, wind, battery storage and other.

[2] Executive Order, 7 July 2025. “Ending Market Distorting Subsidies for Unreliable, Foreign Controlled Energy Sources,” Whitehouse.gov.

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