Cuts to renewable energy tax credits in the budget bill backed by President Donald Trump will likely increase demand for natural gas this decade to generate electricity, as those tax credits would otherwise subsidize the build-out of competing renewable generation infrastructure, according to analysts and industry insiders.
Under the landmark bill, which was passed Thursday by the House after clearing the Senate on Tuesday, wind and solar projects only qualify for the clean energy tax credits in former president Joe Biden's Inflation Reduction Act if they begin construction within the next 12 months or are placed into service by the end of 2027.
The accelerated timelines for renewable energy infrastructure "will likely slow the growth of renewable capacity," said FactSet senior energy analyst Trevor Fugita. "The legislation is likely to shift the focus from new renewable generation to new natural gas-fired generation, especially as AI data centers drive energy demand higher," he said.
Toby Rice, chief executive of EQT, the second-largest US gas producer by volume, in an interview with Argus last week said the bill's effort at "slowing down some renewables could easily add another 1.5-2 Bcf/d" of US gas demand by 2030, especially as coal-fired power plants retire.
"If solar and wind investments decrease, that [power] demand is not going away," said Rice, who identified the rollback of clean energy tax credits as key to the investment thesis for his company, alongside surging power demand for data centers and manufacturing and declining associated gas supply amid weak oil prices. EQT expects to produce 6-6.3 Bcf/d of natural gas equivalent this year.
Under a previous House-passed version of Trump's One Big Beautiful Bill that required wind and solar projects to enter service by the end of 2027 to be eligible for IRA tax credits, Energy Aspects projected utility-scale solar installations falling from 32.9 GW in 2024 to 27.5 GW in 2027 and 20 GW by 2029. With the Senate's revised bill offering developers a "safer deadline" of alternatively securing the credits by beginning construction within 12 months of the bill's passage, the consultancy now expects a less steep downward trend through 2029, Energy Aspects head of North American power and emissions Michael Lawn told Argus. But utility-scale solar installations would have been on an upward trend through the end of the decade in the absence of the IRA rollback.
Jason Grumet, chief executive of the trade group American Clean Power Association, on Tuesday lamented the Senate-passed bill's "very aggressive" 12-month phase out of clean energy tax credits, calling the bill "a step backward for American energy policy."
