Impact of Economic Pressures on Renewable Energy

This record-breaking demand for electricity in the United States is being propelled by the expansion of data centers and the ongoing electrification of various sectors, including transportation. Such growth has intensified the requirement for new generating capacity while concurrently driving up capital costs. According to Lazard’s findings, the levelized cost—representing the average expense of producing a unit of electricity over a power plant’s operational lifespan—for utility-scale solar has climbed to a range of $40-$98 per megawatt hour, up from the previous year’s range of $38-$92 per MWh. The firm noted that data centers are a primary driver of this capacity need, which in turn impacts the overall capital costs of development.

Factors Driving the Increase in Development Expenses

Samuel Scroggins, who serves as the head of renewables and sustainable infrastructure at the firm, noted that the levelized Solar Power Costs, along with storage costs, have risen due to several influential factors. These include elevated interest rates and inflationary pressures stemming from tariff pass-throughs. Additionally, the repricing of supply chains as they transition away from China toward other regions, such as Southeast Asia, has contributed to the upward trend. Even with these shifts, renewable energy options like onshore wind remain a primary choice for new capacity. Onshore wind costs also saw an increase, moving to a range of $37-$99 per MWh from the prior $37-$86 per MWh.

The report emphasizes that even when factoring in the expenses required to back up intermittent renewable energy to maintain grid reliability, solar and wind projects remain broadly competitive against new gas-fired options. This highlights the significant role that renewable energy is expected to play in addressing the nation’s rising power needs while maintaining grid reliability. Meanwhile, the levelized cost for electricity generation over a plant’s operational lifespan for combined-cycle natural gas plants rose to between $51 and $129 per MWh. These natural gas plants remain a functional choice for utilities and developers due to their consistent power output, even as the industry navigates a complex landscape of Solar Power Costs.

Changes in the National Generation Mix

As electricity demand accelerates, the composition of the nation’s energy sources is anticipated to shift. The EIA indicates that natural gas will likely decrease its share of the generation mix from 40% in 2025 to 39% across 2026 and 2027. During the same period, coal’s contribution is expected to slide from 17% to 15%. Conversely, renewable output is poised for a significant climb, rising from approximately 24% in 2025 to 25% in 2026, and eventually reaching 28% by 2027. Nuclear energy is projected to fluctuate slightly, moving from 18% in 2025 to 19% in 2026 before returning to 18% in 2027. In the natural gas sector, although residential, commercial, and industrial sales are expected to decline slightly from previous highs, the volume used specifically for power generation is projected to rise to 35.8 billion cubic feet per day (bcfd) in 2026.

Infrastructure Demands and AI Integration

The rapid escalation of computing power requirements is fundamentally reshaping the grid’s physical footprint. Between 2020 and 2025, the power density of AI servers increased elevenfold, with further growth anticipated by 2027. Modern server racks can now consume as much energy as dozens of residential homes, placing intense pressure on local grids and occasionally requiring utilities to maintain fossil fuel plants longer than originally intended. To manage these loads, operators are increasingly investing in grid batteries and on-site storage solutions. The financial scale of this transition is vast; capital spending by major technology firms exceeded $400 billion in 2025 and is projected to increase in 2026, a rate of investment that currently outpaces global spending on oil and gas production. Despite ongoing research into efficiency methods, such as a new MIT technique for predicting AI workload energy draw, the industry faces significant challenges in ensuring generation keeps pace with the rising U.S. power consumption and avoids potential shortages in data center clusters by 2027.

The US wind industry also faces stiff competition from other sources of renewable energy. Solar power and battery storage are currently outpacing wind in terms of new annual capacity additions. Experts note that solar technology is generally cheaper and faster to install, which is a vital advantage as demand grows from energy-intensive data centers. Additionally, the geographic locations suitable for a large-scale wind farm are becoming increasingly limited. Many prime onshore areas, such as the Texas panhandle, have already been heavily developed, leaving fewer sites where installing massive turbines remains economically viable.

Political and regulatory hurdles have further complicated the landscape for any new wind farm project. The current administration has implemented several measures to restrict development, including an executive order aimed at halting approvals on federal lands and waters. While some of these decrees have been challenged in court, other obstacles remain, such as alleged delays in security reviews by the Pentagon. David Carroll, chief executive officer of Engie North America and chair of the American Clean Power Association, stated that the difficulty in securing permitting approvals has left the sector in a precarious state. “You’ve got capital investments that are just frozen,” Carroll remarked, noting that many boards are now questioning the feasibility of future domestic projects. While existing stalled projects may move forward, the high risk profile is currently deterring significant new investment in turbines and infrastructure. Consequently, the lack of timely permitting approvals and the struggle to integrate with power grids continue to hinder the expansion of renewable energy across the country.

The move comes as data centers continue to drive electricity consumption to unprecedented levels, creating challenges for power systems in multiple regions. According to FERC, the objective is to establish clearer procedures for connecting major energy users and ensuring that the infrastructure required to serve them is funded appropriately. The regulator said the review is intended to support faster deployment of facilities tied to artificial intelligence development while reducing risks to grid stability. FERC Chairman Laura Swett described the issue as a national priority, stating, “This is the biggest priority our country is facing at the moment.” Referring to efforts to expand AI-related infrastructure, she added, “This is a race against time, and we are going to win.”

Under the orders, grid operators and transmission owners have 60 days to explain why their current approaches remain appropriate or outline potential revisions across five key areas. These include creating transparent procedures for connecting large electricity users and determining how infrastructure expenses should be allocated. The review of Data Center Power Rules also encourages grid operators to consider frameworks that allow large customers to develop dedicated power sources, including their own generation facilities, and to deploy advanced technologies that improve the efficiency of existing networks.

Industry stakeholders broadly welcomed the initiative. Robert Montejo, a partner at Duane Morris representing data center developers and power companies, said, “The grid and ⁠prior policy were not built for the pace and scale of demand we’re seeing from AI infrastructure, and FERC is signaling that standing still is no longer an option.” Environmental groups also responded positively. The Sierra Club stated, “We are energized that there is a clear path forward to adopt responsible large load interconnection policies that safeguard reliability, improve transparency, and embed affordability and ratepayer protections for American households.” Alongside the review of Data Center Power Rules, FERC said it would no longer automatically assess cumulative environmental impacts in rulemaking conducted under the National Environmental Policy Act. Swett said, “We are no longer going to waste valuable staff and applicant time and money doing an analysis that is not necessary under the law.”

The dispute centered on a presidential memorandum issued on January 20, 2025, titled “Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects.” Section 2 of the memorandum, widely referred to as the offshore wind ban, directed federal agencies to halt all processing and issuance of permits, approvals, and other authorizations for offshore wind projects. This freeze applied even to areas already under active leases and was tied to an indefinite comprehensive review of offshore wind activities. It also instructed the Department of Interior to assess offshore wind leasing and permitting practices, including environmental review processes under the National Environmental Policy Act.

A coalition of 17 states and the District of Columbia, led by New York, filed a legal challenge on May 5, 2025, in NY et al. v. Trump. The plaintiffs argued that the halt to permitting and leasing harmed the economic and environmental interests of the states and DC, overstepped executive authority in managing federal waters for clean energy development, and violated established legal procedures.

Ten days after the lawsuit was filed, the National Wildlife Federation and nine other environmental non-profits submitted an amicus brief in support of the plaintiffs. The brief stated that “the Agencies simultaneously are seeking to gut the federal wildlife protection that permitting processes are intended to safeguard, and to fast-track non-wind projects that kill and harm species.”

Amber Hewett, senior director of offshore wind energy at the National Wildlife Federation, emphasized that the court’s decision affirmed what advocates had long maintained. “Arbitrary halts to responsible offshore wind development interfere with efforts to protect wildlife, reduce carbon emissions, and address the rising demand for affordable and reliable energy,” Hewett said. “Offshore wind leasing and development is subject to rigorous review and public comment processes to ensure wildlife and communities are protected. The Court’s decision upholds what we have known: that this ban was a baseless overstep of authority impeding responsible offshore wind development, a critical solution to safeguard wildlife and people from the effects of climate change.”

On December 8, 2025, Judge Patti B. Saris issued her decision in the case, ruling that the implementation of the offshore wind ban under Section 2 was unlawful and vacated it in its entirety. The federal government filed notice of appeal on February 17, 2026. However, upon consideration of the appellants’ agreement, the First Circuit Court entered a judgment ordering that the government’s appeal be voluntarily dismissed. The judgment is now final.

New York Attorney General Letitia James released a statement following the resolution. “New York’s wind projects will create jobs, strengthen our economy, and bring down New Yorkers’ electric bills. My office will continue to fight any attempt to undermine that progress,” James said.

Massachusetts Attorney General Andrea Joy Campbell noted that her state has directed hundreds of millions of dollars into offshore wind development, “and the court correctly protected those critical investments from the Trump administration’s unlawful order.” Campbell added that the administration’s decision to drop the appeal and the court’s formal dismissal “will preserve well-paying clean energy jobs and ensure access to reliable, affordable energy as Massachusetts continues to advance its climate goals.”

The conclusion of this case secures the legal standing of existing offshore wind leasing and permitting activities, removing the federal court challenge that had cast uncertainty over the sector’s future along the Outer Continental Shelf.

The Rabbit’s Foot Solar installation, situated in Bowie County, Texas, commenced on-site construction during the early part of this year. Upon completion, projected for the end of 2027, the project will serve as a critical component in Meta’s broader commitment to align its operational energy requirements with 100% clean energy sources. The facility’s generation capacity will directly contribute to this sustainability milestone for the technology company.

The Meta and RWE Solar partnership has already materialized through several significant projects. Previously executed agreements encompass the 274-MW Emily Solar project in Illinois, the 100-MW Lafitte Solar initiative in Louisiana, and the 200-MW Waterloo Solar facility in Texas. These three projects collectively represent 574 MW of generation capacity. With the addition of Rabbit’s Foot Solar, the cumulative portfolio now spans 872 MW across all signed agreements over the previous two years, demonstrating sustained commitment from both organizations toward renewable energy expansion.

Ingmar Ritzenhofen, chief commercial officer for RWE Americas, provided insight into the partnership’s significance: “Our partnership with Meta continues to grow as we work together to deliver reliable power that supports their energy commitments. This agreement for the Rabbit’s Foot Solar project demonstrates how collaboration can drive meaningful economic growth and community benefits. By investing in Bowie County, we’re not only creating approximately 200 local construction jobs, but also generating substantial long-term tax revenue that will help support schools, technical education programs, emergency services, and critical road maintenance and infrastructure improvements across the community.”

The corporate power purchase agreement structure allows both organizations to achieve complementary objectives. For Meta, the renewable energy infrastructure supports long-term sustainability targets and operational efficiency. For RWE, such agreements enable predictable revenue streams and capacity planning across its generation portfolio.

Amanda Yang, head of Clean and Renewable Energy for Meta, outlined the company’s perspective on the expanded partnership: “Through our continued partnership with RWE, the Rabbit’s Foot Solar project will bring new generation to the Texas grid while creating local jobs and delivering lasting economic benefits to Bowie County. We’re proud to deepen our collaboration with RWE with our expanded portfolio.”

RWE operates as a substantial power generation operator throughout the United States, currently maintaining 13 GW of generation capacity across installations in 27 states. The renewable energy developer has articulated ambitious growth plans, targeting an additional 9 GW of net new capacity additions by 2031. This expansion roadmap positions RWE to meet growing demand from technology companies and other corporate entities pursuing clean energy solutions through corporate power purchase agreements and similar mechanisms.

The Rabbit’s Foot Solar facility represents a continuation of this strategic expansion while simultaneously fulfilling Meta’s clean energy commitments through the ongoing Meta and RWE Solar partnership. The project’s anticipated completion by year-end 2027 aligns with both organizations’ longer-term operational and sustainability objectives.

To support the move, President Trump invoked the Defense Production Act, a legal mechanism that allows the US president to expand production in industries deemed critical to national security. The announcement coincided with the effective blockade of the Strait of Hormuz since early March and rising energy prices in the US linked to the ongoing conflict with Iran.

Of the total $700 million committed, $500 million has been earmarked to establish a new export centre in California and to preserve 14 existing coal plants operating across Kentucky, North Carolina, Indiana, Tennessee, Arkansas, Arizona, Oklahoma, North Dakota, Wisconsin, and West Virginia. The remaining $200 million will fund the construction of new coal plants in Alaska and West Virginia the first such new facilities to be built in the US since 2013. Earlier this year, the US had also directed existing coal plants to continue operating beyond their originally planned retirement dates, a significant development for the North American energy sector.

Similar policy shifts are also unfolding in Europe. Italy has announced it will delay the permanent closure of its coal-fired power plants until 2038, pushing the original deadline back by 13 years. In Germany, Chancellor Friedrich Merz has indicated the country may also need to delay planned shutdowns. “We may even have to keep existing coal-fired power stations connected to the grid for longer, should the energy crisis continue, and a shortage actually arise,” Merz stated.

While the ongoing Middle East conflict has accelerated coal’s redeployment in the energy mix, its broader resurgence can also be traced back to the COVID-19 pandemic and the intensification of the Russia-Ukraine conflict in 2022. Both events exposed significant supply chain vulnerabilities across Europe and the wider world, prompting governments to reassess their long-term energy strategies. Data from the International Energy Agency (IEA) confirms that global coal consumption has only grown since 2020, reversing a previous decline.

No assessment of global coal consumption is complete without examining the roles of China and India. According to the IEA’s Global Energy Review 2024, China’s coal demand rose by 1.2%, setting a new record. The country now consumes approximately 40% more coal than the rest of the world combined, largely for electricity generation, with Chinese power plants accounting for more than one-third of global coal use.

India, the world’s second-largest coal consumer, recorded an all-time high growth in coal demand of 5.5% in 2024. Coal power generation in India grew by 5% the same year, directly in line with rising electricity demand.

Southeast Asia emerged as the world’s third-largest coal-consuming region in 2023. In 2024, coal consumption in the region increased by over 8%, driven primarily by Indonesia, Vietnam, and the Philippines. Indonesia’s growth was largely linked to coal’s expanding role in the metallurgical industry, while coal power generation served as the primary driver in Vietnam and the Philippines.

A critical, and perhaps surprising, factor in the coal industry revival is the accelerating global demand for electricity, with artificial intelligence and data centres playing a central role. Research from Lawrence Berkeley National Laboratory projects that by 2028, more than half of all electricity consumed by data centres will be dedicated to AI workloads.

The IEA reports that data centre electricity use reached 415 terawatt-hours (TWh) in 2024, representing nearly 1.5% of total global power consumption. This figure reflects a sustained growth trend, with data centre electricity usage expanding at a rate of 12% per year over the past five years a trajectory that continues to place upward pressure on overall energy demand worldwide and, by extension, on coal consumption as a reliable baseload power source.

At full operation, the BigBeau facility generates enough electricity to serve up to 64,000 typical households across California. The project is expected to avoid more than 315,000t of carbon dioxide emissions annually, an amount comparable to the yearly emissions produced by 67,000 passenger vehicles. The development forms part of a wider partnership between EDF and Masdar that includes seven renewable energy projects across the US with a combined capacity of 1.1GW. Over more than 35 years, EDF power solutions North America has developed 26GW of wind, solar and energy storage projects, spanning utility-scale renewable developments and electric vehicle charging infrastructure.

EDF power solutions North America origination and power marketing associate director Jacqueline de Fresart said: “We are very pleased to support Southern California Edison’s clean energy goals and provide reliable and efficient energy to its customers from our operating BigBeau project.

“We are excited to partner with SCE again and look forward to more opportunities together.”

Masdar, which has been active in the US since 2019 and has invested several billion dollars in the country, is targeting the development of up to 25GW of projects across the US over the next decade. Masdar Americas director asset management Dustin Priemer said: “This agreement forms a part of Masdar’s growing portfolio in the US, reflecting our focus on scaling reliable, utility-scale clean power.

“We are appreciative of our growing partnership with Southern California Edison and our shared commitment to investing in new generation capacity to meet growing energy demand in California.”

The transaction involves the assumption of $750 million in senior secured project debt along with $250 million in equity. To fund the cash component of the deal, TransAlta has launched a concurrent C$350 million bought deal common share offering, which involves the issuance of 18.2 million common shares priced at C$19.20 per share. The equity offering is being underwritten by CIBC Capital Markets and RBC Capital Markets, with closing expected on or around 9 June 2026, subject to customary approvals.

TransAlta projects that the Colorado gas plants acquisition will contribute approximately $80 million in adjusted earnings before interest, taxes, depreciation and amortisation on an annual basis, along with free cash flow of around $33 million per year. The company also noted the potential for further increases through availability incentive payments. The deal is expected to deliver immediate low-to-mid single-digit accretion to free cash flow per share.

Mountain Peak Power has been operational since September 2025, while Canyon Peak Power is expected to reach commercial service in the third quarter of 2026. Both Colorado gas plants are secured under long-term tolling agreements with investment-grade customers for more than 25 years, with full pass-through provisions covering fuel, operations and maintenance, and capital costs a structure that significantly reduces operational risk for TransAlta.

TransAlta president and CEO Joel Hunter commented on the deal, stating: “This acquisition adds new, high-quality, low-risk assets in a core market for us. It strengthens our business risk profile, is immediately accretive to our free cash flow per share and establishes a strategic foothold in Colorado, a state we believe has accelerating growth potential.”

Hunter further noted: “These assets will generate long-term contracted cash flows for redeployment into other growth prospects such as Centralia and Alberta data centres, and I am pleased with the continued meaningful progress on both projects.”

Completion of the natural gas acquisition remains contingent on Canyon Peak Power achieving commercial operation status and on receiving customary regulatory approvals. TransAlta expects to close the purchase early in the fourth quarter of 2026.

The newly released Request for Qualifications builds on Requests for Information issued by the authority last year, to which more than 30 entities responded among them 23 potential developers or partners and eight Upstate New York communities. The RFQ is designed to identify a qualified set of developers capable of delivering an advanced nuclear generation project through two possible technology pathways: a large-scale reactor, “such as the AP1000,” and/or a small modular reactor “such as the BWRX-300.”

Respondents are required to present “credible pathways” to deliver at least 1 GW of advanced nuclear capacity in Upstate New York. These submissions must address technology readiness, siting and permitting strategy, schedule and cost assumptions, ownership structures, and partnership models. Firms that are successfully qualified will subsequently be invited to take part in a future Request for Proposal process.

The authority confirmed it would consider so-called nth-of-a-kind Generation III+ or Generation IV technologies, on the condition that a first-of-a-kind project either by the respondent or by another owner or developer is “at or beyond First Nuclear Concrete by early 2030.” The selected pathway must also “demonstrate a credible path to both produce 1+ GW of energy and start construction before 2033,” a requirement tied to eligibility for investment tax credits under the US Inflation Reduction Act. First-of-a-kind technologies and micro modular reactors fall outside the scope of this initiative. All bidders are expected to hold “commensurate experience,” and the submission deadline is 26 June.

The second solicitation takes the form of a Request for Applications directed at eligible training providers based in New York State. Selected providers will be able to apply for funding to develop and deliver technical training programmes under the Nuclear Energy Workforce Training initiative. The deadline for submissions under this RFA is 31 July.

New York Governor Kathy Hochul commented on the announcements, stating: “Nearly a year ago, I called on the Power Authority to lay the groundwork for the next era of emissions-free power in New York as part of my all-of-the-above approach to energy. The solicitations announced today will help ensure New York is poised to lead the nation in new nuclear development, that along with renewables, will provide needed power in the face of increasing demand to keep the lights on while helping keep costs down. By taking a proactive approach, we are preparing our state to take advantage of the opportunities associated with advanced nuclear, which will provide round-the-clock reliable clean energy while cultivating the partnerships needed to bring the project from concept to concrete.”

New York Power Authority President and Chief Executive Officer Justin Driscoll added: “New York needs reliable, around-the-clock clean power to meet growing energy demand, sustain economic momentum, and achieve a clean energy economy. These solicitations will help NYPA establish the roadmap for deploying the first new nuclear facility in New York in a generation that will deliver the dependable, emissions-free power we will rely on for decades to come.”

New York currently has four nuclear reactors in operation, all run by Constellation Energy, which together account for approximately 21.4% of all electricity generated in the state and 41.6% of its carbon-free electricity supply, according to data from the Nuclear Energy Institute. The State of New York has already backed the continued operation of these facilities two units at Nine Mile Point and the single-unit Ginna and Fitzpatrick plants by formally recognising their zero-carbon attributes within its clean energy mandate.

The two pressurised water reactors at the Indian Point plant were shut down ahead of schedule in 2020 and 2021 respectively, following a settlement agreement between the plants’ then-owner Entergy and the State of New York. Earlier this year, New York Congressman Mike Lawler called for those units to be returned to service.