Energy Transition: What a difference a year makes – or does it?

By Stephen V. Arbogast

It is difficult to remember how things looked for the Energy Transition just twelve months ago.  In August 2024, the US was in the midst of a close-run presidential race.  In fact, the nomination of Vice-President Kamala Harris to run in place of Joe Biden had revived Democratic chances.  V.P. Harris emerged from the Chicago convention having erased Donald Trump’s lead and taken a small advantage in several of the all-important battleground states.  A key plank in the Democratic program was the Inflation Reduction Act (IRA).  Both President Biden and nominee Harris pitched it as one of the administration’s cardinal successes.  There was every reason to believe that a Harris victory in November would lead to continued efforts to extend a subsidy and regulatory regime dedicated to promoting wind, solar, storage and electric vehicles.

Scroll forward to August 2025.  Donald Trump sits in the White House and Republicans control both Houses of Congress.  The One Big Beautiful Bill (OBBB) is law (see the summary also posted on this website and on our LinkedIn page).  Wind and Solar subsidies face phase-outs.  Tax credits for Battery Electric Vehicles (BEVs) die next month.  Rooftop solar support is history.  Meanwhile, the fossil fuel industry received a postponement of the tax on methane emissions, a reboot of federal oil & gas leasing extending from Alaska to the continental US offshore and streamlined permitting for LNG exports.  The president himself wraps US hydrocarbon sales into tariff negotiations.

An apparent reversal of this magnitude requires some assessment.  Below we lay out some of the less conspicuous aspects of these policy reversals and hopefully provide a balanced perspective on how much has changed.

#1: The OBBB didn’t kill Federal support for Transition, it changed the Focus

If the Trump admanistration and its Congressional supporters really believed ‘Climate Science is a Hoax,’ they would have killed every energy subsidy contained in the IRA.  The OBBB’s permanent extension of income tax credits created a huge deficit problem.  Completely eliminating the IRA’s subsidies would have been an easy deficit reduction step if the administration truly believed climate risk is no issue.

They didn’t do that.  A different philosophy is at work, the tell-tale sign of which is the OBBB’s extension of support for battery and other forms of power storage.  The credits available for existing and new nuclear power were maintained and strengthened.  Carbon capture tax credits were extended and improved if the captured CO2 is utilized in Enhanced Oil Recovery (EOR).  Other forms of ‘clean, firm power, e.g., geothermal received long term backing.

This heterogeneous outcome suggests more of a different approach than a scorched earth policy.  This can be analyzed through two different lenses: 1) policy philosophy and 2) political realities.

In terms of policy, three ideas seem to be at work.  The first is to support cleaner energy sources that are also reliable and dispatchable.  Wind and solar power are implicitly critiqued for not offering these characteristics – their intermittency having made grids less reliable and more expensive ‘all-in.’  The OBBB’s support for storage also suggests a view that utility scale wind and solar are now ‘mature technologies’ but storage is not.  Wind and solar have advanced far down their experience curves.  They are now low cost in terms of manufacturing and installation.  Storage remains stuck at 4-hour discharge.  Extending battery capabilities towards 10 hours would go far to remedy renewable’s deficiencies.

The second policy idea is to support the best possible reconciliation between fossil fuel production and decarbonization.  The carbon capture credits are targeting this and especially keeping an eye on the power industry’s need to run natural gas plants far into the future.  The enhanced EOR subsidy looks to enable the fossil fuel industry to demonstrate better capture technologies with industry-scale operations located near oil production sites.  Both Occidental Petroleum in west Texas and ExxonMobil on the Gulf Coast are progressing such projects and lobbied hard for the support.

Finally, a mention is needed as regards nuclear.  This administration sees national security implications in Chinese and Russian domination of international nuclear plant construction.  The facts here are a bit staggering.  Russia’s firm, Rosatom, manages 22 nuclear power plants across seven countries outside of Russia.  It also dominates nuclear fuel supplies for these and many other plants, including in the US. China has 30 reactors under construction with plans to build another 34 units averaging 1 GW each by 2035. China also exports its technology and construction know-how.  The US presence in international nuclear is tiny by comparison.

The administration wants US technology to compete better in this international nuclear game.  It also listens to the tech company leaders as they demand huge amounts of new, firm and reliable clean power to support their AI data center competition.  New nuclear, made available faster than the 14 years it took Georgia Power to build Vogtle 3 & 4, is part of a solution for their needs.

The political realities are that many Republican law makers believe climate risk is a serious issue. Their states have embraced decarbonization.  Texas, a deep-red state, is the leader in wind power and is building copious amounts of solar, storage and some nuclear.  Florida, another red state, is the home of NextEra, America’s leading renewables utility.  North Carolina, a key battleground state, legally requires its utility, Duke Energy, to reach Net Zero by 2050.  With a headcount edge of less than 10 in the House of Representatives, respecting these political facts was essential to getting the OBBB passed.

Summarizing, on closer examination, policy support for a US Energy Transition remains in place.  The new philosophy seems a sound one – supporting firm and reliable clean power sources which need help to get to scale and tapering off support for those which either have matured or will never get to scale.

#2: In U.S. Nuclear, ‘old’ nuclear is ‘new’ Again

For decades the US has been hampering its domestic civil nuclear industry by making it too long and too expensive to build new plants.  As noted, the two Vogtle plants took fourteen years to complete and at a combined cost of almost $35 billion were more than 100% over budget.  Principal contractor Westinghouse went bankrupt.  So did SCANA, the South Carolina utility who attempted to build a duplicate of the Vogtle project.  None of this did the US civil nuclear supply chain, which is in desperate need of rebuilding, any good.

The nuclear technology in question here is known as AP-1000.  It is a large-scale light water reactor with various features intended to enhance safety and dispatchability.  A major US nuclear utility CEO speaking at our Energy Center conference in late 2021 declared large scale nuclear ‘a bet the company’ proposition and stated their firm would never attempt to build an AP-1000.

Hopes then turned to Small Modular Reactors (SMRs).  These run in size from 50 MW-300 MW.  With smaller project budgets, there would be less company-specific financial risk. The modular manufacturing approach promises both faster construction schedules and less tendency towards cost inflation.

SMRs have been in the US limelight for 4-5 years now, but there is still only one SMR design, NuScale’s US 460 (77 MW), approved by the Nuclear Regulatory Commission (NRC).  A new NRC licensing regime designed for SMRs was promised in 2021.  It remains in draft form.  Issuance is now promised in 2027, though the current administration is looking to accelerate that outcome.

Meanwhile, the AI industry burst upon the scene.  Desperate for large blocks of firm electricity, the AI industry is populated by wealthy data companies who also make no secret of their desires for ‘clean power.’  For the moment, they are having to make their peace with natural gas power plants.  A few deals have been crafted envisioning SMR-based electricity in the 2030s.  Many AI competitors cannot afford to wait that long.

Accordingly, some are turning back to ‘old nuclear.’  At least two shut power plants, Palisades in Michigan and Three Mile Island (TMI) in Pennsylvania, are being reopened. TMI’s reopening is scheduled for 2028 and is based on a Power Purchase Agreement with Microsoft as the off taker.  Palisades will reopen this year and supply power to regional utilities.  NextEra is considering reopening the Duane Arnold plant in Iowa with several data centers interested in contracting power.  Finally, the never-completed V.C. Summer plant in South Carolina is under consideration for finishing the construction.

These developments foreshadow a future in which large scale nuclear, like the AP-1000, may return alongside SMRs.  Load growth is now an issue and large scale nuclear can respond to that issue.  SMRs may be tailored to lower demand growth or smaller scale situations, individual customers or niche markets.  The bottom line is that AI load growth has changed the game.  The utility industry is still wary of the financial risk implied by Vogtle-style nuclear, but customer appetite is the new factor.

With the OBBB subsidies to help, if the administration can take some of the schedule and overrun risk out of large scale nuclear and the reopened plants prosper, AP-1000 and the lessons learned at Vogtle and Summer, may not be wasted.

#3 – Energy Policy is being Incorporated into US Geopolitical Strategy

The dizzying pace of Trumpian dealmaking has obscured a startling connection between US energy policy and geopolitical strategy.  The administration is building out America’s status as an energy superpower and then injecting that element into negotiations with friends and foes.

The combined effects of administration licensing and permitting reforms position the US to be the reliable supplier to import dependent countries.  In effect, the US is achieving something of an OPEC-like position – a marginal supplier of oil, natural gas and petroleum products that can be your trusted friend, or someone sometimes compelled to prioritize other goals.  It also puts the US in a position to threaten Russia’s oil & gas export markets and to try to woo China away from its strategic alliance with Putin.

The administration’s cultivation of fossil fuel abundance acts to free up more aggressive foreign policy moves.  It does this by ensuring that energy markets are backed by adequate spare capacity.  This enables the administration to threaten, or even act against, rogue energy producing states.  For decades the US has been a ‘geopolitical taker,’ suffering constraints on its foreign policy to avoid energy supply and price disruptions.  Energy abundance has created the potential for this reversal – for the US to become a geopolitical energy ’shaper.’ The administration has realized this potential and is using it to shape everything from peace prospects in Ukraine and the Middle East to the new terms of trade relations with America’s biggest partners.

This is a topic broad enough to deserve its own discussion.  Director’s Blog XX will explore this nexus between Energy Policy and US Geopolitical Strategy in more depth, including the one area where the US is not dominant – international nuclear power.