US companies are facing a sharp increase in green energy costs as the Trump administration halts renewable tax credits at the same time as cash-rich data centres are snapping up the available supply.
According to a survey of solar and wind developers across the US by LevelTen Energy, a clean energy marketplace, the cost of clean energy power purchase agreements (PPAs) is set to increase by 40 to 120 per cent once Inflation Reduction Act subsidies for solar and wind projects come to a close.
For instance in Texas, PPA prices could jump from $55 per megawatt-hour to $121.
Under US President Donald Trump’s One Big Beautiful Bill, renewable energy projects that start construction after July 4 will no longer be eligible for a Biden-era tax break that has been worth roughly 30 per cent of development costs.
The tax break had helped turbocharge the growth of US renewables projects. According to Wood Mackenzie, US solar capacity almost doubled between 2022 and 2025, jumping from 141 gigawatts to 279 gigawatts. But that growth is now predicted to slow markedly, with the cost of clean energy PPAs expected to soar as developers gain the upper hand in negotiations.
“Ultimately, there is a fixed number of [subsidy eligible] renewable energy projects available on the market,” said LevelTen.
“Once they’re gone, they’re gone.”
The price squeeze comes against a backdrop of rapidly rising energy demand in the US, as the tech giants engage in an AI arms race and as household goods and transport are increasingly electrified.
Meta and Google are the world’s largest buyers of renewable energy contracts in 2026, according to BloombergNEF.
The Energy Information Administration forecasts that US electricity demand will grow between 25 and 50 per cent by 2050.
Large energy users like factories, retailers and data centres buy clean energy PPAs to help meet their sustainability targets, by matching their grid-powered or on-site electricity use — which could be fossil-fuel generated — with renewable power generated elsewhere.
By guaranteeing a buyer for the energy, PPAs give developers the certainty they need to finance and build new projects.
The Trump-led backlash against renewables and the boom in US power demand has made companies less concerned about environmental factors than in previous years. Microsoft is reportedly considering scrapping its 2030 target to match its power use hour by hour, meaning each hour of electricity use would need to be covered by clean power generated at the same time.
Google has warned that reaching its “moonshot” climate goals is becoming more challenging — even while striking a record number of clean energy deals in 2025.
But climate targets have largely not been abandoned, with US companies cognisant that some customers still want to see them reduce their carbon footprint.
“Demand [for clean PPAs] is going to continue,” said Don Leavens, chief economist for the National Electrical Manufacturers Association. “Global corporations have to respect what’s happening globally, not just what’s here in the US.”
Clean energy purchases also help buyers hedge, by giving them a fixed price for electricity so they are less exposed when wholesale prices rise due to fuel costs or demand spikes.
Supply chain issues, labour costs, interest rates and long waiting times to connect to the grid are also pushing up the cost of renewable energy agreements.
According to data from the American Society of Civil Engineers, the cost of transformers has risen 60 to 80 per cent since the start of 2020, while solar labour costs increased 15 per cent in 2025.
“The underlying fundamentals have changed dramatically,” said Mona Dajani of Cooley, pointing to constraints on interconnection, transformers and permitting, as well as higher capital costs.
Some industrial buyers say that as prices shoot up, data centres, which are desperate for as much power as possible and willing to pay sky-high rates for it, are pushing them out of the market for clean energy contracts.
“Hyperscalers will pay a premium, which makes it much harder for manufacturers,” said Paul Cicio of the Industrial Energy Consumers of America.
Solar developers say the influx of AI demand has changed how sellers weigh up prospective buyers.
“The issue comes down to the seller, who says ‘I can sell to any data centre at a higher price, so do I want to sell to a hospital or a utility?’ said Izzet Bensusan, chief executive of Captona, an energy infrastructure investment firm.
“We’re in a very weird place. A market with a small pool of buyers can create deflationary pressure on prices because they have higher bargaining power,” said Nayel Brihi, a corporate energy analyst at BloombergNEF. “But we have booming demand, so a lot of activity might be diverted towards servicing [data centre] clients, crowding out other corporate buyers.”
Corporate buyers are also stepping back from the market due to uncertainty over the Greenhouse Gas Protocol standards which govern how companies report their emissions.
Proposed changes to the rules would make that accounting more granular, possibly requiring companies to show the clean power was generated closer to when and where they used power. Final rules are expected in 2027.
“A larger proportion of buyers are sitting on the sidelines,” said Connor Valaik of LevelTen. “There’s some uncertainty over where [the guidance] will land.”
Corporates may also be betting that power costs will come down if the AI boom cools.
“Something’s gotta give,” said Bensusan at Captona. “Many people just can’t sign that 10-year contract at the current prices.”
