Despite the Trump administration’s opposition to renewables, solar power will likely remain part of datacenter energy supply mix due to its low cost.
This is according to financial analyst Jefferies, which says in a research note – shared with The Register – that clean energy companies are going “on the offense” and adapting to the changing times in which they find themselves.
That reality includes significant cuts in last summer’s US budget bill to many of the tax incentives that clean energy projects benefited from since the passage of the Inflation Reduction Act in 2022. This followed hot on the heels of an earlier executive order halting all federal approvals for wind energy projects.
However, Jefferies notes the budget bill has created regulatory certainty, with clean energy firms now targeting AI datacenter offtake agreements. Nuclear, gas, and even geothermal are better positioned versus wind and solar to meet this demand, the financial analyst claims, but relatively cheap solar energy will play a role.
The preference among hyperscale datacenter operators for baseload power, typically supplied by gas turbine generation, will likely hold back the growth of wind and solar power purchase agreements (PPAs), it says, but forecasts 2026 will be the year traditional wind and/or solar companies step out of their core competencies and “de-silo” into adjacent and complementary markets.
Energy storage is a likely destination. A previous Jefferies report forecast that battery energy storage systems (BESS) could become a standard feature at datacenters, with hyperscalers viewing it as essential to their energy mix as AI-driven demand for infrastructure continues.
Last year, a study by open research institute the Centre for Net Zero claimed to show that a microgrid comprising offshore wind, solar, and battery storage, backed up by on-site gas-driven generation, will be significantly cheaper for datacenter operators than drawing power from a nuclear small modular reactor (SMR) – one of the tech industry’s latest boondoggles.
Meanwhile, a report published Monday by the Council on Foreign Relations (CFR) says US Congress has rejected extreme cuts in the federal energy research and development budget that were proposed by the Trump administration.
The revised budget “provides hope that the United States will not cede the future of vital energy technologies to China and other global competitors,” CFR says.
New technologies which are cheaper and cleaner than those predominating today are creating markets with an estimated worth of trillions of dollars, it notes, warning that China has seized the opportunity to take the lead in rapidly growing industries like solar panels and lithium-ion batteries.
Consumer pressure may also play a part, according to Jefferies. It says energy affordability remains a key issue ahead of midterm elections this year, with “positive implications” for new solar capacity to offset rising utility rates, yet the Trump administration’s stance on wind and solar remains unchanged.
“Watch this tension play out as the administration tries to balance its hard stance on renewables against voters’ pocketbook pain as the cost of retail energy ticks up,” Jefferies says.
While Washington may prefer to push new nuclear capacity, the timeline for this coming online is too distant to have an impact on utility bills amid midterm elections. ®
