Renewable-infrastructure investors breathed a small sigh of relief on Tuesday after a version of President Donald Trump’s “One Big Beautiful Bill” act passed in the US Senate with conditions more favorable to the sector than its initial draft.
The removal of a proposed excise tax on solar and wind projects marks a win for domestic investors betting on the renewable-infrastructure sector. The tax would have placed a levy on wind and solar projects that source imports from China, the largest exporter of wind and solar components, producing nearly 80% of the world’s solar panels.
“Basically, you have a big fire, you’ve already poured some gasoline on it with some of the changes to the [Inflation Reduction Act], and the excise tax was like throwing dynamite on it,” said Ben Holthus, an investment officer at the Montgomery County Employees’ Retirement System, a nearly $5 billion public fund with 12.4% of its portfolio allocated to ESG investments in the private markets, including renewable energy. “So it’s good that it’s gone; it’s a big deal.”
The US is experiencing an energy shortfall as surging demand for electricity—fueled by AI’s growth and reindustrialization—exceeds the current grid supply from both traditional and renewable energy sources, leading to higher energy prices. Power demand in the US is expected to increase by over 3% each year through 2040, according to estimates from McKinsey.
A slowdown in deal flow
Clean energy stocks rallied on Tuesday in response to the Senate’s approval of the bill, which proposed energy tax credits that are slightly more favorable to the renewable energy industry than those outlined in the initial draft.
Still, the energy sector isn’t free of headwinds. The bill pulls back meaningfully on energy tax incentives implemented under former President Joe Biden’s administration. Additionally, questions surrounding trade policy and interest rates are larger barriers to dealmaking in renewable energy than the bill’s pullbacks in tax incentives, Holthus said.
“We’ve seen it already in our deals,” Holthus said. “All these contracts are being pushed out, pushed out, pushed out.”
Higher tariffs on components like solar panels and batteries are raising the construction and operating costs of renewable energy infrastructure. The trade policy threatens to impose a financial burden on clean energy companies, slow the growth of renewable energy, increase power prices for consumers and businesses and tilt the playing field in favor of fossil fuels in the short term.
A retreat by LPs overseas
Many backers of the US renewable infrastructure sector had been non-domestic pension funds and sovereign wealth managers, who are now adopting a more cautious stance toward the American market. According to two industry sources, many had paused their US investments prior to the bill’s passage.
But in Europe, fundraising gained robust momentum early this year.
In Q1 2025, roughly 80% of capital raised by infrastructure funds—most of which have exposure to energy transition strategies—was committed to European vehicles, and the remaining 20% flowed into funds in North America, according to PitchBook’s latest Global Real Assets Report. European managers EQT and Copenhagen Infrastructure Partners led the quarter, closing the two largest funds during this period.
A closer look at the US market shows that just three energy transition funds were closed in Q1, collectively raising $6.3 billion, according to PitchBook data.
However, these figures may shift as more funds are closed and reported throughout the year, said Anikka Villegas, PitchBook’s senior analyst covering fund strategies and sustainable investing.
“[Foreign investors] are telling [fellow] investors that ‘we feel good that we will eventually start investing again in the US, but we just can’t do it now.’ That ‘eventually’ is a very murky term,” said an executive overseeing current affairs at a US-based investment firm backing clean energy projects.
At the same time, many low-carbon energy sources are produced at higher costs in the US than in other regions, mainly due to higher labor and materials expenses.
A utility-scale solar farm in Europe can be constructed for $0.6 to $0.7 per watt, while the equivalent cost in the US is nearly triple that price, at around $1.5 per watt, according to Izzet Bensusan, CEO and founder of energy transition investor Captona.
Despite uncertainty, domestic investors are still largely optimistic about the potential long-term growth in the US clean energy industry, citing surging demand for power.
“You cannot operate the grid in the United States or meet the demand without introducing renewables,” Bensusan said.
Featued image by Daniel Bosma/Getty Images
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