Welcome to Womble Perspectives, where we explore a wide range of topics, from the latest legal updates to industry trends to the business of law. Our team of lawyers, professionals and occasional outside guests will take you through the most pressing issues facing businesses today and provide practical and actionable advice to help you navigate the ever changing legal landscape.
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Today, we’re diving into the ripple effects of the One Big Beautiful Bill Act and what it means for the data center sector.
Enacted on July 4th, 2025, One Big Beautiful Bill Act introduced sweeping changes to the U.S. energy landscape. While data centers weren’t directly targeted, the law’s amendments to the tax code—especially around decarbonized energy—are already reshaping how developers think about power procurement.
Let’s start with the big picture. One Big Beautiful Bill Act strengthens traditional energy sources like oil, gas, and nuclear. It delays the methane emissions fee until 2035 and positions nuclear as a cornerstone of U.S. energy strategy. But it’s not all good news—especially for renewables. The law begins phasing out key tax credits for wind and solar, which could stall many early-stage projects. On the flip side, credits remain for nuclear, geothermal, hydropower, and energy storage.
Now, why does this matter for data centers? These facilities are power-hungry—requiring firm, scalable, and low-carbon electricity. But connecting to the grid can take years. That’s why many developers are turning to “behind the meter” setups, sourcing power directly from nearby plants. It’s fast, but it’s also forcing regulators to play catch-up.
Solar and wind are quick to deploy and clean, but they’re intermittent. Without storage, they can’t provide the reliable power data centers need. And storage isn’t cheap. Plus, land requirements for co-located solar or wind farms are steep—both in size and cost.
Still, there’s hope. The ITC for energy storage remains intact, encouraging developers to pair renewables with storage. But new IRS guidance complicates things, eliminating the 5% safe harbor for most systems—except those under 1.5 MW. Fortunately, this doesn’t apply to storage tech.
Another wrinkle? The new Foreign Entity of Concern restrictions. With China dominating the lithium-ion battery supply chain, qualifying for tax incentives just got harder. But the storage sector is evolving, with alternative technologies gaining traction.
Looking ahead, One Big Beautiful Bill Act may shift investment away from solar and wind toward nuclear and geothermal. That could drive innovation and lower costs over time. Ultimately benefiting the data center sector with more affordable, reliable baseload energy.
As regulations continue to evolve, our team is keeping a close eye on developments. If you have questions or need guidance, feel free to check out the links in our show notes.
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