How the 'One Big Beautiful Bill' Will Reshape U.S. Energy

Signed into law on July 4, 2025, the 'One Big Beautiful Bill' (OBBB) isn't just another piece of legislation; it's a fundamental rewrite of America's energy strategy.

The OBBB moves away from the broad, all-of-the-above decarbonization incentives of the 2022 Inflation Reduction Act (IRA). In its place is a highly selective, "America First" industrial policy.

The new law deliberately picks winners and losers, rewarding technologies deemed critical for national security and energy dominance while putting others on a fast track to obsolescence.

Underpinning everything is a formidable new compliance regime—the "Foreign Entity of Concern" or FEOC rules—designed to purge U.S. supply chains of influence from China, Russia, and Iran.

So, what does this mean for key clean energy sectors? Let's break down the new reality.

The Big Winner: Carbon Capture (Especially for Oil & Gas)

If there's one clear champion in the OBBBA, it's Carbon Capture, Utilization, and Storage (CCUS). The law fundamentally transforms the Section 45Q tax credit to favor the oil and gas industry.

• EOR Gets a Massive Boost: The tax credit for using captured CO2 in Enhanced Oil Recovery (EOR)—injecting it into wells to produce more oil—has been raised to match the credit for permanent geologic storage. This removes the financial incentive to prioritize permanent storage, creating a powerful new subsidy for producing fossil fuels with a lower carbon footprint.
• A Lighter Compliance Burden: Crucially, CCUS projects are exempt from the most complex and burdensome part of the new FEOC rules (the "material assistance" test). This makes developing a CCUS project significantly less risky and complicated than a solar or battery project.

The bottom line: The OBBB makes CCUS, especially when linked to oil production, one of the most attractive energy investments in the country.

The Favored Few: Nuclear, Geothermal, and Grid Storage

A select group of technologies has been granted a long, stable runway for growth, protected from the credit cliffs facing wind and solar.

Nuclear Power: The Strategic Asset

Nuclear is treated as a cornerstone of national energy security.

• Existing Plants Preserved: The tax credit to keep the current nuclear fleet running (Sec. 45U) is preserved through 2032.
• New Fuel Rules: After 2027, plants will no longer be able to claim the credit if they use fuel from Russia or China, a direct move to build a secure domestic fuel supply.
• Long-Term Support for New Builds: New and advanced reactors (like Small Modular Reactors) get the full, long-term tax credits available through the end of 2033.

Geothermal: The New Oil Well?

The OBBBA reframes geothermal energy not as a simple renewable energy source, but as a form of resource extraction, aligning its tax treatment with that of oil and gas.

• Oil & Gas Tax Breaks: Geothermal projects can now be structured as Publicly Traded Partnerships (PTPs), opening them up to a vast new pool of investors. They also get to deduct intangible drilling costs, a powerful tax benefit long enjoyed by the fossil fuel industry.
• Stable Credits: Like nuclear, geothermal power projects have a full decade of eligibility for the primary production and investment tax credits.

Battery Storage: A Tale of Two Grids

The law creates a sharp divide between large, grid-scale batteries and smaller, consumer-facing ones.

• Grid-Scale is King: Large, standalone battery storage projects are clear winners, with access to the full investment tax credit (ITC) through the end of 2033. These are seen as essential for grid stability.
• Consumer Credits Vanish: The OBBB terminates the popular tax credits for electric vehicles and residential battery systems after 2025. This demand shock poses a significant risk to the very domestic battery factories the law is meant to support.

The Squeezed Middle: Advanced Manufacturing

The Section 45X manufacturing tax credit has been surgically altered to reward specific business models and technologies.

• Batteries Favored, but with Strings Attached: Credits for battery manufacturing are preserved, but the rules are stricter, requiring more complete assembly in the U.S. to qualify.
• Wind Manufacturing Penalized: In a significant blow to the industry, tax credits for producing wind turbine components will be terminated after 2027.
• "Gigafactories" Encouraged: A new "stacking" rule makes it difficult to claim credits for different components made in separate factories. This heavily favors extensive, vertically integrated facilities where everything is made under one roof.

The New Compliance Challenge: The "FEOC Gauntlet"

This is the most transformative—and challenging—part of the new law. To claim almost any energy tax credit, you must now prove you and your supply chain are free from the influence of "Foreign Entities of Concern."

This involves two main tests:

1. Ownership Test: Your company cannot be owned or significantly controlled (through equity, debt, or other agreements) by an entity from China, Russia, Iran, or North Korea.
2. Material Assistance Test: Your project or component cannot receive significant "material assistance" from a PFE. This requires a complex accounting of your entire supply chain to ensure a high percentage of your costs come from "clean" sources.

The takeaway: The FEOC rules introduce a massive new layer of risk and due diligence. Companies must immediately audit their investors, partners, and every supplier in their value chain or risk losing tax credits entirely.

What's Next?

The One Big Beautiful Bill is a seismic shift. It signals a move away from broad decarbonization toward a protectionist energy policy focused on dispatchable power and secure, domestic supply chains.

For domestically focused businesses and investors, the message is clear: reevaluate your project pipeline, audit your supply chains, and adapt to the new landscape. The winners will be those who can navigate this complex new world of picked technologies and geopolitical guardrails.

Looking Offshore

At Accredica, we are pursuing additional opportunities for accredited investors in countries with a continued commitment to wind and solar energy production. To learn more about these opportunities, please schedule a meeting to discuss further.