The United States needs an energy policy investors can bank on

The United States is asking its energy system to do more, faster. Artificial intelligence (AI), data centers, advanced manufacturing, and electrification are pushing electricity demand upward after two decades of relative stagnation. Data centers alone consumed about 4.4 percent of US electricity in 2023 and could consume between 6.7 and 12 percent by 2028, according to the US Department of Energy. Meeting that demand while maintaining affordability, reliability, energy security, and environmental stewardship will require enormous amounts of private capital.

Yet federal energy policy remains difficult to finance around. Power plants, transmission lines, pipelines, storage facilities, and other infrastructure are built to operate for decades. Federal energy policy has whipsawed with recent election cycles. When a new administration favors a different set of technologies than the previous one, investors and lenders must price not only construction and market risk, but also the possibility that the rules supporting a project will be reversed before the asset has repaid its capital.

That policy risk does not remain on a spreadsheet. By forcing investors and lenders to price regulatory and political uncertainty into long-term projects, policy instability raises the cost of capital, delays investment, and ultimately increases energy costs for consumers. The United States therefore needs more than an “all of the above” slogan. It needs a durable and bankable federal framework that rewards energy performance rather than political preference.

Political volatility has become an energy cost

Recent administrations have pursued sharply different energy agendas. Democratic administrations have generally emphasized renewable deployment and emissions reduction, while Republican administrations have generally emphasized fossil-fuel development and conventional baseload generation. Each approach has advanced legitimate national objectives. The problem is the repeated reversal of direction.

Technology-specific incentives amplify that cycle. They can accelerate deployment, especially for growing industries, but they also tie project economics to the political durability of a particular credit, grant, mandate, or regulatory interpretation. When support expires abruptly or is rescinded, projects that were economically rational under one set of rules often become unfinanceable under the next. The risk is especially acute for capital-intensive assets with long development timelines.

The scale of the challenge makes this instability increasingly costly. At the end of 2025, approximately 1,312 gigawatts of proposed generation and 749 gigawatts of storage were seeking US grid interconnection, according to Lawrence Berkeley National Laboratory. Interconnection reform is essential, but so is a policy environment in which developers can confidently carry projects through years of permitting, construction, and financing. While recent progress has been made in this area, such as the Federal Energy Regulatory Commission’s Order No. 2023 to speed up generator interconnection, the issue is still far from resolved.

Energy security also weighs against betting national policy on any single resource. Oil and natural gas are exposed to geopolitical disruption and price shocks. Renewable technologies depend on concentrated mineral-processing and manufacturing supply chains. Nuclear, hydropower, geothermal, storage, and carbon capture each face distinct cost, siting, licensing, or commercialization constraints. A diversified system reduces the risk that a single fuel disruption, supply-chain bottleneck, extreme-weather event, or technological shortfall becomes a national economic crisis.

The need for private capital to modernize US energy infrastructure

These issues of interconnection delays as well as AI-related electricity demand growth come at a time when US energy infrastructure is in dire need of private investment. The grid relies on outdated equipment. A J.P. Morgan report warns that this aging energy infrastructure is vulnerable to severe weather events, cyberattacks, and geopolitical risks. If major modernization and substantial increases in energy capacity are not made soon, the country could experience a significant increase in blackouts by 2030, according to the Department of Energy.

Policy volatility undermines the private sector’s ability to make much-needed investments. Frequent policy reversal creates high levels of risk. This heightened uncertainty can increase financing costs, delay investment decisions, and make some otherwise viable long-term energy projects more difficult to finance. Developers can face insurmountable financial risks when starting a decades-long project if tax incentives disappear during the next presidential turnover. As a result, political whiplash creates difficult roadblocks for the private sector to meet the demand for energy investment.

Make durability a design requirement

The energy industry needs a bankable energy policy that would operate over an investment-relevant period and include predictable phase-down schedules instead of policy cliffs. One impactful reform to protect investors from policy whiplash would be grandfather clauses. Projects that make binding investments under one set of rules should receive reasonable transition or grandfathering protection. That is, changes to tax credits, energy incentives, and other federal policies should generally apply prospectively, with reasonable transition protections for projects that make substantial, binding financial commitments based on  rules in place when the project starts. This would provide greater certainty for long-term investments in energy infrastructure. Congress would remain free to change energy policy, but those changes should generally govern future investment decisions rather than undermine substantial commitments made under previous rules.

Independent agencies and system operators should also publish more transparent methodologies for assessing performance measures including reliability, resource adequacy, interconnection costs, and system planning. This transparency, coupled with a consistent and predictable regulatory framework, would reduce uncertainty and the costs associated with it. Uncertainty causes banks to lend capital at higher interest rates and investors to factor risk into investments. Thus, by increasing all parties’ access to regulatory information, the costs of energy investment will drop. 

Finally, Congress should review energy policies on a predictable periodic basis and adjust metrics prospectively rather than rewrite them retroactively. This would allow developers and investors to plan projects around scheduled policy adjustments, rather than constantly monitoring the potential for sudden, politically driven reversals. When changes are made, there should be a significant buffer period to allow the private sector time to transition. 

Underlying these policies should be the principle that reforms be technology neutral. Transition protections should be applied consistently to similarly situated projects, rather than favoring or penalizing particular technologies for political reasons. This would protect the framework from being a political target for reversal when the next administration comes in and allow for the existence of true long-term stability in the industry. 

There is precedent for durable, bankable energy policy. The Clean Air Act’s sulfur dioxide trading program set an emissions objective while allowing power plants to choose how to comply. It reduced pollution while encouraging lower-cost solutions. The Price-Anderson Act, although not technology neutral, illustrates a related financing lesson: a stable, long-term federal framework can define and allocate risks that private investors otherwise cannot absorb.

The United States’ growing power needs are too large for public funding alone and too urgent for a strategy that changes with every election. Private capital will finance the next generation of US energy infrastructure more efficiently if investors can reasonably evaluate the rules over the life of an asset. A durable, technology-neutral framework would not guarantee that every project succeeds. It would do something more useful: lower policy risk, improve competition, strengthen energy security, and help capital flow toward the resources that can deliver affordable, reliable, secure, and cleaner energy.

Brian Farnen is a faculty member at Fairfield University’s Dolan School of Business and general counsel and chief legal officer of the Connecticut Green Bank. He holds a JD, an MBA, and a bachelor’s degree from the University of Connecticut.

John-Henry Burke is a student legal associate at the Connecticut Green Bank and a law student at the Elisabeth Haub School of Law at Pace University, where he received the Haub Scholar full-tuition scholarship. 

A full version of this article will be published in the San Diego Journal of Climate and Energy Law in May 2027. 

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The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, drive economic opportunity, and foster a sustainable energy future.

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