Top 10 Energy Issues for 2026: A Six-Month Check-In

In February, we offered our predictions for the year ahead in energy and clean technology. Our predictions for hot issues largely hit the mark; to the extent we erred, it was in understating the rate of change. In the spirit of accountability — and because our clients deserve advisors who own their track record — we present this mid-year check-in. For each of the 10 issues we flagged in February, we summarize what has happened, what we got right, where the surprises landed, and what to watch for the rest of the year.

1. Powering Data Centers

Original Prediction: Data centers would drive an “all-of-the-above” approach to power, with behind-the-meter gas-plus-storage deployments, early nuclear commitments, and intensifying debates over cost allocation and consumer electricity prices. 

What Happened: This issue has exceeded even our elevated expectations. Goldman Sachs projects US data center power demand will reach 41 GW in 2026 and 66 GW in 2027 — more than doubling the 31 GW baseline in 2025. Idaho National Laboratory published its comprehensive Nuclear Power for Data Centers Playbook in April, providing detailed technical guidance on nuclear-powered data center configurations. Meanwhile, the Federal Energy Regulatory Commission’s (FERC) December 2025 order directing PJM to establish new pathways for co-location of large loads with generation became effective, and FERC is reviewing PJM’s proposed compliance proposals. And as a powerful market signal on the convergence of power and data centers, on May 27, digital infrastructure asset manager DigitalBridge announced a business combination with ArcLight Capital Partners, one of the leading investors in power and electric infrastructure.

What We Did Not Expect: We are seeing numerous examples of local opposition to new data centers and associated power development for affordability and environmental concerns. Back in January we reported here on the Illinois data center boom but in May and early June we reported here and here on how some state and local governments are withdrawing support due to constraints on power, water, and other resources. Rising local opposition is a new factor, as demonstrated by the recent antagonism towards Kevin O’Leary’s proposed data center in Box Elder, Utah, which became national news earlier this month and led to major political fallout for local officials. While local challenges are a normal part of many new infrastructure projects, the discussion around requiring new large artificial intelligence (AI)-focused data centers to have a “social license to operate” is a national trend that is likely to continue.

What to Watch: FERC has announced a Commission-led technical conference on PJM governance and stakeholder reforms for later this year. Expect continued focus on whether large-load customers will pay their fair share of grid costs, and whether onsite generation becomes the default rather than the exception. Keep watching for other power and data business combinations. (Also, see items 6 and 8 below.)

2. The Energy Dominance Strategy: Oil, Gas, Coal, Geothermal, and Nuclear

Original Prediction: A revived “energy dominance” strategy would maximize domestic production, deregulate to speed development, expand exports, and assert stronger federal authority over energy infrastructure. 

What Happened: Five LNG export terminals have been authorized, bringing the total volume to 11.45 Bcf/d, including the Port Arthur Phase II facility. On nuclear, Executive Order 14300 directed a fundamental restructuring of the US Nuclear Regulatory Commission (NRC), mandating binding 18-month licensing deadlines for new reactors and a wholesale revision of NRC regulations. On March 20, the USDepartments of Energy and Commerce announced a public-private partnership including at least 9.2 GW of natural gas generation to power new data center development in Ohio, heavily funded by Japanese investment. FERC announced in May that it has “unleashed natural gas permit reforms, accelerating infrastructure upgrades for affordable, reliable energy nationwide.” On June 4, the Energy Department announced its intention to save or support 17 coal plants and one export facility and funding for modernizing coal-powered infrastructure. However, this spring’s sale of oil and gas drilling rights in the Alaska National Wildlife Refuge drew only two bidders, no bids from the oil majors, and a surprisingly low $3.7 million price tag.

What We Did Not Predict: What was completely not on our 2026 bingo card was the war with Iran and the blockade in the Straits of Hormuz. As of mid-June, the US Strategic Petroleum Reserve is at its lowest level since 1983. This global disruption of energy flows will have significant long-term market impacts which could include anything from a redoubled focus on North American production to a heightened shift away from petroleum as a fuel source. 

What to Watch: Watch for more relaxation of federal regulations related to energy, which projects are funded by the Office of Energy Dominance (previously known as the Loan Program Office) and lending and investments — authorized projects will only be built if there is investment and financing to support them. And of course, the big wild card is the war with Iran and the impact it will continue to have on global energy flows. (See also items 5, 6, and 9 below.)

3. FERC and RTO/ISO Market Redesign

Original Prediction: FERC would pursue market efficiency, interconnection reform, and capacity market redesign, with PJM under particular scrutiny. 

What Happened: FERC has been remarkably active. In January, Commissioner David Rosner outlined priorities including automation and AI in interconnection studies, implementation of Order No. 1920 on regional transmission planning, and continued large-load solutions. At the April Commission meeting, FERC issued compliance orders on PJM’s Order 2023 interconnection reforms and its co-location framework. PJM’s May report proposed three market reform paths — including a “Come Hedged” model, an expanded reserve market, and a hybrid approach — responding to the reality that permitting delays now account for 29% of generation milestone changes. FERC also withdrew several Biden-era rulemaking proceedings, including one on demand response aggregation. Then, on June 18, in furtherance of policies to expedite the integration of large loads onto the transmission system, FERC issued orders to six regional grid operators and their transmission owners to provide justification within 60 days on why their current tariffs remain just and reasonable in the absence of clear and consistent provisions for large load customers — or, alternatively, to propose changes. Notably, FERC took efforts to maintain that nothing in the orders intrudes either on the authority of states to select, site, and permit generating resources or on the authority of state public utility commissions to set the rates, terms, and conditions of retail sales of electricity.

What We Did Not Predict: The projections for surging electric growth specifically from AI data center building projections exceeded what we had imagined and have shone a spotlight on the limitations of the current grid and load capacities. (In fairness to us, we were not the only ones surprised — Dario Amodei, CEO of Anthropic, said here in May that Anthropic planned for 10x growth in AI compute demand but it is seeing 80x.) While grid and market design were always a topic for energy nerds, it is increasingly being followed outside the industry because the biggest limits on AI growth are now the capacities of the physical infrastructure needed to run it.

What to Watch: Now that the transmission grid’s limitations are potentially limiting growth, combined with concerns about affordability and the impact on consumers, expect greater scrutiny of the grid and a closer examination of new projects requiring significant electricity. The FERC technical conference on PJM governance, scheduled for this summer, will be a flashpoint. FERC must begin reviewing regional transmission planning proposals under Order 1920 this year. Whether these reforms actually reduce interconnection timelines — rather than just reorganize the queue — remains an open question. Look for the grid operators’ responses to the June 18 FERC order on whether their rates are just and reasonable for large load customers. (See also item 9 below.)

4. Energy Storage and Distributed Generation

Original Prediction: Storage and distributed generation would become central to grid flexibility, but fire safety concerns, supply chain risks, and regulatory uncertainty around interconnection would constrain deployment. 

What Happened: The fire-safety narrative continues to evolve. New York’s updated 2026 Fire Code took effect January 1, establishing significantly strengthened standards for battery energy storage systems, including enhanced ventilation, containment, and emergency response requirements. Massachusetts is implementing new siting and processes for clean energy infrastructure starting on July 1. On the market side, battery storage continues to be viewed as essential infrastructure for data center power strategies, with developers increasingly treating it as a complement to onsite generation for peak shaving and grid support. Local opposition to new battery electric storage (BESS) projects is often premised on fire risk, so local fire codes that address these concerns are meaningful to building support and advancing projects.

What to Watch: State regulatory frameworks are still catching up to the pace of deployment . Watch how updated safety codes facilitate or further constrain project development, and how capacity accreditation rules evolve as more storage enters the market. 

5. New Nuclear Projects and SMRs

Original Prediction: Federal support, NRC licensing milestones, and private-sector demand signals from data center operators would shape the nuclear industry’s trajectory. 

What Happened: We called this one. Executive Order 14300 in May 2025 set the policy goal of expanding US nuclear capacity from 100 GW to 400 GW by 2050. The NRC approved NuScale Power’s uprated small modular reactor (SMR) design in May 2025. A June Carnegie Endowment paper cataloged hyperscaler nuclear commitments: Alphabet has partnered with Elementl for 1.8 GW across three sites, and combined hyperscaler commitments could add roughly 6.1 GW of capacity by the mid-2030s. The NRC is now undertaking a massive rulemaking effort specifically to modernize reactor licensing, with proposed rules on siting practices and safety oversight scheduled for July. 

What to Watch: The true test remains whether any SMR breaks ground at commercial scale by year-end. TerraPower’s construction permit timeline, Kairos Power’s progress, and X-energy’s licensing path are the leading indicators. Cost trajectories and bankability remain unproven. The economic premise for small nuclear reactors depends on efficient manufacturing and scalability, both which are unknown. And while the public currently seems to support nuclear development (notwithstanding organized opposition to BESS based on fire risk), public support could evaporate if safety concerns arise.

6. State-Federal Jurisdiction: State Energy Plans Under Strain

Original Prediction: Tension between state and federal authorities will intensify, particularly around offshore wind and preemption arguments. 

What Happened: We were right about this too. The Trump Administration’s January 2025 memorandum withdrawing outer continental shelf (OCS) lands from wind leasing was followed by December 2025 stop-work orders on five East Coast projects, triggering a wave of lawsuits. Federal courts repeatedly ruled against the Administration: a December 2025 Massachusetts district court decision vacated the wind energy authorization pause as arbitrary and capricious. The Administration appealed in February. We did not expect the Administration would put taxpayer money behind its fight against offshore wind to the extent it has: In March, the Administration struck a deal paying TotalEnergies approximately $795 million to abandon two offshore wind leases and pledge not to develop any new offshore wind in the United States. In June, Governor Kathy Hochul and Attorney General Letitia James led a seven-state coalition in suing to block the TotalEnergies deal as an unlawful use of taxpayer funds. Separately, Trump Administration efforts to challenge state-led climate policies in New York, Vermont, and California continue. 

What to Watch: The TotalEnergies litigation will be a bellwether for the limits of executive authority over energy development on the OCS. Also watch for the appellate courts’ treatment of the Administration’s “national security” arguments for lease suspensions and whether any new preemption legislation advances. Litigation regarding federal efforts to preempt state-led climate policies will likely continue throughout the year. 

7. Trade and Tariffs

Original Prediction: Tariffs on solar components, batteries, transformers, and critical minerals would raise costs and complicate supply chains. 

What Happened: As we wrote about here, Section 201 safeguard tariffs on solar cells and modules were extended, with the 14% rate applying from February 7, 2025, through February 6, 2026. New tariffs and anti-dumping and countervailing duty (AD/CVD) measures add an estimated $0.05–$0.15/W to installed solar costs. The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, has compounded uncertainty by imposing restrictive “foreign entity of concern” (FEOC) sourcing requirements on clean energy tax credits — effectively creating trade-adjacent barriers to deployment. The US Senate Finance Committee’s June 2025 bill text narrowed the accelerated phase-out of the clean electricity production and investment credits (45Y/48E) principally to solar and wind technologies, while largely retaining transferability for other credits. The enacted FEOC restrictions continue to apply across multiple credits and prohibit transfers to specified foreign entities in relevant circumstances.

What We Did Not Expect: We expected to see a steep drop in solar installations due to rising costs and supply chain. However, the Energy Information Administration, among others, predicts that the installation of renewable energy resources, such as wind, solar, and BESS, is projected to stay strong at least through the end of the year. 

What to Watch: Treasury and Internal Revenue Service (IRS) guidance will determine the final contours of FEOC restrictions and whether the clean energy investment pipeline faces a hard cliff or a more manageable transition. Implementation is already underway, including Notice 2026-15, which provides interim guidance on the prohibited foreign entity and material-assistance rules for Sections 45X, 45Y, and 48E. Separately, IRS Notice 2025-42 addressed beginning-of-construction rules for wind and solar projects, but the DDC vacated the notice on June 6, which should continue to be monitored for any IRS response, appeal, or revised guidance. Furthermore, rising energy costs due to the Iran War may strengthen the case for renewable energy investment so the trend may continue even with higher tariffs and reduced tax credits.

8. Affordability

Original Prediction: Electricity affordability would become central to energy politics, driven by constrained supply, surging demand, and data center load growth. 

What Happened: According to the Energy Information Agency, residential electricity costs were 10.2% higher in March 2026 than in March 2025. An E3 analysis published in May found that the relationship between load growth and rising rates is complex and multifactorial, cautioning against blaming data centers alone. But energy affordability is also a hot button political issue, recently being used to justify a rollback of New York’s ambitious climate goals and an overhaul of California’s carbon market, to name a few.

What to Watch: State commission proceedings on rate design and cost allocation for data center loads are multiplying. At the federal level, watch whether any executive action directly targets retail electricity costs. At the state level, look for affordability arguments being used to counter both state climate and environmental initiatives and to oppose data center buildouts and other energy intensive projects. Also, expect more discussion around electric service generally, and increased political support for small scale solar (such as balcony solar and community solar) and other policies that could directly reduce consumer electric bills.

9. Permitting Reform

Original Prediction: Bipartisan consensus on permitting reform would produce tangible action, with both state and federal initiatives advancing. 

What Happened: Permitting reform continues to enjoy bipartisan support, with much of the policy focus being on accelerating permit review times without sacrificing quality. As the Regional Plan Association wrote in a recent report, “The permitting process has proven essential to safeguarding our environment - preserving open space, ensuring clean air and water, and protecting ecosystems and endangered species - while also ensuring community well-being, the protection of property rights, and the preservation of cultural and historic resources. But permitting - due to its time and cost - can also become a barrier to achieving public goals, such as building the energy infrastructure we need to achieve climate goals or extending a transit line to an underserved community.” FERC reported moving from National Environmental Policy Act review to final permit more than 30% faster than was typical in the prior decade. In May, FERC announced natural gas permit reforms designed to accelerate infrastructure upgrades. At the state level, Governor Hochul’s “Let Them Build” agenda in New York and New Jersey Governor Mikie Sherrill’s Executive Order No. 5 continue to advance. The NRC’s regulatory overhaul under Executive Order 14300 represents the most aggressive federal permitting reform in the nuclear sector in decades, with 21 proposed rules in the pipeline. 

What to Watch: Whether FERC’s faster processing translates into measurable reductions in project development timelines — or merely shifts the bottleneck to state and local permitting — is a key question. The NRC must finalize its rules by November. Similarly, whether state and local governments also streamline their permitting processes remains to be seen. 

10. Clean Air Act

Original Prediction: Potential shifts in Clean Air Act architecture would affect permitting timelines, New Source Review, and state implementation plans, with the endangerment finding under particular scrutiny. 

What Happened: The US Environmental Protection Agency (EPA) finalized rescission of the 2009 Greenhouse Gas Endangerment Finding on February 12, effective April 20, as we explained here. EPA relied on the “major questions doctrine” to argue that regulating GHG emissions exceeded its statutory authority. On March 19, 24 states, 10 cities, and five counties challenged the rescission, with the case potentially headed to the US Supreme Court. 

What to Watch: The DC Circuit petitions for review will continue to be litigated for some time. The immediate practical question for project sponsors is whether interim guidance affects near-term permitting for new generation capacity. If the rescission survives judicial review, the implications extend well beyond vehicles to the entire GHG regulatory architecture — including PSD permitting, Title V, and methane rules. Separately, on June 12, EPA announced that it is submitting four Clean Air Act Section 209 waivers to Congress for review under the Congressional Review Act. Section 209 grants California alone among all the states permission to promulgate California-specific standards for vehicle emissions. Congress now has 60 days to act on the waivers. These waivers join already-existing challenges to fuel economy standards, compounding uncertainty to mobile source emissions programs. 

Conclusion

Six months into 2026, the US energy landscape is evolving at a pace that challenges even seasoned practitioners to keep current. The themes we identified in January — load growth, jurisdictional tension, the nuclear renaissance, and the interplay between affordability and decarbonization — have proven durable. What surprised us was the velocity: the Administration’s willingness to pay nearly $1 billion to kill an offshore wind project, the breadth of EPA’s endangerment rescission, and the sheer scale of data center power projections all exceeded our January baseline.

For the second half of the year, we are watching the 2026 budget process and the impact on tax credits, the NRC’s November rulemaking deadline, the appellate trajectory of offshore wind litigation and federal government efforts to challenge state-led efforts to regulate carbon-intensive industries, and whether any SMR developer achieves a construction milestone that changes the bankability calculus. We are also watching data center development and whether opposition to siting continues to grow. The impact of the Iran War is a wildcard.

As always, the Energy & Cleantech team at ArentFox Schiff stands ready to help clients navigate what promises to be an eventful remainder of the year. We have been right more often than not, but we are humble enough to know that this market still has surprises in store.