Power shortages, UN Ocean Conference, and US bill impact on renewables

Indonesia aims to reduce reliance on imported oil and gas, which costs the country about USD 40bn annually. The country is pursuing an "all of the above" energy strategy by boosting domestic fossil fuel production and advancing clean energy initiatives through the new sovereign fund Danantara, which will finance low-emission projects.

The surge in AI and data centers is driving unprecedented energy demand, particularly from computing power, cooling systems, and facility operations. According to the latest International Energy Agency (IEA) report, global electricity consumption by data centers is projected to more than double by 2030 to 945 TWh—exceeding Japan’s annual electricity consumption. AI-optimized data centers are expected to be the primary driver, with their power demand forecast to at least quadruple by 2030.

This trend could intensify the existing imbalance between electricity supply and demand, with US authorities warning of the heightened risk of power outages in summer. As nearly half of all data centers are in the US, they are set to account for almost 50% of the country’s increase in electricity demand through 2030. By then, the US is expected to consume more electricity for data processing than for all energy-intensive goods manufacturing combined, according to the IEA.

Outside the US, data centers are rapidly expanding across markets, especially in the Asia-Pacific region, where KPMG projects a compound annual growth rate (CAGR) of 13% in data center capacity, between 2025 and 2030. Meeting power demand is therefore a global issue, and regions or countries may take different approaches regarding fuel mix and capacity additions—depending on the country-specific resource availability and policy dynamics, in addition to economic and political factors.

But a common denominator behind the need to meet growing energy demand across regions is addressing the lack of energy infrastructure to enhance energy systems’ resilience and independence. Rising curtailments, where power generation is intentionally reduced due to insufficient grid capacity to handle the generated power, are becoming a global trend. This oversupply of electricity generation leads to low or even negative electricity pricing, undermining project economics and profitability.

We believe the solutions lie in grid modernization, energy storage investments, and market mechanism reform to incentivize system flexibility (see Power pricing reform in China). The economic case for electrification and infrastructure remains attractive, presenting long-term demand visibility.

Investor takeaways:

• Rising electricity demand from AI data centers and electrification is fueling the need for power generation and grid infrastructure, with renewable energy sources remaining clearly part of the power mix.
• Positions in infrastructure-focused strategies can offer further portfolio diversification and hedge against inflation with high visibility on associated environmental outcomes.

Unfortunately, most projects and innovations offering direct, additional, measurable, and verifiable positive impact on the ocean remain small and sub-scale. This is why the focus needs to broaden beyond technological solutions and encompass the broader blue economy—including the transition of corporate operations toward a more sustainable use of ocean resources. These include shipping, tourism, fishing, port infrastructure, and other key industries.

A systems-based lens remains critical to bringing about a more sustainable blue economy. Tightening policy and regulations will be key, with the top priority being to get 30% of the ocean protected by 2030 (currently 8%). This aims to raise the cost of bad behavior, and examples are starting to stack up. In May, 3M reached a settlement within New Jersey to pay USD 450mn to address “forever chemicals” contamination in drinking water. This adds to ongoing court cases since 2018 that have already amounted to over USD10bn in penalties for the company on this topic.

In April, the International Maritime Organization approved net-zero regulations for global shipping, with mandatory marine fuel standards and emission pricing, which would have widespread repercussions among shippers on both operational (fuel) and capital (fleets) expenditure levels.

But while the “stick” can be visible and harsh, it can be highly sector- or company-specific, while the “carrot” (i.e., incentives) remains elusive. Shifting political winds and popular perceptions may further dampen companies’ urgency to update “business as usual” practices. In May, PepsiCo announced it is sun-setting its target for plastic reuse, which follows Coca Cola’s guidance in February to shift back to plastic if the new US aluminum tariffs take effect. These moves clearly underscore that sustainable and effective transition relies not only on consistent signals, but also incentive alignment from revenue opportunities to cost competitiveness of lower-impact materials and solutions.

Investor takeaways:

• Investors can engage in blue economy opportunities through active engagement in public market portfolios, with companies that have demonstrable and material dependence or impact on the ocean. Effective engagement should have clear and regular monitored targets and outcomes.
• Opportunities also exist in lower-impact materials and solutions—for example in water treatment, advanced recycling, bio-materials and better testing and navigating technologies.
• We're seeing investors deploying capital into innovative investment structures to attract or redirect capital toward ocean-positive investments, such as blue bonds, although these remain small in scale.

The House-approved OBBB heightens scrutiny on foreign sourcing for entities seeking tax credits. Updates to the Foreign Entity of Concern (FEOC) provision in the bill most notably deny credits to any projects whose construction involves material assistance from a FEOC, or a prohibited foreign entity. This typically applies to suppliers from “covered nations” such as China, Russia, Iran, and North Korea. In this case, material assistance refers to any component, sub-component, or critical mineral as well as intellectual property. Extending beyond the component level appears to be unusual and could increase pressure on developers. For some aspects of solar production, the only place currently to source certain critical minerals is from China. This rule also pertains to suppliers which may have incorporated materials from a prohibited foreign entity. The new bill also accelerates the timeline for compliance. Earlier versions noted FEOC would come into effect one year after the bill had passed; however, the current version notes it will come into effect by the end of 2025.

Companies are attempting to reduce the impact of these provisions by safe-harboring or stockpiling resources for future use. This strategy is more likely to be available to larger companies with strong balance sheets and more cash than highly leveraged or smaller developers.

The House bill accelerates phase outs of clean energy credits and creates tighter deadlines for eligibility while also eliminating residential solar and EV credits at the end of 2025. To be eligible for renewable or clean energy credits (45Y and 48E), projects must begin construction within 60 days of enactment and be operational by 31 December 2028. It is unclear how feasible it may be for some companies to adjust their timelines to comply, but again it likely favors large companies with significant backlog, equipment inventory and transmission interconnection rights. We anticipate the elimination of EV and residential solar panel credits in 2026 will likely limit expansion of these products.

The Senate is expected to amend some of the more onerous provisions, particularly regarding renewable energy development deadlines and FEOC effective dates. Though we expect policy pressure on renewable to continue, rising demand will likely drive the development of renewable energy more than tax credits.

Investor takeaways:

• Current provisions in the bill may increase the price of US solar development, which may be a slight negative to equity investments in solar in the very near term. As this was anticipated, we expect some contracts to already include flexibility on pricing.
• We anticipate increased pressure on renewable energy from a policy standpoint, but believe market forces will continue to incorporate renewable energy given the rising electricity demand we expect over the next 5-10 years from AI datacenters, reshoring manufacturing activity, and broader electrification.
• AI demand will likely drive the continued adoption of solar as hyperscalers and other end-use customers are likely to assume increased costs.