While the change in administration ushers in a period of uncertainty for the renewable energy industry, the clean energy transition won't stop in its tracks; in fact, some of the developments may prove beneficial for renewable energy deployments. With the incoming administration expected to push for more investment in oil and gas production while scaling back climate change policies, there's rising speculation about the impact on the clean energy transition and the resilience of the renewable industry.
Let's break down what to expect.
Renewable energy is poised to weather the expected regulatory storm
It goes without saying that some major changes within the regulatory environment should be expected, but the changes do not necessarily spell disaster for the renewable energy industry. In fact, regulatory reform may ease permitting requirements, making it easier to build new infrastructure.
However, we can expect regulatory changes to slow the momentum of the clean energy boom in some ways. Promises have been made to claw back all or parts of the Biden administration's Inflation Reduction Act (IRA), which provides many clean energy incentives, including tax credits. The expectation is that the government will need to find funding to extend the tax reform set to expire in 2025, which likely means a negotiation around the IRA's extension of the solar and wind tax credits.
Widespread support from lawmakers whose districts have benefited from IRA-related incentives for investments in renewable energy is likely to have a hand in ensuring many of the provisions of the IRA remain at their core; it's just a question of what they will look like. How tax credits will be structured and changes to project eligibility requirements under IRA provisions remain to be seen.
The Greenhouse Gas Reduction Fund (GGRF) -- the EPA's program established under the IRA to mobilize funding for clean energy projects that reduce greenhouse gas emissions and create energy independence in economically disadvantaged areas -- is one area of the IRA that is likely to remain intact, since most of the funding has already been distributed to recipients. GreenieRe is an insurance entity established using GGRF funds to ensure clean energy projects and other funded programs in these communities have access to financial backing. This low cost funding has yet to flow to projects in a material way, and may provide some unexpected tailwinds for the renewable industry to meet decarbonization goals.
Demand for energy is growing and renewables will continue to play an important role
With near certainty, we can expect economic growth, crypto, and AI to lead to load growth, which needs to be satisfied by new supply. It's safe to say that we'll see more natural gas under the new administration, but solar and storage will continue to be beneficial in keeping up with increasing energy demand. Even if tax credits available for renewable energy are pared back, Lazard's most recent
The renewable supply chain will remain nimble in the face of tariffs
It is unlikely that solar will be excessively disadvantaged by new or strengthened tariffs. From a trade perspective, the industry's supply chains have proven incredibly resilient and dynamic in the face of years of prior tariffs. Supply chain restrictions and additional costs that the industry has had to navigate have enabled manufacturers to be nimble with their operations. Although the impact of new tariffs on consumer cost is unknown, historically solar has proven to be capable of managing cost structure in the face of a changing regulatory environment because of its ability to adapt.
The bottom line is that the renewable energy industry has weathered these storms before. Headwinds for residential solar and offshore wind are expected with the incoming administration, but utility-scale solar and storage development is projected to remain relatively stable.
