Can the renewables boom withstand Trump?

Donald Trump’s election victory sent renewables shares tumbling yesterday, given concerns he will pull the plug on the US’s nascent offshore wind sector and roll back green tax credits.

US renewable energy shares were hit hard. NextEra Energy, the country’s largest renewable energy developer, slumped 5 per cent, hydrogen developer Plug Power shed a fifth of its value and solar developer Sunrun’s stock was down almost 30 per cent.

The chief executives of Danish wind energy giants Ørsted and Vestas sounded sanguine when quizzed about the impact of a potential second Trump presidency alongside their quarterly results on Tuesday as US voters went to the polls.

Trump has pledged to end offshore wind in the US on “day one” and stop doling out subsidies under President Joe Biden’s Inflation Reduction Act designed to boost renewables across the US. His campaign has also said he will take the US out of the Paris Agreement on climate change.

But Ørsted’s chief executive, Mads Nipper, highlighted the renewable industry’s strong economic logic, ranging from demand for “green” power to robust job creation in Republican states.

“We are convinced that no matter what happens [in the election] there will be a strong role for renewables, both onshore and offshore at least in parts of the country,” he said.

“Sometimes comments are comments made in political statements, and then we will see what actually comes out of it,” added Henrik Andersen, chief executive of Vestas, the wind turbine maker.

Shareholders were less sanguine as markets in Europe opened on Wednesday morning to news of Trump’s victory. Ørsted’s and Vestas’s shares fell almost 13 per cent by Wednesday afternoon UK time.

Spanish utility Iberdrola fell more than 4 per cent, while EDPR fell almost 11 per cent. Copper — a critical electricity conductor — was also down almost 5 per cent, pushed also by the stronger dollar. The S&P Global Clean Energy index was down almost 6 per cent in the UK afternoon.

“The world has changed in the past 24 hours,” said Rob West, analyst and chief executive at Thunder Said Energy, a research consultancy, in a note on Wednesday morning.

“Momentum behind many energy transition themes has been slowing in 2024. It is now harder to see a re-acceleration.”

The question now is whether Trump’s bark turns out to be worse than his bite after he takes office in January — and whether the shift to renewables has taken too deep a root to reverse.

Several analysts point to the growth in renewables during Trump’s first presidency and agree the economic benefits of the IRA in Republican states are likely to give it some protection. Cancelling offshore wind projects under construction might be legally challenging, they add.

But others argue that even a partial repeal of the IRA or modifications would have a large impact. “We don’t anticipate the IRA is going to go away entirely,” says Michelle Davis, head of global solar power research at Wood Mackenzie. “But we anticipate elements of it will be significantly modified.”

Modelling by Wood Mackenzie indicates that if all potential modifications — such as reducing tax credit bonuses or changing eligibility timelines — are made, about one-third less renewable energy capacity will get built in the US over the next decade.

Meanwhile, the “permitting process for future [offshore wind] projects might be halted by federal government agencies”, analysts at RBC warned on Wednesday.

Beyond those immediate potential changes, Trump’s plans for new import tariffs and other protectionist measures could push up the costs of developing renewables in the US, slowing their rollout, analysts add.

The US’s retreat from climate initiatives is likely to “slow momentum to combat climate change unless other parts of the world step in to fill the gap”, warns Nazmeera Moola, chief sustainability officer at investment firm Ninety One.

However, she added: “We do think that countries like China and India will continue to focus on energy transition-related investments — as these investments have been driven by their positive financial benefits and impact on growth to date.”

With so much at stake, executives on Wednesday were trying to make the right overtures to the new man soon to be in the White House.

“The International Energy Agency looks forward to working closely with your new administration,” said its executive director Fatih Birol, whose predictions on the future of oil and support for the energy transition has irked fossil fuel executives.

“We will work with the new administration, Congress and officials at the state and local levels to help meet these critical economic needs and energy demands,” added David Hardy, head of Ørsted’s Americas business.

The new year will tell how effective their overtures have been.

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