The energy transition during a second Trump administration will contain opportunities and uncertainties for energy project owners and developers. Beyond media narratives, the stated goals of the incoming Trump administration present a somewhat more nuanced approach to energy policy. Though policy risks, supply constraints, and cost increases will serve as headwinds for renewable energy projects, tailwinds will be present, too. Those projects that are already operating or have locked-in tax credits and supply contracts will have a positive outlook, as higher costs for future supply resources push up long-term prices. In the immediate term, rapid load growth will drive a need for resources of all types, and increased production for LNG may also benefit clean energy developers.

In a recent webinar discussing Trump and the energy transition, Dr. Gary Dorris, CEO at Ascend Analytics, joined Dr. Brent Nelson, Managing Director of Markets and Strategy, to offer in-depth analysis and concrete strategies for project owners, developers, and financiers to navigate the energy transition during the coming years.  

Key Takeaways

• President Trump's stated energy policy goals have been more nuanced than media narratives or some of his stream-of-consciousness public statements. Reducing red tape, increasing natural gas exports, and "winning an AI arms race," for instance, could all be positives for clean energy projects. Accomplishing these goals would require expanding and maximizing all forms of energy production, including renewable energy.

• Some of the most important driving forces for renewable energy development remain independent of federal policy. Many states will continue to pursue aggressive clean energy policies. Similarly, corporate demand for clean energy, as well as corporate clean energy goals, continue to grow, though high costs could weaken their appetite for clean energy.

• Demand growth from onshoring of manufacturing, data centers, and electrification all point to a need for more of every type of power resource. Across the US, most projects in development and with a path to coming online quickly are renewable energy projects.

• Many of the most likely changes to the Inflation Reduction Act (IRA) would have a modest impact on clean energy development. A full repeal is unlikely, as it would require near-unanimous support from congressional Republicans whose districts are seeing significant benefits from clean energy investment.​ Of the high-likelihood IRA changes, the most impactful would be the imposition of domestic content requirements for full tax credit eligibility, which would increase costs and likely lead to demand exceeding domestic supply capability.  

• Leveraging analysis from Ascend Market Intelligence™, the webinar offers recommendations for maximizing renewable energy project value, identifying ideal investment locations, and other strategies for navigating the energy transition under the Trump administration.

Trump's Energy Goals: A More Nuanced Approach

The incoming administration's statement on energy goals reveals a somewhat more nuanced approach than what is often reported in the popular media. Five key areas could have important ramifications for renewable energy projects.  

First, the administration states that it wishes to reduce red tape, encourage private sector investment, and focus on innovation rather than regulation. Any efforts to remove red tape and speed permitting will likely be a boon to clean energy projects, which make up the majority of projects in interconnection queues around the US.

Second, the Trump administration seeks to "win the AI arms race with China." To the extent that AI companies are seeking clean supply, winning an AI arms race will require getting a lot of renewable energy online as fast as possible.

Third, the incoming administration wants to increase domestic gas production and to increase energy exports to "friendly" nations. Both goals could prove positive for renewable energy developers. The less fossil fuel America uses domestically, the more it can sell abroad, so maximizing energy exports requires maximizing domestic solar and wind production. Additionally, increased LNG production is likely to increase domestic gas prices, flowing through to increased long-run power prices and merchant tails – which represents further good news for renewable energy project developers.

Fourth, the Trump policy goals include an interest in expanding all forms of energy production. Doing so would necessarily include wind and solar, and would also serve the goal of increasing fuel exports.

Finally, while the Trump administration has stated that it would like to dramatically increase baseload power, the impact of federal policy is limited and new build will still be constrained by financial considerations and state policy. Additionally, state clean energy policies remain aggressive, though rising costs may test some state commitments. Corporate clean energy goals also continue to grow, including from data center operators driving load growth. ​

Energy Transition Headwinds and Tailwinds: What to Expect

Demand growth from onshoring of manufacturing, data centers, and electrification all point to a need for more of every type of power resource. Most projects in development are clean resources, as seen in Figure 1. Additionally, most headwinds for development become tailwinds for late-stage and operational projects: increased costs for future projects will increase equilibrium revenue conditions (power prices, volatility, REC prices, ELCC/capacity revenues, etc.), benefitting projects grandfathered into current costs and tax credits.

Raw project costs are likely to rise due to proposed tariff increases on Chinese imports. Even with tariffs, Chinese supply may still be cheaper than domestic manufacturing. Under the Trump administration, tariffs may increase further across a range of categories, such as critical minerals, steel, or aluminum, that the administration may want to protect. Across the board, developers can expect higher future costs for clean energy technologies.

Possible Impacts to Existing Federal Energy Policies

The Inflation Reduction Act (IRA) faces moderate risks. Republicans want to extend the tax cuts in the Tax Cut and Jobs Act (TCJA) passed during the first Trump presidency, which will require a variety of budget cuts that may have to include the IRA.  

A full repeal of the IRA appears unlikely, however, because most of the money from the IRA goes into investments in Republican districts and the Republicans only command a narrow three-seat majority in the House. A repeal of the standalone storage ITC is a possibility, given that most of the benefits from this credit are concentrated in urban and primarily Democratic communities.  

The most probable outcomes include a variety of targeted changes to the IRA. These include shifting tax credits to require domestic content instead of it being a 10% adder. This would have a significant impact on renewable energy project development by pushing up production costs and creating severe supply constraints during the next 5-10 years. Additionally, the Republican-controlled Congress will likely enforce an earlier, firmer tax credit sunset. It is also likely that manufacturing tax credits will end up with Foreign Entity of Concern (FEOC) restrictions aimed at China, and that the EV tax credit will be repealed.

The Environmental Protection Agency's (EPA) carbon rules are also likely to be abandoned. Any potential impact, however, will be muted. Even though the carbon rules were detrimental to the coal industry, coal was also facing, and continues to face, stiff economic viability challenges as well as regulatory risks. Moreover, the carbon rules were unlikely to withstand legal challenges. If these rules are abandoned, coal plants in regulated areas may receive a brief lifeline.

Navigating the Energy Transition Under Trump: Recommendations

The webinar offered multiple recommendations for navigating the energy transition under a second Trump administration. Lobbying will become even more crucial, especially considering the narrow House majority. Key clean energy stakeholders should do everything possible to ensure that Congress understands the benefits of renewable energy investment in their districts.  

Developers and owners should also seek to grandfather and safe-harbor projects as rapidly as possible. Safe harboring will ensure greater value for renewable energy projects, especially given the low likelihood of changes to safe harbor rules. Similarly, clean energy stakeholders should move quickly to secure domestic supply chains and minimize Foreign Entity of Concern (FEOC) risks. Demand for domestic content will likely outstrip supply, especially in the near term.

Clean energy developers should also seek to invest in locations with barriers to fossil generation resources. States and cities with clean energy mandates, emissions restrictions, and environmental justice goals will have an acute need for clean resources, and are likely to introduce subsidies and procurements as needed, even if they fall short of targets. State policy failures and offshore wind delays will also increase the value of onshore projects in coastal states.

Interested in Learning More about Trump and the Energy Transition?

Access the webinar recording, which offers an in-depth analysis of potential impacts on the energy transition, further guidance for navigating the coming headwinds and tailwinds in US energy markets, and tips for how and where to invest in energy projects.

AscendMI™(Ascend Market Intelligence) delivers proprietary power market forecasts that have been trusted in hundreds of projects and resource planning activities, supporting over $25 billion in project financing assessments. Contact us to learn more.

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Ascend Analytics is the leading provider of market intelligence and analytics solutions for the energy transition. The company’s offerings enable decision makers in power development and supply procurement to maximize the value of planning, operating, and managing risk for renewable, storage, and other assets. From real-time to 30-year horizons, their forecasts and insights are at the foundation of over $50 billion in project financing assessments. Ascend provides energy market stakeholders with the clarity and confidence to successfully navigate the rapidly shifting energy landscape.