Possible Implications of the Election on the Renewable Energy Industry

As the United States prepares for another Trump presidency in January 2025, the renewable energy sector is trying to sort through what the election’s implications will be. While there are obvious reasons for concern, considering campaign rhetoric promised a dramatic rollback of clean energy incentives (particularly the Inflation Reduction Act (IRA)), there are some reasons for glass-is-half-full optimism, at least relative to many dire predictions about what’s to come. The reality of governing often differs from campaign promises, and there are several factors that suggest a more nuanced outlook for the industry.

The intersection of Republican priorities—including extending the 2017 tax cuts and promoting domestic manufacturing—with the current momentum in clean energy development presents a complex policy landscape for lawmakers and industry leaders to navigate. Understanding where vulnerabilities and opportunities lie will be critical for the industry to understand as we navigate the transition to a new administration. Here is our brief analysis of some factors to consider as we approach the new year.

What’s at Stake?

The electric vehicle tax credits established under the IRA may be the most vulnerable to change under a Trump administration. These credits have been a particular target of Republican criticism, characterized as subsidies for wealthy coastal consumers. That said, given Elon Musk’s expected influence with the Trump administration, we will have to wait and see whether Musk lobbies to maintain at least some level of EV tax credits. 

The long-term extensions of wind and solar tax credits could also face pressure, particularly as Congress searches for revenue to offset the costs of extending the 2017 tax cuts, which are set to expire in 2025.

The IRA’s direct pay and transferability provisions may also be targeted for modification or elimination. These mechanisms, which have helped expand the pool of renewable project investors and accelerated clean energy deployment, could be viewed as revenue-raising opportunities in future, broader tax negotiations. 

However, at the end of the day, changes may be surgical rather than sweeping. The complexity of unwinding programs where significant investments are already underway creates practical and political constraints on dramatic policy shifts.

There are other reasons for guarded optimism that some of the worst-case scenarios about the impact of election on the renewable energy sector won’t come to fruition. 

First, there is a wide geographic distribution of clean energy investments across the country, including many in Republican-led states. Major manufacturing facilities, solar and wind farms, and hydrogen hubs are already driving economic growth and creating jobs in traditionally conservative regions. In August, as reported by The Hill,  18 House Republicans submitted a letter to House Speaker Mike Johnson arguing that the Inflation Reduction Act’s clean energy tax credits shouldn’t be repealed, emphasizing that “energy tax credits have spurred innovation, incentivized investment, and created good jobs in…many districts represented by members of our conference.” Moreover, as reported by The Wall Street Journal in October, “Big Oil” also has been lobbying Republicans not to gut the IRA (at least the provision it likes).

IRA provisions that enjoy at least some bipartisan support include carbon capture incentives, hydrogen tax credits and domestic manufacturing incentives, which align with Republican priorities of energy independence and economic competitiveness with China. 

Practical considerations may also favor policy continuity. The regulatory process required to unwind existing programs involves time-consuming notice and comment periods, potentially taking years to complete. Furthermore, many IRA funds have already been obligated, creating established business relationships and investments that would be difficult to unravel without significant economic disruption. This institutional momentum, combined with the administration’s likely prioritization of extending broader tax provisions set to expire in 2025, means that changes to the IRA may be more evolutionary than revolutionary.

Finally, the administration’s approach to trade policy and tariffs, particularly regarding solar panels and electric vehicles, is likely to be aggressive. Trump’s previous term saw the implementation of significant solar tariffs, and his campaign has promised even more, including potential tariffs of up to 100% on Chinese goods and 200% on Chinese electric vehicles. The solar industry, which has begun shifting supply chains and expanding U.S. manufacturing in response to existing trade pressures, may need to further accelerate domestic production plans. Companies should prepare for a trade environment that prioritizes domestic manufacturing and stricter enforcement of anti-circumvention measures, while potentially creating new opportunities for U.S.-based production.

No one—including us—knows for sure what will happen next. What we can say for sure is that while change is coming, the renewable energy industry has demonstrated remarkable resilience through previous policy transitions, and the sector’s growing economic importance, coupled with practical constraints on policy reversal, suggests that it will weather—and hopefully emerge stronger—from whatever tumult there is to come.