Trump's Victory: Impact on Renewables & Energy Storage

A Donald Trump victory could create uncertainty for U.S. renewable energy, with potential reductions in incentives and a focus on boosting fossil fuel production. Energy storage growth is expected to continue, driven by state mandates and private investment, despite federal challenges. Declaration of energy emergency on the first day of office in 2025 indicates Trump administration’s intent to promote fossil fuel and mineral development while curbing renewable energy initiatives.

Potential Impact of a Trump Victory on U.S. Renewable Energy 

A Donald Trump victory in the U.S. presidential election could lead to uncertainty in the renewable energy sector in the coming years. Trump's previous support for fossil fuels and his skepticism toward climate action suggest that incentives for renewable energy may be reduced or eliminated. Additionally, his administration will likely focus on boosting fossil fuel production, including oil, gas, and coal, potentially accelerating drilling, mining, and infrastructure projects, while rolling back regulatory measures in the energy industry. This could include the reversal of key policies like the Inflation Reduction Act (IRA), which has significantly promoted growth in the solar, wind, and energy storage sectors.

Plan to Declare an Energy Emergency 

President Donald Trump plans to declare a "national energy emergency," granting him the authority to boost U.S. energy production, including expanding drilling operations in Alaska. This decision is driven by the administration's belief that the U.S. has significant untapped energy resources that can be used domestically and exported to international allies and partners as a dependable, diversified, and cost-effective energy supply.

The declaration of a national energy emergency, along with the extensive executive order accompanying it, serves as a strong signal of the Trump administration’s intent to promote fossil fuel and mineral development while curbing renewable energy initiatives and climate mitigation efforts. However, it is essential to view this declaration as an expression of intent rather than immediate action. Revising or rescinding existing regulations will be a gradual process, subject to legal challenges. Efforts to boost oil and gas investment will depend on demand, projected returns, and the broader economic growth of the United States’ primary markets.

Learning from the previous term (2017-2021)

During Trump's presidency from 2017 to 2021, policies favored fossil fuel development while scaling back federal support for renewable energy. The administration withdrew the U.S from the Paris Agreement in 2017, impacting global climate change efforts. 

Despite the challenges, renewable energy showed resilience. Solar energy costs fell by 17% during this period. Wind energy grew, adding ~30 GW capacity between 2017 – 2020, primarily in Texas, Iowa and Oklahoma. The capacity of energy storage systems also increased from ~ 431 MW in 2017 to 1.4 GW by 2020 as battery costs dropped.

State level initiatives played a critical role in advancing renewables, with California achieving a renewable portfolio by 2030 and Texas leading wind energy production, accounting for 28% of the nation’s total. Corporate investment surged, with companies like Amazon committing 100% renewable energy by 2030 and signing major power purchase agreements.

Renewable Market Resilience

Donald Trump's pledge to halt renewable energy projects on his first day in office caused significant stock declines, with Orsted, Vestas, and Nordex seeing drops of 14%, 11%, and 7.5%, respectively.

His stance on eliminating offshore wind farms and potentially scaling back renewable energy tax credits raised concerns about the industry's growth.

Trump’s energy policies, which prioritize fossil fuels, pose a threat to key renewable initiatives like the Inflation Reduction Act. However, despite political uncertainty, technological advancements and corporate sustainability initiatives continue to drive the renewable energy sector.

For instance, Acadia Infrastructure Capital, in partnership with companies like Microsoft, has launched the Climate and Communities Investment Coalition (CCIC). This initiative aims to develop a USD 9 billion pipeline of renewable energy projects across the U.S., targeting the construction of approximately 5 GW of renewable power over five years. The project is expected to lower energy costs for low- and middle-income households while creating jobs.

Similarly, Energix Renewables has signed a long-term agreement with Alphabet’s Google to supply electricity and renewable energy credits from its solar projects. This collaboration supports Google's rapidly expanding AI data centers, underscoring the tech industry’s commitment to integrating renewable energy into its operations.

The ripple effect on Energy Storage Sector in US

The U.S. energy storage sector faces risks from a ripple effect caused by potential policy changes. During his campaign, Trump proposed tariffs as high as 60% on Chinese goods, including components for battery manufacturing, more than doubling the Biden administration’s 25% tariff on Chinese battery materials set to phase in through 2026. While experts argue that higher tariffs may not significantly curb Chinese imports due to limited U.S. battery manufacturing capacity, it would still result in higher costs for U.S. developers. Additionally, cuts to IRA tax credits could slow growth, although demand for energy storage is expected to remain strong due to competitive economics. BloombergNEF forecasts that the U.S. could see 185 GW of energy storage capacity between 2025-2035, 15% less than the base case scenario of 218 GW.

Despite federal uncertainty, states continue to support energy storage, with Massachusetts considering legislation to accelerate deployment and Illinois targeting 8.5 GW of cumulative storage by 2030. Companies like Tesla and GE are expanding energy storage business, including plans for increased deployment, underscores ongoing investment in the sector, regardless of federal policy shifts.

Aranca Takeaway

Trump’s policies could slow the growth of renewable energy, especially if incentives for fossil fuels make clean energy less competitive. The U.S. withdrawal from the Paris Agreement again in 2024 further threatens the future of the renewable energy sector. Multilateral Development Banks, which play a crucial role in funding climate initiatives for developing countries, may shift their focus away from climate finance. Given the U.S. veto power in the World Bank, it could influence the institution to reduce its climate-related investments.

However, the strong economic appeal of renewable energy and ongoing technological advancements suggest that the industry can remain resilient despite federal policy changes. With continued state-level mandates and sustained private investment, the renewable energy sector could still grow despite potential challenges at the federal level.