What a Trump Victory Means for Energy: Deregulation, Tariffs, and Future Electricity Prices

With the election of Don

ald Trump to a second term, the U.S. energy policy is poised for a significant shift, moving away from climate change mitigation to a framework that prioritizes #deregulation and domestic energy production. This change comes amid a broader political shift, with Republicans taking control of the Senate and potentially the House, which may allow for sweeping legislative changes affecting the energy sector.

• Trump’s victory signals a return to his administration’s “energy dominance” agenda, characterized by reduced regulations on fossil fuel production and expedited approvals for infrastructure projects like LNG export facilities. These actions suggest potential boosts for oil and gas production, though market dynamics and existing production levels might temper any immediate spikes in output. We suspect there is less “there” there, but LNG exports are more likely to be price inflationary for US consumers. 
•  Additionally, Trump’s administration will undoubtedly roll back some various Biden-era environmental initiatives, including greenhouse gas emission controls across multiple sectors. We anticipate that some of the struggling coal plants may hold on longer – however this trend was already taking hold given regional reliability concerns and capacity rate increases, see. e.g.  PJM capacity prices increase over 10x. 
• The Republican control of the Senate introduces further uncertainties, particularly concerning the fate of federal tax incentives for clean energy outlined in the Inflation Reduction Act, which Trump has derisively termed the “green new scam.” While a full repeal of these incentives is unlikely due to opposition within Trump’s own party, significant modifications could be on the legislative agenda and may stymie growth in the sector for projects that are slated more than a few years out. Ultimately, it is important to acknowledge that domestic producers of renewable energy technology could still fair well under the new Administration, however the wind is no longer at their backs as it has been under the Biden Administration. 
• FERC Commissioner Mark Christie is likely to be nominated to Chairman and this almost certainly will result in the dismantling of nebulous rules promoting clean energy transmission infrastructure, namely FERC Order 1920, the rule that set out new guidelines for transmission buildout and cost allocation. FERC Order 1920 was already legally tenuous and Mr. Christie has been vocal about his disdain. The big losers here will be developers of grid scale solar and wind projects, however they would have been silly to be too optimistic about Order 1920 in the first place. 
• Investors have reacted swiftly, with clean energy stocks like First Solar and Sunnova seeing significant declines amid fears of policy reversals that could undermine the sector. We suspect that prices for renewable projects and PPAs will increase materially as a result of this election. 
• The ITC and PTC tax credits could face significant challenges under a potential Trump administration. While a complete elimination of these Inflation Reduction Act  tax credits is not considered the most likely outcome, substantial modifications or restrictions are possible. A “severe downside case” scenario modeled by Wood Mackenzie analysts includes phasing out the Production Tax Credit (PTC) and Investment Tax Credit (ITC) starting in 2029, with bonus “adders” eliminated by 2026. This scenario could result in a 30% drop in wind, solar, and storage capacity installations from 2024-2033, potentially leading to approximately $350 billion in lost investment over a 10-year period. Section 30D, which provides EV tax credits, is considered particularly vulnerable to changes or repeal. 
• The broader implications for clean energy companies are admittedly  dire, as these policy shifts will certainly slow the transition to renewable energy sources while favoring traditional fossil fuels. We think nuclear remains well positioned for potential renaissance in America –tech firms still want and need clean reliable power and this technology with somewhat broad based political appeal.  A plurality of both Republican and Democratic voters favor nuclear power and the need has never been more obvious.
• On the global stage, Trump’s potential withdrawal (again) from the Paris Agreement and revisiting sanctions policies could disrupt global oil markets and international relations, particularly with key energy players like Iran and Russia.
• In summary, Trump’s second term could reshape the U.S. energy landscape in some profound ways, emphasizing deregulation and fossil fuels at the expense of renewable energy progress. This pivot raises crucial questions about the future of U.S. energy policy, its alignment with global climate goals, and the economic implications for the burgeoning clean energy sector.