Renewable Energy Under Trump: Reading the Tea Leaves
In 2023, Texas added more new renewable energy than any other state, while in 2024, more Texans voted for Trump than any other state. illustrating the puzzling politics of renewable energy. Whether economic liberalism vs. environmentalism, climate change skepticism, or simply the polarization that turns almost every issue into us vs. them, Republicans have never embraced renewables. Hence the trepidation in the renewable energy sector about its prospects under a Trump administration.
Trump has been an outspoken critic of wind power, and said he’d rescind unspent funds from the Inflation Reduction Act, which allocates billions of dollars in incentives to clean-energy projects. Given that, portions of the renewable energy sector will likely face some setbacks.
Yet, at the same time, energy demand is soaring – electricity in particular – with demand projected to accelerate, utility scale solar (and wind) are the lowest cost ways to generate that electricity. And the IRA only restored residential solar tax credit to the same 30% as the prior decade – that small increase from 26% didn’t come close to offsetting interest rate and inflation-driven cost increase. Eliminating incentives on battery storage would be especially disruptive, as utilities are relying on them to meet demand surges. From a purely political perspective, IRA-spurred investments have flowed largely to red states.
Elon Musk, perhaps counterintuitively, supports eliminating electric vehicle subsidies. But the Alliance for Automotive Innovation, which represents 42 car companies that produce nearly all the new vehicles sold in the United States, recently requested that Trump preserve auto-related provisions in the current tax code.
Another critical issue is the state of the US electric grid. Already fragile and overtaxed by demand, risks from software failures (including cyberattacks) and increasingly severe weather make it increasingly vulnerable. Solar systems with battery storage insulate homeowners from grid outages, and many utilities hope to use those systems as “virtual power plants” to help meet spikes in demand. And the security homeowners gain from grid-independence in times of emergency collectively means safer communities and enhanced national security.
Finally, while the US is the world’s largest national economy, like petroleum-based jet fuel, sustainable aviation fuel (SAFl energy is a global market US producers can get higher returns converting plentiful corn-based ethanol to SAF as long as it meets international standards that mandate renewable energy be used for production. With massive demand spiking as Europe’s SAF mandate takes effect, and low tanker costs to Europe (lower than US rail in fact), renewable SAF makes financial sense for US producers irrespective of IRA incentives.
Aspects of the IRA that likely don’t align with the new administrations’ broader policies, such as added incentives for meeting labor standards and community income levels, seem those most likely to be eliminated or revised. On balance, as the Wall Street Journal concluded, the new administration is more likely to take a scalpel than an ax to renewables policy and incentives.