With the increasing likelihood of a Trump presidency, investors are growing more concerned about the future of the Inflation Reduction Act (IRA) and U.S. renewables.
Stocks like Vestas, Orsted, EDPR, and PWR have experienced significant declines due to these uncertainties, although analysts believe the market reaction may be overstated.
The IRA could be a target for a Trump administration, particularly if Republicans secure the presidency and Congress, according to the firm’s observations.
Despite the potential threat, analysts point out that IRA investments have disproportionately benefited red states. Since the law was enacted in August 2022, approximately 74% of clean energy investments, 68% of new jobs, and 46% of new clean energy capacity have flowed into Republican states. This alignment could act as a deterrent against a complete repeal, as per the firm’s analysis.
Furthermore, the firm suggests that any modifications to the IRA are unlikely to have retroactive effects. Existing projects would be shielded by safe-harbor regulations, and developers could secure future projects up to four years in advance of completion. Projects in progress or fully permitted for offshore wind would also remain secure.
Even in the event of IRA repeal, analysts believe that corporate Power Purchase Agreements (PPAs) could help offset the impact. Major technology firms may offer higher offtake prices to meet their decarbonization targets, ensuring continued viability for renewable projects.
Analysts also predict that tariffs on Chinese imports are not likely to significantly disrupt the wind sector, given the existing domestic content incentives and tariffs that already reduce dependence on Chinese components.