Although former US president Donald Trump has promised to end climate policies enacted during the administration of President Joe Biden, the political complications of reversing course make a full change of direction unlikely should Trump return to the White House.
Trump has frequently criticized Inflation Reduction Act (IRA), promising to terminate the "Green New Scam" and rescind all unspent funds in the Biden administration's climate policy suite, if he is elected to a second term.
But fulfilling that pledge may be difficult for many reasons, not least of which is whether Republicans have control of both chambers of Congress after Tuesday's election, including the unlikely outcome of a 60-seat majority needed to bypass a Senate filibuster. Beyond the math, Republican districts are benefiting from IRA funding, with some lawmakers from Trump's party already opposing the turmoil that could arise from an about-face on tax policy.
"There's no way they're going to be able to replace and repeal the IRA, in large part because so many of the dollars are flowing to [Republican] states," said David Shepheard, a partner at consultant Baringa who specializes in energy and resources. "I think the pieces of the IRA that are most at risk are the [electric vehicle] tax credits, potentially some of the stimulative pieces around offshore wind."
The IRA established a host of federal incentives to support clean electricity growth and the associated domestic supply chain. Those include technology-agnostic production and investment tax credits for electricity generators based on their emissions intensities. But the law went well beyond the power sector and also established credits for hydrogen production, electric vehicles and the manufacture of components needed by clean electricity systems.
Project developers are counting on a policy trajectory that does not match Trump's rhetoric, which would allow some incentives to stay on the books.
Companies expect market forces, such as corporate demand, and state mandates to continue to drive growth for solar and onshore wind and energy storage, rather than national politics. But there is more trepidation around offshore wind, a less mature sector for which the federal government is effectively the landlord for project sites.
"There is no doubt that the trajectory of the US offshore wind industry will be impacted by the November election," Liz Burdock, chief executive of offshore wind industry group Oceantic Network, said. "Its outcome will influence how we maintain our momentum."
Uncertainty around the US presidential election has dampened private investment in the sector this year, according to Oceantic. At the same time, companies say the industry has come a long way since 2016, with a handful of projects now operating, while recent macroeconomic challenges are subsiding. Furthermore, demand for offshore wind would continue at the state level, and these factors could make the industry more resilient to headwinds.
Executive decisions
Trump still could use the executive branch to "stonewall" sectors helped by the IRA in the absence of a repeal, including by influence the timing or distribution of IRA funds, according to Shepheard. He could shift regulators' priorities to new oil and gas development, which, along with other actions, could make resources such as combined-cycle natural gas plants more attractive than renewables.
"The extent that renewables and other cleaner energy assets are competing with gas, that'll be the big change from a Trump administration," Shepheard said.
At the same time, funding for onshore wind and solar is "relatively safe", and tax credits for hydrogen and carbon capture are on comparably firm ground because of support from the oil and gas industry, Shepheard said.
Some companies have expressed cautious optimism that some elements of the IRA, such as the advanced manufacturing tax credit, will survive. The incentive is not only important for the solar supply chain but also offshore wind, as state-level solicitations often require developers to invest in local manufacturing.
Republican states in the US southeast have already benefited from new factories springing up on the back of the credits. For example, Enel chose Oklahoma for a new new module plant, First Solar located a factory in Alabama and Qcells has expanded production in Georgia.
Moreover, removing that carrot could leave the US solar industry reliant on Chinese companies, which could run afoul of Trump's protectionist trade instincts.
Trump's campaign did not respond to multiple requests to elaborate on his policy plans.
