An analysis from global data and analytics group Wood Mackenzie says Republican control of the White House and Congress means U.S. energy policy will move away from net-zero emissions targets, but there remains bipartisan support for the Inflation Reduction Act (IRA). The group also said competitive economics for renewable power resources mean the energy transition will continue, despite a better regulatory landscape for fossil fuels.
WoodMac, in a Nov. 18 news release, said President-elect Donald Trump’s full agenda would face political and market opposition. The group said the U.S. will likely have lighter standards on emissions regulations, and more protectionist trade policies, which would raise costs for imported materials including some metals and equipment. Trump also has vowed to remove the U.S. from the Paris climate agreement, as he did during his first term, which also could impact the power generation sector.
“The IRA has supported over US$220 billion in manufacturing investment and much of this has been concentrated in Republican-led states,” said David Brown, Director, Energy Transition Service at Wood Mackenzie. “The likelihood of a full IRA repeal is low. However, there could be some amendments to the legislation. Renewables investment could slow, but capacity is set to grow by 243 GW from 2024-2030 even in our delayed transition scenario.”
Brown continued: “We expect President-elect Trump to support the growth aspirations of Big Tech. We have identified over 51 GW of new data center announcements since 2023, which have a better chance of coming to fruition if Republican-supported permitting reform comes to pass. With manufacturing investments concentrated in Republican states, we believe advanced manufacturing credits will remain intact and around 7 GW of solar manufacturing will likely proceed.”
Momentum for Low-Carbon Tech
WoodMac said that while coal-fired power generation could be supported in the near-term by increased power demand from data centers and electrification, its general decline will continue. “But as coal power plants become less economic to operate and continue to retire, domestic thermal coal demand will irreversibly weaken in the years ahead,” said the analysis.
Brown noted there is significant momentum for investment in low-carbon technologies. He said the impact of the election will vary by sector, commodity and technology, with some industries at immediate risk than others.
WoodMac acknowledged that the near-term pipeline for solar power “is robust,” while adding that “longer dated projects face policy risk.” The group said “there is no lack of demand for solar energy in the United States. The pipeline of contracted utility-scale solar projects is nearly 100 GWdc, and customer demand for distributed solar projects continues to grow. A Trump administration will not change this in the near term.”
“We expect flat installation growth in the next few years despite high demand for solar, driven primarily by interconnection and transmission bottlenecks,” said Michelle Davis, global head of solar for Wood Mackenzie. “Then, from 2028-2031, annual growth should pick up modestly, averaging 5% annually and reaching about 50 GWdc. However, various IRA incentives such as tax credit bonus adders and transferability of tax credits propel additional growth in our base case forecast. This growth is at risk if the IRA undergoes substantial modifications—a strong possibility given Trump’s agenda to maintain tax cuts.”
Trump has said he wants to end the U.S. offshore wind industry. WoodMac said it “expects the new administration to de-emphasize offshore wind development by restricting permitting resources and limiting new leases. However, these impacts will not materially change the 10-year outlook, as almost 25 GW of projects under development are already permitted or in the late stages of permitting.”
The group said a more significant risk is related to project economics. “If the administration chooses to not issue guidance on the domestic content bonus credit for offshore wind, or pares back the 45X advanced manufacturing tax credit, investments in a domestic supply chain could be significantly delayed,” said Stephen Maldonado, research analyst at Wood Mackenzie. “While Wood Mackenzie’s base case outlook expects 27 GW of cumulative installed capacity by 2033, the compound effects of these constraints could lead to a 30% decrease over the same time frame.”
There also could be threats to onshore wind, as the group said a repeal of key mechanisms of the IRA, and a restructuring or earlier phase-out of the production tax credit, could significantly slow deployment.
Energy Storage
Wood Mackenzie said that in its base case outlook for energy storage, provisions of the IRA remain in place “and storage continues a rapid expansion as a necessary component for grid balancing, reliability, and resiliency given increasing renewables. However, policy changes in the IRA could change this.”
“A quicker phase-out of ITC and PTC tax incentives, removal of bonuses and manufacturing incentives, and increased protectionism, including higher tariffs, are developments to monitor,” said Allison Weis, global head of energy storage for Wood Mackenzie. “Although transferability may not be a likely target for Republicans, its removal has particular downside risk for storage as it has been a key source of ITC financing for stand-alone storage projects.”
Wood Mackenzie expects the U.S. Environmental Protection Agency (EPA) will become more “friendly” for fossil fuels. “We expect GHG (greenhouse gas) standards will not survive both the legal process and a Trump EPA,” said Ryan Sweezey, director, power and renewables for Wood Mackenzie. “Demand growth driven by data centers and manufacturing requiring significant investment in new generation.”
Trump will likely try to use executive orders to eliminate some IRA provisions, such as enhanced 45Q tax credits and project funding, but WoodMac said “bipartisan support for CCUS [carbon capture utilization and storage] makes it unlikely that a Republican Congress will target these incentives in an unwinding of the IRA. However, other administration priorities, like a reversal of SEC [Securities and Exchange Commmission] emissions reporting and EPA power emissions reduction requirements, could have cascading effects on near-term CCUS adoption.”
Hydrogen, SMRs, LNG
The WoodMac analysis said a second Trump administration will bring more uncertainty for investment in hydrogen as an alternative, low-carbon fuel. It said that “Without a clear Republican stance on hydrogen, the 45V guidance could shift dramatically.” The group said the U.S. still maintains “globally competitive investment incentives,” adding that “Wood Mackenzie’s 2024 Energy Transition Outlook sees hydrogen as a pillar of decarbonization across all scenarios.”
The incoming administration is expected to continue to support nuclear power, as it did during Trump’s first term. It also is expected to remove the pause on exports of U.S. liquefied natural gas (LNG), which many foreign countries use to supply their natural gas-fired power plants.
“The competitive environment for new U.S. LNG projects will intensify during President-elect Trump’s second term,” said Mark Bononi, principal analyst at Wood Mackenzie. “Global LNG prices are set to fall over the next few years as more capacity is developed from North America and the Middle East, but the market needs more LNG after 2030, and the U.S. is competing with other suppliers to meet this need. We expect the Trump administration to enact legislation simplifying and strengthening the permitting process. A more stable and predictable regulatory and legal environment should allow buyers to renew their reliance on the U.S. for new LNG supplies.”
Impact of Tariffs
“Under a Trump administration, we expect environmental policies around mining to be eased, allowing for faster permitting and potentially lower costs for domestic metal mining or processing operations,” said Natalie Biggs, Global Head, Base Metal Markets for Wood Mackenzie. “However, despite declining U.S. production costs, metal costs for U.S. consumers are likely to rise significantly if Trump follows through with plans to impose tariffs.”
Those consumers include power generation equipment manufacturers, both in the renewables and thermal sectors. Trump has said he would hike tariffs on imports to at least 10% globally; the rate for Chinese imports could be 60%. The tariffs could be enacted by executive order and could take effect early in 2025.
“In the short term, increases in U.S. domestic production to substitute for imports will be minimal—spare manufacturing capacity is insufficient,” said Peter Martin, Head of Economics for Wood Mackenzie. “Shifting trade patterns, especially to reduce imports from China, will be material.”
Martin added, “But with tariffs rising for all trading partners, import costs will increase. We estimate raising tariffs could cost an additional US$450 billion in import duties in 2025, a burden that U.S. businesses and households would carry. And this is before any global retaliation.”
—Darrell Proctor is a senior editor for POWER ().
