As the likelihood of a Trump presidential victory grows, investors are increasingly anxious about the future of the Inflation Reduction Act (IRA) and U.S. renewables.
Analysts note that stocks like Vestas, Orsted (CSE:ORSTED), EDPR, and PWR have fallen significantly due to these concerns. However, they believe this reaction is exaggerated.
The IRA could be targeted by a Trump administration, especially if Republicans win the presidency and control Congress notes the firm.
Despite this threat, analysts highlight that IRA investments disproportionately benefit red states. They explain that since the law's passage in August 2022, about 74% of clean energy investments, 68% of new jobs, and 46% of new clean energy capacity have been directed to Republican states. This alignment could deter a complete repeal, according to the firm.
Moreover, the firm explains that changes to the IRA are unlikely to be retroactive. Existing projects will be protected by safe-harbor regulations, and developers could secure future projects for up to four years ahead of completion. For offshore wind, projects that are under construction or fully permitted would remain safe.
Even if the IRA is repealed, analysts say corporate Power Purchase Agreements (PPAs) could mitigate the impact. Large technology companies might offer higher offtake prices to meet their decarbonization goals, maintaining viable returns for renewable projects.
Analysts conclude that tariffs on Chinese imports are unlikely to significantly disrupt the wind sector, as domestic content incentives and current tariffs already reduce reliance on Chinese components.