Republican control in the US government could alter the energy policy landscape, potentially steering it away from net-zero targets. However, Wood Mackenzie predicts that bipartisan support for the Inflation Reduction Act (IRA), renewable energy competitiveness, and private sector climate commitments will help maintain momentum in the energy transition.
The analyst firm considers a full repeal of the IRA unlikely, though some amendments could occur. David Brown, director of the energy transition service at Wood Mackenzie, highlighted that the IRA has already spurred over $220 billion in manufacturing investments, with much of it concentrated in Republican-led states.
Key shifts could include lighter emissions regulations, more protectionist trade policies, and withdrawal from the Paris Agreement. The policy impact would vary across sectors and technologies, with some areas facing heightened risks.
The solar sector benefits from robust demand, with a pipeline of nearly 100 GW DC in contracted utility-scale projects. However, interconnection and transmission bottlenecks are expected to limit installation growth in the short term. Michelle Davis, global head of solar at Wood Mackenzie, noted that growth from 2028 to 2031 is forecasted at an average of 5% annually, potentially reaching 50 GW DC annually.
IRA provisions like tax credit bonuses and transferability are critical to this growth but could be at risk under potential legislative revisions.
Offshore wind could face slower development due to restricted permitting and fewer new leases, though its 10-year outlook remains relatively stable with 25 GW of projects already permitted or nearing approval. However, lack of guidance on domestic content tax credits and reduced manufacturing incentives could delay investments, potentially reducing offshore wind capacity by 30%.
Onshore wind might experience sharper slowdowns if the production tax credit (PTC) is phased out earlier than planned or if other IRA mechanisms are repealed.
The energy storage sector is poised for continued rapid growth under Wood Mackenzie's base case, though IRA amendments could affect incentives like the investment tax credit (ITC), PTC, and manufacturing bonuses. Heightened tariffs and protectionist policies also pose risks.
Low-carbon hydrogen investments face uncertainty under a potential second Trump administration, as guidance on the 45V tax credit could shift significantly in the absence of a clear Republican stance on hydrogen.
While potential policy changes could slow the pace of the energy transition, Wood Mackenzie maintains that private sector initiatives and the competitive advantages of renewables will continue to drive progress in the long term.
