How a Trump administration could risk green energy investment

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How a Trump administration could risk green energy investment

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is much less clear than the rhetoric,” analyst Tobin Marcus wrote in a recent note. Nonetheless, given a focus at the *********** National Convention on ending the “Green New Scam,” Wolfe Research believes Trump is serious about ending investment and production tax credits that benefit solar projects under the IRA. Recent declines in renewable energy stocks caused by some investors pricing in the possibility of a “*********** sweep create a buying opportunity,” the Baird analysts wrote. “Nonetheless, headline risk will make our sector volatile until the election.” Sector views Sustainable energy stocks came under particular pressure following the presidential debate between Biden and Trump in late June, as opinion polls pointed to a higher likelihood of a Trump victory. TAN 1M mountain Invesco Solar ETF in July Analysts are divided on the extent to which higher tariffs and a rollback of the IRA would affect the solar sector. JPMorgan believes that the impact is “likely limited” because the U.S. accounts for less than 7% of the global addressable market. The Wall Street bank noted, however, that “geopolitical tensions may hurt investor sentiment toward export-oriented solar names while such tensions persist.” Meanwhile, some firms see First Solar potentially benefiting from a *********** administration in spite of it benefiting from the IRA. The view is that First Solar will benefit the most within the U.S. solar sector from greater trade restrictions, according to Baird. Others agree. “We think a potential Trump administration may more likely represent a positive than [a] negative outcome for FSLR,” Morgan Stanley said in a late July note. “We see fairly limited downside (5%) to where FSLR is currently trading even in what we view as an unlikely IRA repeal scenario. Furthermore, we believe the market is ignoring the arguably positive impacts that a potential *********** administration could have on FSLR’s position in the U.S. market, as we would expect further protectionist measures to be put in place to protect domestic manufacturing,” Morgan Stanley continued. On the other hand, electric vehicle and battery subsidies could be revoked in spite of Elon Musk’s endorsement of Trump — which would threaten the entire web of EV companies, Baird said. The investment bank highlighted electric vehicle manufacturers and suppliers as most at risk, specifically Tesla , Rivian , Albemarle, Lucid and MP Materials Corp. A longer-term look While tariffs and other protectionist measures are meant to strengthen domestic green energy companies catch up with China, it will be challenging for the U.S. to overcome today’s yawning gap. “From a price perspective, it’s going to be really hard to ever get to the place where China is right now. They created their own sort of monster with how influential they are in the industry,” said Sage Advisory’s Poreda. Only extreme measures can help companies compete with ******** manufacturers — but they would result in high upstream costs, Poreda noted. Higher input costs from tariffs will also dent profit margins, especially difficult to bear for public companies that have to report results to investors. “That is structurally where China has an advantage, in that their government tends to think very long-term, [many manufacturers] don’t have to report quarterly to shareholders; they can go ahead with investments,” said Schleif. Ultimately, that may curtail the number of green energy startups and private companies that want to go public, Schleif said. From the companies’ perspective, facing the dual pressure of high input costs curbing margins and reporting quarterly to shareholders could lower their willingness to make long-term investments that face high upfront costs. “They may not necessarily want to have to be held to a shorter-term mindframe that public investors hold them to,” Schleif said. So far, tariffs have had only a limited effect on the broader goal of the U.S. strengthing its renewables industry. ******** manufacturers have managed to bypass some of the current tariffs and other barriers in place. ******** solar panel manufacturers, for example, are investing in factories in the U.S. to obtain IRA benefits, and now account for a fifth of solar factories announced since the rollout of the IRA. Although it has brought ******** investment to the U.S., questions regarding domestic job creation have made it “limited in success,” Poreda said. “It takes a whole supply chain to be able to fully realize the successes at the domestic level. In the end, just being a final assembly plant is not really as big of a victory,” Poreda said. “It’s been really hard to compete with ******** companies in any way, shape or form.”

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