Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Economy

Clean Energy Stocks Are Bracing for a Trump Victory

White House policy might not even be the biggest issue.

Donald Trump.
Heatmap Illustration/Getty Images

If you look at the polls, the presidential election — now exactly two weeks away — is very close. If you listen to the prognosticators, Trump has a slight edge. And if you look at the markets, whether prediction markets or Wall Street, Trump’s chances are looking pretty good, with a sweep of the White House and both houses of Congress now firmly on the table.

“Politics prediction market data have tilted toward a win by former President Trump, and markets have responded in line with this development,” Morgan Stanley analyst Michael Wilson wrote in a note to clients Monday. “Such an outcome should now be taken seriously,” wrote Jefferies global head of equity strategy Christopher Wood in a separate note last week.

And seriously is exactly how the market appears to be taking it, with a range of assets now seeming to be pricing in a Trump victory. Yields on Treasury bonds are also rising, which may be because traders see fewer interest rate cuts coming in a more inflationary Trump economy fueled by tax cuts, spending, and an icing of tariffs on top. Gold and Bitcoin prices have risen in the past month as well.

But what about the clean energy economy? Trump often speaks critically of the Inflation Reduction Act, clean energy in general, and wind energy in particular. With Republicans in control of Congress, those sentiments are more likely to be be turned into policy ... of some kind.

For investors in clean energy companies, Trump's improving odds make for nervous times. In the initial days after a Trump victory, as the reality solidifies, you’ll likely see some big price swings. Eight years ago, on Wednesday, November 9, 2016, an exchange traded fund that tracks around 100 clean energy stock called iShares Global Clean Energy, which is used as a benchmark for the industry as a whole, fell almost 5%, even as stocks overall jumped. In 2020, the fund rose more than 6.5% percent between close on election day and the following Monday, after networks had called the race for Joe Biden.

“I think stocks will trade on sentiment” following a win in either direction, Maheep Mandloi, an analyst at Mizuho, told me. “We’ll probably see that knee-jerk reaction.”

The iShares fund has been falling recently, dropping from $14.77 on September 27, when Kamala Harris peaked at 58.1% in Nate Silver’s polling models, to 47% on Monday, when Trump’s probability to win reached 52.7%.

“Renewables underperformed last week,” Mandloi wrote in a note to clients on Tuesday, with the iShares ETF down compared to the S&P 500 index. That sluggishness mostly came from solar stocks, particularly residential companies like Sunnova, Sunrun, Enphase, and Solaredge — “likely due to election, concerns” Mandloi added.

The fall has been even more dramatic for companies more exposed to Trump’s particular (dis)taste in energy, namely wind. U.S.-traded shares in Vestas, the Danish wind turbine manufacturer, have fallen over 16% since Harris peaked in the forecasts last month through Monday.

But a number of analysts are more sanguine about the fate of the IRA and the clean energy economy it has fostered. For one, the politics of repeal might not hold up in a Trumpified Washington. In August, 18 House Republicans in competitive districts wrote a letter to House Speaker Mike Johnson asking him not to target the clean energy tax credits at the core of the law. These same House Republicans have supported Johnson’s speakership where he’s taken flack from the body’s most conservative members, so this is hardly a constituency he can afford to ignore.

Even if a reconciliation bill passed next year were to scrap some or all of the IRA’s clean energy tax credits, the Internal Revenue Service could — as it has in the past when tax credits were about to expire — write rules that allow projects to claim the credits for years to come, Mandloi told me.

In any case, people in the tax credit market don’t seem to think the IRA tax credits are particularly at risk. “Political uncertainty has slowed the development of some industries,” analysts at LevelTen, a clean energy financial infrastructure company, wrote in a report last week. “It it hasn’t stopped the tax credit market from growing.” They assigned a low likelihood to a complete gutting of the IRA, noting that “there is bipartisan support for the investments catalyzed by the IRA across the nation.”

While it's possible that the bipartisan enthusiasm for investments stemming from the Inflation Reduction Act could protect much of the bill, the parts of the bill that directly support manufacturers may be the safest, namely the advanced manufacturing tax credit that has been especially popular in the solar industry.

These credits have been complemented by aggressive trade policy as well. Some of Trump’s earliest tariffs were on solar panels, and the Biden administration has also tried to protect the domestic solar manufacturing industry from “overproduction” in China and Southeast Asia. First Solar has thrown itself into domestic manufacturing with the wind of the Inflation Reduction Act’s manufacturing tax credits at its back. Bonuses for solar developers whose systems are made up of “domestic content” have helped, as well.

Morningstar analyst Brett Castelli wrote to investors a note last month acknowledging the risk to solar stocks from a change in White House party control. First Solar specifically, however, “would likely benefit from proposed trade policies, such as higher tariffs, under a Republican administration.”

The company’s stock is up 14% so far this year through Monday, although it has dipped as Harris has dipped in election forecast. The Invesco Solar ETF, which tracks the broad solar industry, is down 13% on the year.

“First Solar is unique in our view in the fact that it is relatively indifferent regardless of outcome,” Castelli told me this week. It’s helped by sheer size. “They have the largest U.S. presence for manufacturing solar panels here, domestically,” he said. “The biggest competitive threat to those factories would be cheap imports from China or Southeast Asia.”

But while the renewable energy industry is always at the risk of public policy shifts, for good and for ill, there’s another, harder to predict and harder to tame factor: interest rates.

Despite the spigot from Washington due to the IRA, many renewables companies have not been doing great in the stock market in recent years, and high interest rates are likely the reason why.

For renewables, most of the cost comes from simply building the thing. The “fuel,” whether it be photons or wind, is free. This means that renewables projects are highly sensitive to the price of the borrowed money they need for construction. While the Federal Reserve has finally begun to cut rates and anticipates continuing doing so through the end of next year, it’s by no means something it’s mandated to do, especially if there's a major change in fiscal policy going forward.

Predicting the path of interest rates is something people get paid far, far more than journalists’ salaries to do, and they’re often wrong. That being said, it’s not hard to see a world where a sizable Trump win keeps rates elevated.

As president, he showed zero appetite for fiscal restraint, and going into round two has indicated a desire for sizable tax cuts and almost nothing specific for any large scale cuts in spending, policy preferences that may be more likely to be indulged in a Washington under unified Republican control. “Interest Rates Will Be Higher in the Future, Especially if Trump Is President,” the Wall Street Journal declared earlier this month.

The “downside scenario” for stocks envisioned by Jonathan Golub, chief U.S. equity strategist at UBS investment bank, largely follows this scenario. “A combination of fiscal and monetary stimulus causes a reacceleration in inflation, forcing the Fed to abandon their rate cut plans,” he wrote to clients earlier this month. Clean energy could be hardest hit, no matter what happens to the IRA.

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Energy

It Took a Decade, But Big Tech Finally Loves Nuclear

Meta’s deal with Constellation is a full circle moment for an Illinois nuclear plant.

A Constellation plant and the Meta logo.
Heatmap Illustration/Getty Images, Constellation Energy

America’s nuclear fleet remains its largest source of emissions-free power. America’s biggest technology companies are its largest voluntary buyers of emissions-free power. Only in the past few years have these two facts managed to mingle with each other.

The latest tech nuclear deal is in Central Illinois; Meta on Tuesday unveiled a 20-year power purchase agreement for the electricity produced by the Clinton Clean Energy Center, an 1,100-megawatt nuclear plant run by Constellation Energy. The deal will “guarantee that Clinton will continue to run for another two decades,” Constellation said in its announcement. The deal allows the company to look at extending its existing early site permit for a new plant, the announcement said — or apply for a new one to “pursue development of an advanced nuclear reactor or small modular reactor,” although it made no specific development commitments.

Keep reading...Show less
Blue
White House Requests Slashes to Climate Programs in Rescission Package
Heatmap Illustration/Getty Images

Current conditions: Thunderstorms today will span 1,000 miles from Detroit to DallasNOAA’s Hurricane Hunters aircrews will begin their 2025 season by gathering weather data from a disturbance off the Southeast coast of the U.S.Romanian officials are rerouting a stream to prevent the further inundation and collapse of one of Europe’s largest salt reserves following historic floods.

THE TOP FIVE

1. White House takes aim at climate programs in rescission package

The White House on Tuesday formally asked Congress to rescind $9.4 billion in federal funds to make permanent some of the Department of Government Efficiency’s spending cuts. The 24-page proposal includes clawing back $1.1 billion from the Corporation for Public Broadcasting, which funds PBS and NPR, as well as $8.3 billion from the U.S. Agency for International Development and the African Development Foundation. Congress has 45 days to pass the measure.

Keep reading...Show less
Yellow
Podcast

The Supreme Court’s Double-Edged Change to Permitting Law

Rob and Jesse pick apart Justice Brett Kavanaugh’s latest opinion with University of Michigan law professor Nicholas Bagley.

The Supreme Court.
Heatmap Illustration/Getty Images

Did the Supreme Court just make it easier to build things in this country — or did it give a once-in-a-lifetime gift to the fossil fuel industry? Last week, the Supreme Court ruled 8-0 against environmentalists who sought to use a key permitting law, the National Environmental Policy Act, to slow down a railroad in a remote but oil-rich part of Utah. Even the court’s liberals ruled against the green groups.

But the court’s conservative majority issued a much stronger and more expansive ruling, urging lower courts to stop interpreting the law as they have for years. That decision, written by Justice Brett Kavanaugh, may signal a new era for what has been called the “Magna Carta” of environmental law.

Keep reading...Show less
Yellow