The Dealmakers Aren’t Fretting About the IRA’s Future

Almost every day, Donald Trump attacks clean energy and climate action. He assails electric vehicles, offshore wind, and calls climate change a hoax. He’s also up a little bit in the polls.

Everyone in and out of the clean energy and environmental movement knows this. So why, over two days at a conference hosted by the American Council on Renewable Energy this week, did clean energy bankers, investors, lawyers, and operators seem pretty optimistic about much of the Inflation Reduction Act and other Biden energy policies surviving into 2025 and beyond?

Pretty simply: Because there’s a lot of money being made — including in Republican-controlled states.

“Money is money,” Gina McCarthy, the former Environmental Protection Agency director and White House climate advisor, said during an on-stage interview. “Honestly, who is going to pull the plug on the investments from the Inflation Reduction Act without huge blowback from each of the individual states and governors?”

“I’ve been telling my clients that it’s very unlikely that we’re going to see substantial changes,” Mona Dajani, a partner at Baker Botts, told me. “There’s a lot of clean energy in traditionally Republican states. So do I see anything very material happening? No, I don’t. I think it’d be very unlikely”

It’s not surprising that lawyers and investment bankers would be optimistic about the Inflation Reduction Act. Much of the bill’s spending is channeled through tax credits, which require lawyers and investment bankers to arrange and write up deals between developers and investors.

Whether this optimistic consensus will bear out in 2025 remains to be seen (obviously), but that it exists at all in the present is a testament to a deliberate strategy. The legislation, along with the Bipartisan Infrastructure Law, gave a wide cross section of industries, and regions a stake in the energy transition.

Even if it wouldn’t make these various elected officials and business leaders Democrats — Georgia Governor Brian Kemp, for instance, seems to be opening a new battery plant every week and is not supporting Biden’s reelection — it may turn them into supporters of climate policy, or at least give them a second thought about killing it.

At the core of the IRA are tax credits that, while they will soon be “technology neutral,” will still largely benefit and are modeled on tax credits for wind and solar. Those credits, the Production Tax Credit and the Investment Tax Credit, are decades old, and have historically been affirmatively extended under both Democratic and Republican presidents when the status quo would have meant their demise. To undo them under a second Trump administration would require Congress and the White House to agree affirmatively to toss them out.

“When I look at the composition of Congress, even with a new administration, I think it will be difficult to repeal it,” said Mit Buchanan, managing director of energy investment at JPMorgan Chase, speaking of the IRA during a panel at the conference. “There’s been good support on both sides of aisle in respect to renewable energy in red and blue states. Job creation means a lot.”

Texas and Florida are two of the standouts in clean energy investment, with Texas surpassing California in deploying utility-scale solar and leading the leading the country in wind generation. Florida, meanwhile, has the third-most solar installed among U.S. states.

Between the Inflation Reduction Act and the Bipartisan Infrastructure Law, though, there’s spending that goes beyond wind and solar, including subsidies for oil industry darlings like carbon capture and sequestration, as well as hydrogen energy development.

“Carbon sequestration and hydrogen brings in industries that were traditionally hostile to renewables,” said Jordan Newman, a managing director and renewables investment banker at Wells Fargo, at the conference. A number of carbon sequestration infrastructure projects have popped up in Republican-voting states, including a carbon dioxide pipeline project in Iowa, while the sizable planned investments in hydrogen include a hub in Houston, of which Chevron and ExxonMobil are partners.

But the Biden administration and regulatory agencies run by Biden appointees are certainly acting as if large swaths of the administration’s climate policy are at risk. The Treasury Department, the Environmental Protection Agency, and the Federal Energy Regulatory Commission have put out a flurry of rules and guidance before self-imposed deadlines at the end of this year and to attempt to front-run the ability of a Republican Congress and White House to undo regulations through the Congressional Review Act.

“Our mission and what we continue to do is seek to get as much of the guidance done right and done effectively on the most reasonable timeframe that we can, and we’ll continue to do that all the way through the end of this year,” Ethan Zindler, climate counselor at the Treasury Department, told the audience.

Even if much of the energy tax credits and subsidies for specific technologies like hydrogen and carbon sequestration could survive a change in administration, other parts of the IRA may be at greater risk, especially wind and especially especially offshore wind, for which Trump seems to have a special distaste.

“Offshore wind is challenging,” Meghan Schultz, the chief financial officer of Invenergy, which won a contract for an offshore wind project off the coast of New Jersey earlier this year, said on a panel.

She previewed a message for a potential second Trump administration, focusing on the industrial and job benefits of offshore wind: “If he were to be elected, it will be important that we’re working as an industry to educate this administration on the value these projects will bring, in clean energy and job creation and infrastructure.”

No matter what happens, business people tend towards the optimistic. Said Thomas de Swardt, chief commercial officer at D.E. Shaw Renewable Investments: “If it happens, we’ll sit around table and talk about how we restructure and reprice deals.”