While many investors and analysts had anticipated a Donald Trump victory Tuesday — Maheep Mandloi of Mizuho Securities wrote earlier this week that stocks had “priced in” a 70% chance of Trump winning — that hasn’t stopped markets from twitching reflexively now that he’s actually done it.
The clean energy industry, for its part, is already preparing to sell itself to a Republican Washington. The trade group Advanced Energy United’s president Heather O’Neill congratulated Trump in a statement and said it was “committed to working with the Trump-Vance Administration to meeting America’s energy challenges with advanced energy solutions.”
But the market isn’t convinced the gambit will pay off.
The first and most obvious effect of the decisive election result is that clean energy stocks are down. The iShares Global Clean Energy exchange traded fund, whose biggest holdings are the solar panel company First Solar and the Spanish utility and renewables developer Iberdola, was down about 7% in early trading versus yesterday. The iShares U.S. Energy ETF, meanwhile, whose largest holdings are Exxon and Chevron, is up over 3% compared to yesterday and just over 10% on the year.
Some specific publicly traded clean energy stocks have sunk so far today, especially residential solar companies like Sunrun, which was down over 25% in early trading. Sunrun competitor Sunnova was also down over 40%, while the inverter company Solaredge is down over 20%. Solar panel company First Solar, which some analysts think could be protected from a Trump revision of the Inflation Reduction Act due to its U.S. manufacturing presence, is still down over 12%.
“Manufacturing credits will likely stick,” Greg Brew, an analyst at Eurasia Group, told me. “Why touch a whole of bunch of jobs in red districts?”
That doesn’t mean manufacturing will be unaffected. This morning FREYR, a Norwegian battery companies, announced that it will acquire the U.S. assets of Trina Solar, a Chinese solar module manufacturing company. These include a plant in Texas that started production just last week, according to the announcement, indicating worry that a Trump administration could see more trade conflict with China and Chinese companies while also trying to boost domestic manufacturing, even in the renewables sector.
That renewables companies are falling more than fossil energy companies are rising, however, indicates that the market is not expecting a Trump White House to do much to improve oil and gas profitability or production, which has actually increased in the Biden years thanks to the spikes in energy prices following the Russian invasion of Ukraine and continued exploitation of America’s oil and gas resources through hydraulic fracturing. And while the Biden administration attempted to issue a formal pause on approvals of new export terminals for liquified natural gas, a federal judge blocked that move in July. In September, the Department of Energy approved exports for a terminal on the Mexican Gulf Coast using American gas.
“He’s going to come in and say ‘drill baby drill,’” Brew said of Trump. He will also likely increase leasing on federal land and toss the ban on new facilities for liquefied natural gas exports. But the overall effect may be limited. “I don’t think the Biden administration did anything to get in the way of exploration and production investment” for the fossil fuel sector, Brew said.
Cheniere Energy and Energy Transfer, two companies with existing or planned LNG terminals, did see their shares rise a touch in morning trading. Companies that operate oil refineries have also gotten a nice boost today. Phillips 66 and Valero shares are up 4.5% and 5%, respectively, as the market is anticipating an overhaul of Environmental Protection Agency mileage standards designed to accelerate the transition to electric vehicles. “Anything on mileage standards and/or EV credit reduction is likely positive for duration of refining as it pushes out the EV adoption curve,” the investment bank Jefferies wrote in a note to clients.
On the other hand, the wind energy industry has long been the target of specific ire from Trump and is taking a hit Wednesday. U.S.-traded shares of Vestas, the Danish turbine manufacturer, are down almost 15% and have hit their lowest point this year. GE Vernova, meanwhile, the GE energy spinoff that makes both wind turbines and the turbines that go into natural gas power plants (as well as electrical equipment) is up over 3%. Unlike pure-play green energy companies, GE Vernova is positioned to profit from any increase in electricity demand, whether served by renewables or fossil fuels.
And of course, there’s the most valuable green technology company in the world, one that manufactures electric vehicles and batteries (and robots). In early trading, Tesla stock is up over 13%, bringing it to its highest price per share — $285 — since September 2022.
Renewables companies are at risk from both changes in tax policy as well as the potential for Trump’s tax cut and spending plans to keep interest rates high. While the market is focused on the prospects of new legislation and regulation in Washington, renewables companies may be looking just as warily at the Federal Reserve, which will announce an interest rate decision on Thursday. The market expects the federal funds rate to fall another 0.25 percentage points, following the half-point mega-rate cut in September. What happens after that is anyone’s guess.
