Shifting Winds: How Republican Policies Could Influence America’s Energy Transition

Republican control of the United States government under President-elect Trump is expected to bring significant changes to energy policy, moving away from net-zero targets. According to an analysis from Wood Mackenzie, this shift could include lighter emissions regulations, protectionist trade policies, and withdrawal from the Paris Agreement. However, political and market factors, along with bipartisan support for certain measures like the Inflation Reduction Act (IRA), are likely to limit the full realization of Trump’s agenda.

The IRA has been instrumental in driving over $220 billion in manufacturing investments, much of which has been concentrated in Republican-led states. David Brown, Director of Energy Transition Service at Wood Mackenzie, noted that a complete repeal of the IRA is unlikely, though amendments to the legislation could occur. While renewable energy investments might slow, capacity is still expected to grow by 243 gigawatts from 2024 to 2030, even in a delayed transition scenario.

The Trump administration is expected to prioritize the growth of the technology sector, which could benefit from permitting reforms supported by Republicans. Since 2023, over 51 gigawatts of new data center projects have been announced, with many likely to move forward under Republican leadership. Advanced manufacturing credits are also expected to remain in place, with around seven gigawatts of solar manufacturing set to proceed.

For solar energy, the demand in the United States remains strong, with a pipeline of nearly 100 GWs of contracted utility-scale projects. Michelle Davis, Global Head of Solar at Wood Mackenzie, anticipates flat installation growth in the coming years due to transmission and interconnection challenges. Growth is expected to pick up modestly from 2028 to 2031, with annual installations averaging around 50 GWs. However, changes to the IRA’s incentives could pose risks to this forecast.

Offshore wind development may face challenges as the administration reduces permitting resources and limits new leases. Despite this, the current 10-year outlook is not expected to change significantly, as many projects are already in advanced stages of development. Onshore wind could face greater risks if key mechanisms of the IRA are repealed or restructured, potentially slowing deployment.

Energy storage is another area exposed to policy changes. Allison Weis, Global Head of Energy Storage at Wood Mackenzie, highlighted potential risks, such as a quicker phase-out of tax incentives and increased tariffs. However, storage is projected to continue expanding as it plays a vital role in grid reliability alongside renewable energy.

Domestic gas demand is expected to grow through 2030, driven by data centers and manufacturing. Deregulation of greenhouse gas standards under a Trump EPA is anticipated, potentially bolstering fossil fuel use. Carbon capture and storage technology is likely to remain supported due to bipartisan backing, with capacity expected to reach 80 million tons by 2030.

Low-carbon hydrogen investments could slow until clearer guidance on 45V tax credits emerges, while nuclear energy is likely to receive continued support as part of efforts to enhance energy independence. Liquefied natural gas (LNG) projects are expected to benefit from permitting reforms, enabling increased exports to meet global demand.

In the oil sector, slower economic growth due to potential tariffs could reduce global oil demand and prices. U.S. refining may see short-term gains from new tariffs but will face long-term challenges from slowing demand. Coal demand may experience a temporary increase due to load growth but is expected to continue declining as plants retire.

Increased tariffs on imports, especially from China, could raise costs for metals and other commodities. While easing mining regulations may lower domestic production costs, consumers are likely to face higher prices due to protectionist trade policies.

Overall, the energy transition in the U.S. will continue, but certain sectors and technologies could face challenges under a second Trump administration.