It’s the big guessing game, given that the federal investment and production tax credits have been a major stimulant for renewables deployment in the U.S. President-elect Trump is famously pro-fossil fuels, but some renewables advocates hope that the industry’s bipartisan support, declining costs, and record of domestic jobs production will help it weather the Trump storm.
Two big titans of the field, Bill Gates and Elon Musk, have differing views of what will happen, based on their conversations with the president-elect. First per PV Tech, Gates is pessimistic:
After a call on clean energy with Donald Trump, Microsoft co-founder Bill Gates fears for federal support of renewables under the new US president. […]
Gates announced the formation of the Breakthrough Energy Coalition, the group that is launching the fund, at COP21 last year. In addition to the private investments, Gates said he and other investors convinced 20 governments to double their energy research and development budgets over the next five years.
In light of the call with Trump, however, Gates doubts how involved the US government will be in that commitment.
Gates acknowledged that the US “will probably see at the federal level less incentives for renewable deployment” during the Trump administration. “That is unfortunate,” he said.
But Musk is sounding more optimistic after meeting with Trump, per Eletrek:
During an event with investors at the Gigafactory in Nevada this week, Musk described his takeaway from the meeting and it looks somewhat encouraging for the clean tech industry.
“The President-elect has a strong emphasis on US manufacturing and so do we. We are building the biggest factory in the world right here, creating US jobs… I think we may see some surprising things from the next administration. We don’t think they will be negative on fossil fuels… but they may also be positive on renewables.”
For my part, I could envision two possible futures for renewable incentives, both of which are not great. First, Congress could eliminate the tax incentives in a larger budget deal that cuts taxes significantly, since they’ll need to find offsetting revenue any way they can. The tax credits could therefore be among the first to give.
Alternatively, Congress might keep the tax incentives as is but cut corporate tax rates so much that they become ineffective. Boomberg described how this would work back in November:
Wind and solar companies depend heavily on financing from large banks, insurers and other backers that take advantage of federal credits through tax-equity financing — they’re expected to provide developers with about $14.8 billion this year, according to Bloomberg New Energy Finance.
If corporate rates fall, as Trump has pledged if he is elected Tuesday, investors will have less need for write-offs through tax-equity investments. With wind and solar projects expected to need $56.2 billion in capital during the next president’s first term, a slump in the tax-equity market may leave developers short.
If corporations owe less to the government, “there will be less tax capacity to be taken up with tax equity,” said Keith Martin, a Washington-based attorney for law firm Chadbourne & Parke LLP who specializes in tax and project finance.
I hope I’m proven wrong and that the incentives stay strong, but it’s probably worth gearing up for at least some degree of rollback. And that means strong advocacy in Congress to keep the incentives effective, and also coordinated state action among pro-renewable states to provide financing backstops in case of federal retrenchment.