Republican control, led by President-elect Trump, will move U.S. energy policy away from net-zero targets, Wood Mackenzie said.
Inflation Reduction Act (IRA): Full repeal is unlikely due to bipartisan support and substantial investments, but modifications, such as tax cuts, are possible.
Impact: Over $220 billion in manufacturing investments, particularly in Republican-led states, is expected to remain intact.
Sector-Specific Insights
Solar Energy:
Near-term growth remains steady with nearly 100 GW of contracted projects.
Long-term growth (2028–2031) depends on maintaining IRA incentives.
Wind Energy:
Offshore: Risks from restricted permits and reduced tax credits could delay domestic supply chain investments.
Onshore: Deployment faces risks if tax credit mechanisms are repealed.
Energy Storage:
Expansion continues in the base case, driven by renewables and grid reliability needs.
Potential threats include faster phase-outs of ITC/PTC tax incentives and increased tariffs.
Natural Gas:
Deregulation likely boosts domestic demand, particularly for data centers and manufacturing.
GHG standards for coal and gas plants face challenges under a Trump administration.
Carbon Removal:
Enhanced 45Q credits for carbon capture (CCUS) are expected to remain safe due to bipartisan support.
Broader deregulatory moves may slow CCUS adoption in the near term.
Key Takeaways
Renewables Resilience: Despite political shifts, renewables remain competitive, with a projected 243 GW growth by 2030.
Market Forces: Private sector commitments and favorable economics are expected to sustain the energy transition, even amid policy changes.
Protectionism Rise: Policies favoring domestic manufacturing and higher tariffs could reshape the energy landscape.
Carbon Capture and Storage (CCUS)
Outlook: Expected to reach 80 million metric tons (Mt) of capacity by 2030, driven by existing incentives.
Low-Carbon Hydrogen
Uncertainty: Investment momentum slowed due to unclear Republican stance on the 45V tax credit.
Potential: U.S. remains globally competitive in hydrogen investment as a key pillar of decarbonization.
Nuclear (Small Modular Reactors – SMRs)
Support: New nuclear development prioritized for energy independence and technology leadership.
Projection: Capacity between 14–27 GW by 2050, depending on policy conditions.
Liquefied Natural Gas (LNG)
Boost: Permitting reforms under Trump expected to facilitate 50 million metric tons per annum (mmtpa) of LNG capacity by 2027.
Competitive Market: Global LNG prices may decline short-term but rise post-2030 due to growing demand.
Oil and Gas
Demand: Global oil demand could drop by 1.1 million barrels per day by 2026 due to tariffs reducing economic growth.
U.S. Production: Oil production expected to rise to 13.6 million barrels per day (mb/d) by 2025.
Private Operators: Activity could increase due to flexible capital plans and federal permitting reform.
Energy Storage
Risk: Policy changes in the Inflation Reduction Act (IRA) could slow rapid expansion, particularly for standalone storage projects.
Coal
Temporary Pause: Short-term demand increase due to data centers and electrification.
Decline: Long-term trends show irreversible weakening as coal-fired plants retire and production declines.
U.S. Refining
Boost: Tariffs expected to benefit domestic refiners by increasing prices and shifting production to gasoline.
Limitations: Economic slowdowns and reduced oil demand growth could offset long-term benefits.
Metals
Price Risks: Eased mining regulations may lower domestic costs, but tariffs could raise prices for U.S. consumers.
Trade Policy and Tariffs
Protectionism: Global tariffs of at least 10%, and up to 60% on Chinese imports, could be enacted in early 2025.
Impact: Higher import costs could burden U.S. businesses and households with an additional $450 billion annually.
Retaliation: Likely global response could shift trade patterns significantly.
Key Takeaways
Energy Shift: Renewables and low-carbon technologies remain competitive despite political headwinds.
Economic Impacts: Protectionist policies could reshape energy and trade landscapes, potentially slowing economic growth.
Sectoral Resilience: Some sectors like CCUS, LNG, and nuclear stand to benefit, while others face increased risks.