A recent report by Wood Mackenzie outlines the potential shifts in the US renewable energy sector following the November 2024 presidential election.
The report says that President Joe Biden’s initiatives — Infrastructure Investment and Jobs Act (IIJA) of 2021 and Inflation Reduction Act (IRA) of 2022 — have established the United States as a global leader in decarbonization efforts. However, the outcome of the upcoming election could significantly alter this trajectory.
Wood Mackenzie predicts that a victory for former President Donald Trump could delay the energy transition, affecting investment and policy direction. David Brown, Director of Wood Mackenzie’s Energy Transition Research, highlighted the stakes: “This election cycle will really influence the pace of energy investment, both in the next five years and through 2050. Investments in low carbon supply need to be made in the near term to realize longer-dated decarbonization targets. US carbon emissions could grow, putting net zero out of reach in our delayed transition scenario.”
The report anticipates that under a second Trump administration, executive orders might dismantle the 2035 net zero target for the power sector, implement less stringent emissions goals from the EPA, and introduce tax credit regulations favoring blue hydrogen. Furthermore, the fiscal environment could become challenging due to efforts to manage the national debt, projected by the US Congressional Budget Office to reach a debt-to-GDP ratio of 109 percent by 2030 and 155 percent by 2050.
Wood Mackenzie’s base case projects approximately $7.7 trillion in investments for the US energy sector from 2023 to 2050. However, in the delayed transition scenario, reduced policy support for low-carbon energy and infrastructure could decrease investment by $1 trillion. This would slow the development of carbon capture, utilization, and storage (CCUS) and low-carbon hydrogen technologies. Natural gas demand could rise by 6 billion cubic feet per day by 2030, a 6 percent increase over the base case.
Early indicators from 2024 suggest a potential slowdown in the energy transition. While hybrid car sales have surged by 57 percent, electric vehicle (EV) sales have only increased by 19 percent, falling short of expectations. This trend could be exacerbated by weakened federal greenhouse gas (GHG) emissions and fuel economy regulations, potentially resulting in the total stock of EVs being 50 percent lower than projected by 2050.
The delayed transition scenario also foresees a reduction in financial support from the Department of Energy Loan Program Office, fewer grid improvements, and continued trade tensions with China. Consequently, wind, solar, and energy storage capacity could be 25 percent lower than the base case, reaching only 500 gigawatts (GW) by 2050.
Despite these challenges, power demand is expected to increase by 2.0 petawatt-hours (PWh) between 2030 and 2050, driven by industrial, residential, electrolytic hydrogen, and EV usage. Without sufficient policy support for renewables, coal generation capacity could be four times higher than the base case by 2040, with 104 GW remaining on the grid.
The investment outlook for low-carbon hydrogen is uncertain, with potential adjustments to IRA tax credits favoring blue hydrogen. Growth in this sector may shift to export markets in Europe and Asia, with a projected two million tonnes exported by 2050.
At the state level, momentum for low-carbon investment remains strong, independent of federal policy. California, for example, has seen its utility-scale battery capacity expand eight-fold to 8.4 GW since 2020, with expectations to reach 11.7 GW by the end of the year.
State renewable portfolio standards and voluntary renewable energy targets have supported significant wind and solar capacity expansions, averaging over 13 percent annually between 2016 and 2020. Additionally, California’s Low Carbon Fuel Standard (LCFS) continues to drive investments in low-carbon hydrogen, direct air capture (DAC), and bioenergy nationwide.