The energy-focused market research company Aurora Energy Research analyzes the impact of the new administration under newly elected US President Donald Trump on the country’s energy and industrial policy. 

Republicans gained majorities in both the House of Representatives and the Senate, which has raised concerns among investors in the sector regarding the future of the energy transition in the US after a record year of investment in clean energy during the Biden-Harris administration. 

According to Aurora Energy Research, a very clear priority for the new administration is to finance the continuation of the tax cuts enacted during Trump’s first presidency in 2017. 

Although the Trump administration’s hostility towards clean energy is well known, it is likely that the administration will attempt to find at least partial funding for the tax cuts through a combination of tariffs and cost reductions. 

The energy transition in the US will continue over the next decade, regardless of who occupies the White House, according to the report. However, it is clear that there are several ways in which the incoming government could slow down the pace of clean technology implementation. 

Donald Trump, in a move that reinforces his antipathy towards renewable energy, has nominated Chris Wright, CEO of Liberty Energy, a company specializing in hydraulic fracturing (fracking), as his candidate for Secretary of Energy. Wright, a staunch advocate for the oil and gas industry, has openly criticized the idea of a "transition to clean energy," calling it a misleading term and a marketing strategy designed to promote policies that benefit the wealthy elite at the expense of the general population. In his statements, Wright has argued that technologies such as wind and solar energy cannot truly be described as "clean" or "low environmental impact," due to the intensive use of materials like cement, steel, and polysilicon in their production. 

Pausing the flow of funding 

One of the most direct ways for the Trump 2.0 administration to recover money is by halting the flow of funds for provisions with large sums of money allocated but not yet spent, such as IIJA funding for clean hydrogen regional centers or electric vehicle infrastructure construction. 

From the $7 billion fund to create clean hydrogen centers, less than $100 million has been allocated, leaving at least $6.9 billion vulnerable. Wind, solar, and battery tax credits do not fall into this category. While they are accounted for in the federal budget through estimates by the Congressional Budget Office, it is not as simple as stopping the availability of credits: recoveries could come in the form of unfavorable tax code guidance or total repeal, as discussed below.

Tax code guidance influence 

According to the report, the new administration could try to draft yet-to-be-finalized tax code guidance in such a way that it would make it more difficult to access credits. 

While the president does not have direct influence over the tax code, they will have the opportunity to appoint the heads of the Treasury Department and the IRS, the two agencies responsible for interpreting laws and turning them into tax code guidance. 

For example, the new administration is not expected to have final guidance on the clean hydrogen tax credit before taking office. Strict temporal matching or additionality requirements could make the credit much less favorable for the emerging hydrogen industry. 

Changing or revoking tax code guidelines through legislation 

A more substantial reform is also possible, such as rewriting tax code guidelines that have already become final or repealing tax credits altogether. 

The report indicates that rewriting finalized tax code guidelines would require the approval of a joint resolution through the Congressional Review Act (CRA), which requires a simple majority in both chambers of Congress. 

This would be a long process but not without historical precedent: during Trump’s first administration, Congress used the CRA 16 times to reverse Obama-era actions, primarily centered on Environmental Protection Agency (EPA) resolutions. In 2017, Congress had only used the CRA once to overturn a rule. The administration could also seek broader reform and try to repeal tax credits entirely through the passage of a law. 

Given the partisan divisions, this would likely have to be achieved through budget reconciliation, the same process used to pass the IRA in 2022. This is perhaps the worst-case scenario for the industry. 

Delay of action at the EPA 

Although EPA laws are somewhat protected from changes in administration, we can expect that President Trump’s EPA will not take more aggressive actions. Since the EPA mainly deals with pollution control, its rules have not historically been a direct driver of clean energy investment. 

Presenting proposed regulations to FERC (via the Department of Energy) 

Finally, the new administration could try to influence energy regulation by submitting rules to the Federal Energy Regulatory Commission (FERC) through the Department of Energy (DOE). This is not a common practice, but it was attempted in 2017 to approve subsidies for coal and nuclear energy, and it was unanimously rejected by FERC commissioners.

Budget cuts 

Spending on energy represents a fraction of the total government spending, only about 1.3% of the national budget. Regardless of where the cuts come from, the Trump administration has set several priorities that could divert attention away from the energy sector, particularly defense, immigration, and trade policy. 

Projections: The most likely scenario has little impact on gas and electricity markets 

Our case for a Trump presidency assumes a 50% tariff on China, which would put downward pressure on gas prices, the end of electric vehicle subsidies reducing adoption, and subsidies for coal extending the lifespan of coal plants. 

In our modeled ISOs, electricity prices decreased due to the coal capacity surplus and reduced demand, but the overall impacts are not large. This is our “most likely” Trump scenario: given high tariffs and some reallocation of subsidy money, there is relatively little impact on gas and electricity markets. 

Repealing the tax credit has a material impact on renewable deployment 

A much greater impact was observed in the 2025 Project Scenario. Since tax credits are the main form of clean energy subsidies in the US, their termination leads to less renewable energy and battery construction across the country, resulting in a reduction of 200 GW in renewable and storage capacity across the six modeled ISOs. 

There is a massive impact in markets lacking substantive state clean energy policies, such as Renewable Portfolio Standards and carbon mechanisms (e.g., ERCOT and MISO). Higher electricity prices due to reduced renewable construction do not fully mitigate the loss of federal tax credit revenues, evidenced by a wind project in ERCOT where the IRR falls by 2.7 percentage points in the 2025 Project Scenario. 

Sectors at highest risk 

Subsidies most likely to be vulnerable include: electric vehicles, home energy modernization, grid modernization, green fuels, Department of Energy (DOE) loan guarantees, and the phase-out schedule for tax credits. 

According to the report, Production Tax Credits (PTC) and Investment Tax Credits (ITC) for the implementation of onshore wind, solar, and storage are most likely to be safe from elimination, given they have relatively broad bipartisan support. 

If this is true, it would avoid some of the “worst-case” scenarios for the transition to clean energy. 

Somewhat less susceptible, but still on the chopping block, are provisions for direct payment and transferability, domestic manufacturing, offshore wind, and green hydrogen. 

The challenge of legislating without a supermajority in the Senate 

Despite the Republicans’ triple victory, passing laws will not be without opposition. Senate Republicans are short seven seats to reach the supermajority needed to avoid a filibuster, meaning that Democrats could effectively block any legislation they do not wish to approve. 

The budget reconciliation process avoids the filibuster risk, but it is a more complicated process, much like how the IRA was passed in 2022 after a year and a half of negotiations between Democrats. 

Both the House of Representatives and the Senate have narrow Republican majorities (220/435 and 53/100, respectively), and it is clear that many clean energy provisions have the support of both Republican legislators and their constituencies. 

With a similar majority in the Senate and a larger majority in the House of Representatives during the first two years of Trump’s first administration, no significant legislation was passed due to the difficulty of reaching an agreement. Without unanimous support from Republicans in Congress, passing laws will be a challenge. 

The US energy transition is at an interesting point. Energy demand will increase for the first time in over a decade, largely driven by demand from data centers. Wind, solar, and battery energy continue to be built at a record pace. 

Regardless of who occupies the Oval Office, demand growth, decreasing costs of clean technologies, and state policies will continue to drive the energy transition. However, capital flow may slow down during this period of uncertainty.