The recent analysis from Wood Mackenzie paints a complex picture of the U.S. energy landscape as it braces for a shift under Republican leadership. With Donald Trump set to take the helm again, the energy sector is gearing up for a potential pivot away from ambitious net-zero emissions targets. However, the bipartisan support for the Inflation Reduction Act (IRA) suggests that while the overarching goals may change, the momentum for renewable energy could remain surprisingly resilient.
Despite the anticipated regulatory embrace of fossil fuels, Wood Mackenzie asserts that the competitive economics surrounding renewable resources will continue to drive the energy transition. This is a critical insight; it indicates that the market dynamics of renewables are so strong that they might withstand political turbulence. As David Brown, Director of Energy Transition Service at Wood Mackenzie, points out, “The likelihood of a full IRA repeal is low.” This is a crucial takeaway, especially for stakeholders who might be concerned about the future of renewable investments.
The analysis highlights that while Trump’s agenda may face significant political and market resistance, the demand for solar energy remains robust. The pipeline for utility-scale solar projects is nearly 100 GWdc, and customer interest in distributed solar projects is on the rise. This demand isn’t likely to wane, even with a Trump administration. However, the report does caution that installation growth might stagnate due to interconnection and transmission bottlenecks. The expected uptick in growth from 2028 to 2031, averaging 5% annually, hinges on the IRA’s incentives remaining intact.
On the other hand, the outlook for coal isn’t rosy. As demand for power from data centers and electrification rises, coal-fired generation may see short-term support, but its decline is inevitable. Brown notes that “domestic thermal coal demand will irreversibly weaken in the years ahead.” This suggests that while some sectors may benefit from a more favorable regulatory environment, others, particularly coal, are on borrowed time.
The potential for changes in offshore wind development under a Trump administration raises eyebrows. The expectation that permitting resources could be restricted doesn’t bode well for new projects. However, with nearly 25 GW of projects already in the late stages of permitting, the immediate impact may be muted. The real concern lies in project economics, particularly if the administration chooses to scale back incentives for domestic supply chains.
Energy storage presents another interesting facet of this evolving landscape. Wood Mackenzie anticipates rapid expansion in this sector, driven by the need for grid balancing and reliability as renewables proliferate. Yet, the risk lies in potential policy shifts that could stifle this growth. As Allison Weis, global head of energy storage for Wood Mackenzie, notes, “A quicker phase-out of ITC and PTC tax incentives…are developments to monitor.”
The analysis also delves into hydrogen, small modular reactors (SMRs), and liquefied natural gas (LNG). While uncertainty looms over hydrogen investments, the expectation of continued support for nuclear power signals a strategic direction that could foster stability in the energy mix. The anticipated easing of environmental policies around mining could also facilitate faster permitting, potentially lowering costs for domestic operations. However, the looming specter of tariffs threatens to raise costs for U.S. consumers, including those manufacturing power generation equipment.
The interplay between regulatory changes, market dynamics, and bipartisan support for certain initiatives creates a multi-layered environment for the U.S. energy sector. As the dust settles from the election, stakeholders will need to navigate this landscape with agility, keeping a close watch on how these developments unfold. The future may not be as clear-cut as some might hope, but one thing is certain: the energy transition is far from over.
