25/01/02
Viewpoint: Trump, macro issues ahead for US renewables
Viewpoint: Trump, macro issues ahead for US renewables
Houston, 2 January (Argus) — A combination of substantial policy shifts under
president-elect Donald Trump and macroeconomic issues puts the US renewable
power sector on uncertain footing to begin 2025. Analysts expect the federal tax
credits that have bolstered new renewable generation during its substantial
growth over the past decade will survive in some fashion, although Trump
campaigned on repealing the Inflation Reduction Act (IRA). He also has promised
60pc tariffs on goods imported from China, a major player in the solar and
battery storage supply chains. The ultimate effects may vary by project type and
what the new administration is able to accomplish. Chinese solar products
already face 50pc tariffs , which could temper any effects on the industry from
Trump's protectionist trade policies, said Tom Harper, a partner at consultant
Baringa specializing in power and renewables. But the new administration could
make it more difficult to claim IRA incentives and could roll back federal power
plant emissions rules , creating an environment that could slow the adoption of
renewables. Utilities may become more cautious in using renewables because of
higher costs, while others, such as companies with sustainability goals, might
be able to weather the change, according to Harper. "There might be some very
price insensitive corporate [power purchase agreement] buyers out there who are
looking at a $45/MWh solar [contract] and now it's going to be $50/MWh after the
tariff, and they'll be fine," he said. In addition, the US renewables industry
is still weathering headwinds from supply chain constraints, increased borrowing
rates and inflation, which have hampered new projects. For example, the PJM
Interconnection — which spans 13 mostly Mid-Atlantic states and the District of
Columbia — had approved more than 37,000MW of generation at the end of third
quarter 2024, with only 2,400MW of that partially in service. Developers have
blamed the delays on financing challenges, long lead times for obtaining
equipment and local opposition to projects. Global problems, local solutions
Changes to state procurement strategies could help. Maryland state delegate
Lorig Charkoudian (D) next year will propose new state-run solar, wind and
hydropower solicitations that would first target projects that have already
cleared PJM's reviews. Her approach would echo programs in New Jersey and
Illinois, and ultimately reduce utilities' reliance on renewable energy
certificates (REC) procured elsewhere. "The idea is to give a path for these
projects, so presumably they can be built within a few years," Charkoudian said.
Utilities would use the new procurements for the bulk of their RECs, covering
remaining demand by buying legacy Maryland solar credits and other PJM RECs on
the secondary market. But a quick fix for Maryland's broader renewable energy
objectives is unlikely after utilities used the alternative compliance payment
(ACP) for two-thirds of their 2023 REC requirements. The fee for each
megawatt-hour by which utilities miss their compliance targets serves as a de
facto ceiling on REC prices. Maryland's ACP is low compared to neighboring
states, where the qualifying REC pool overlaps, meaning that credits eligible in
the state can fetch a higher price elsewhere. While lawmakers could raise the
ACP to mitigate those issues, those costs would ultimately fall on utility
customers. "As best as I can tell, the options are raise the ACP or adjust how
we do it," Charkoudian said. "We're really concerned about ratepayer impacts,
and so I don't think there's a real appetite to raise the ACP." In other states,
the policy landscape is less certain. Pennsylvania governor Josh Shapiro (D) has
no clear path for his proposed hike to the state's alternative energy mandate,
should he choose to revisit it, after Republicans retained their state Senate
majority in November. New Jersey state senator Bob Smith (D) has been working
for two years to enshrine in law governor Phil Murphy's (D) goal of 100pc clean
electricity, but the proposal failed to escape committee in 2024 after dying in
2023 over opposition to its support for offshore wind . Is the answer blowing in
the wind? Offshore wind is a slightly different matter. Trump has been critical
of the industry and federal regulators control much of the project permitting in
the US. Moreover, as a burgeoning sector with higher costs, it could be more
sensitive to the loss of the investment tax credit (ITC). Based on current
expenses, Baringa's analysis suggests that losing the ITC could increase project
costs by "at least" $30/MWh and push offshore wind REC prices in some cases near
$150/MWh. That would be a "difficult cost for states to swallow", according to
Harper. "We've seen a few offshore wind developers already say, 'Hey, we're not
going to spend a dime more until we know what's going on,'" Harper said. Despite
the challenging landscape, Charkoudian expects Maryland will move forward in
areas it can control, such as expanding the onshore transmission, that will make
offshore wind viable, whether it's now or "eight years from now". By Patrick
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