Dive Brief: Renewable energy stocks suffered significant losses on Wednesday, despite broader market gains, as investors expressed concerns about potential policies under a newly victorious Trump administration. Analysts warned that these policy shifts could undermine the competitiveness of the renewable energy sector. Although most companies in the sector are expected to recover, some, such as solar developer Sunnova Energy and First Solar, saw slight rebounds on Thursday, with Sunnova rising nearly 5% and First Solar gaining more than 2%.
Market sentiment is divided on whether the upcoming change in administration will spur a rush to close renewable energy deals before the year’s end or lead to market stagnation as investors adopt a “wait-and-see” approach. However, there is consensus that demand for renewable energy will continue to rise as the U.S. power grid grows.
Dive Insight: Stock prices of renewable energy firms took a sharp hit on Wednesday, following the news that Republicans had secured the presidency, gained control of the Senate, and remained competitive for the House. Losses ranged from a 5.25% drop at NextEra Energy to a staggering 51.56% plunge at Sunnova Energy.
“Markets often overreact, and I think the market’s response right now is both immediate and exaggerated,” said Kevin Kang, a senior associate at Enverus Intelligence Research.
However, analysts also warned that the second Trump administration could slow down renewable energy dealmaking, reduce company valuations, and increase development costs. These concerns have been largely driven by Trump’s campaign statements, particularly around the potential repeal of the Inflation Reduction Act (IRA). While such a repeal could harm key voter demographics, it remains a significant concern for investors, according to Raj Prabhu, CEO of Mercom Capital Group.
Another major concern is the possibility of additional tariffs on imported solar panels or steel, an issue that may gain traction given Trump’s previous policies and the growing bipartisan push to curtail foreign imports. Prabhu noted, “That is a real fear in the market right now. If we add more tariffs, it will exacerbate inflation and create additional supply chain disruptions.”
Becky Diffen, a partner at Norton Rose Fulbright, echoed these concerns, noting that while the desire for more tariffs stems from a push to support domestic manufacturing, it’s unlikely that U.S. manufacturers can meet the surge in demand for clean energy products. “If you impose significant tariffs, it will absolutely drive up prices,” she said.
Despite these concerns, Diffen suggested that the next two months could see a “tremendous increase in activity” as developers move to close deals before the new administration takes office.
On the other hand, Prabhu and Kang were more cautious about a year-end surge. They believe the market could experience a lull in dealmaking as developers and financiers await clarity on future policies. The renewable energy market, particularly for privately held companies, often requires lengthy transaction and financing processes that are unlikely to be wrapped up in just two months, Prabhu explained.
In the longer term, Kang speculated that reduced policy support for renewables might help alleviate congestion in the U.S. energy grid’s interconnection queues, which have contributed to rising costs for renewable energy power purchase agreements (PPAs). “The main reason companies are queuing up solar projects is because of incentives that reduce risk. As those incentives diminish, you can expect shorter queue durations,” Kang said.
While long delays and interconnection bottlenecks have generally pushed up PPA prices, the expectation of continued interest rate cuts could lead to short-term reductions in PPA prices. However, Kang emphasized that Enverus expects PPA prices to remain stable overall, driven by rising electricity demand from electrification and data center expansion—trends that are unlikely to be significantly impacted by the incoming administration’s policies.
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