Trump Victory Puts Clean Energy Incentives in the Crosshairs

Renewable energy equities sold off sharply on Nov. 6, with much of our coverage declining between 5% and 15%. The reaction comes after Donald Trump won the US presidential election and Republicans appeared set to control Congress.

Why it matters: Wind and solar have enjoyed a bevy of government incentives following the passage of the Inflation Reduction Act. A Republican sweep in Washington leaves those subsidies in potential jeopardy since Trump has said he would look to repeal the act.

• We see a full repeal of the legislation as highly unlikely. However, a partial repeal is possible. Changes to wind and solar incentives, such as reducing the incentive amount or accelerating the phaseout, will be the main items to watch.

The bottom line: We are maintaining our fair value estimates across our clean energy coverage as we await further clarity on potential federal policy changes. For investors looking for opportunities amid the selloff, we highlight Brookfield Renewable BEPC and First Solar FSLR.

• Brookfield trades at a 15% discount to our fair value estimate. Its globally diversified portfolio limits exposure to US policy.
• First Solar shares are trading in line with our fair value estimate but could present a buying opportunity if the selloff persists. We view the impact on the stock as more nuanced than the market appreciates, with its competitive position potentially benefiting from Trump’s trade policies.

Big picture: Structural drivers, such as technological advancements, cost declines, and state renewable energy policies, ensure the energy transition will continue regardless of which party is in the White House.

• The biggest potential risk from policy changes is margin compression across the value chain (to offset reduced incentives) and less about the long-term role of wind and solar in the energy transition.