We expect renewables to remain competitive, and while protectionism will rise, a full repeal of Inflation Reduction Act (IRA) is unlikely.
Following the US election, our experts from across the energy sector have worked to produce a cross-commodity report – ‘A second Trump administration Part 2: A deep dive into energy and commodities‘ – outlining our key predictions for the impact of Republican control on US energy policy and net zero, based on our original analysis.
One of the key predictions of this report is that although Republican control in the US will move energy policy away from net zero targets, President-elect Trump’s full agenda will face political and market opposition.
The US is likely in store for lighter standards on emissions regulations, more protectionist trade policies, and removing the US from the Paris Agreement, all of which would shift US policy away from a net-zero trajectory.
However, bi-partisan support for the Inflation Reduction Act (IRA) in Congress, competitive economics for renewable power and private sector net zero goals will not derail the energy transition.
Read on for a short summary of the impacts we expect Trump’s appointment to have across the energy sector:
Impact on the IRA
The IRA has supported over US$220 billion in manufacturing investment, and much of this has been concentrated in Republican-led states. The likelihood of a full IRA repeal is low. However, there could be some amendments to the legislation. Renewables investment could slow, but capacity is set to grow by 243 gigawatts (GW) from 2024-2030 even in our delayed transition scenario.
We expect President-elect Trump to support the growth aspirations of Big Tech. We have identified over 51 GW of new data center announcements since 2023, which have a better chance of coming to fruition if Republican-supported permitting reform comes to pass. With manufacturing investments concentrated in Republican states, we believe advanced manufacturing credits will remain intact and around 7 GW of solar manufacturing will likely proceed.
With a significant momentum for low-carbon investment, the impact of the election will vary by sector, commodity and technology, with some more at immediate risk than others.
US solar: the near-term pipeline is robust and longer dated projects face policy risk
There is no lack of demand for solar energy in the United States. The pipeline of contracted utility-scale solar projects is nearly 100 GWdc, and customer demand for distributed solar projects continues to grow. A Trump administration will not change this in the near term.
We expect flat installation growth in the next few years despite high demand for solar, driven primarily by interconnection and transmission bottlenecks. Then, from 2028-2031, annual growth should pick up modestly, averaging 5% annually and reaching about 50 GWdc.
However, various IRA incentives such as tax credit bonus adders and transferability of tax credits propel additional growth in our base case forecast. This growth is at risk if the IRA undergoes substantial modifications – a strong possibility given Trump’s agenda to maintain tax cuts.”
Offshore and onshore wind: deployment risk arises from 2040
We expect the new administration to de-emphasize offshore wind development by restricting permitting resources and limiting new leases. However, these impacts will not materially change the 10-year outlook, as almost 25 GW of projects under development are already permitted or in the late stages of permitting.
The more significant risk pertains to project economics. If the administration chooses to not issue guidance on the domestic content bonus credit for offshore wind, or pares back the 45X advanced manufacturing tax credit, investments in a domestic supply chain could be significantly delayed. While Wood Mackenzie’s base case outlook expects 27 GW of cumulative installed capacity by 2033, the compound effects of these constraints could lead to a 30% decrease over the same time frame.
A second Trump administration also presents significant downside risk to onshore wind. Should Congress seek to repeal key mechanisms of the IRA or restructure an earlier phase-out of the production tax credit, deployment could slow significantly.
Energy storage: exposed to policy changes in the IRA
In our base case outlook, the IRA remains in place and storage continues a rapid expansion as a necessary component for grid balancing, reliability, and resiliency given increasing renewables. However, policy changes in the IRA could change this.
A quicker phase-out of ITC and PTC tax incentives, removal of bonuses and manufacturing incentives, and increased protectionism, including higher tariffs, are developments to monitor. Although transferability may not be a likely target for Republicans, its removal has particular downside risk for storage as it has been a key source of ITC financing for stand-alone storage projects.
Domestic gas demand: deregulation supports demand growth through 2030
Wood Mackenzie expects the US Environmental Protection Agency (EPA) to be a target for deregulation and to become more fossil fuel-friendly. The lawsuit challenging the final Green House Gas (GHG) emission standards for existing coal and new gas plants is still on track.
We expect GHG standards will not survive both the legal process and a Trump EPA. Demand growth driven by data centers and manufacturing requiring significant investment in new generation.
Carbon removal technologies: the 45Q remains safe
Trump’s executive branch has little power to outright eliminate assorted IRA provisions, like enhanced 45Q credits and project funding, and bipartisan support for CCUS makes it unlikely that a Republican Congress will target these incentives in an unwinding of the IRA. However, other administration priorities, like a reversal of SEC emissions reporting and EPA power emissions reduction requirements, could have cascading effects on near-term CCUS adoption.
In our base case outlook for US energy, we expect CCUS capacity to reach 80 Mt by 2030.
Low-carbon hydrogen: near-term momentum slows until 45V guidance emerges
The second Trump administration introduces greater uncertainty for low-carbon hydrogen investment. Without a clear Republican stance on hydrogen, the 45V guidance could shift dramatically.
Despite the near-term uncertainty from the 2024 election, the US boasts globally competitive investment incentives. Our 2024 Energy Transition Outlook sees hydrogen as a pillar of decarbonisation across all scenarios.
Nuclear Small Modular Reactors (SMRs): policy and market support to continue
A second Trump Administration will support new nuclear on the grounds of energy independence and US technology-leadership in the energy sector. The range of capacity we see between our base case and delayed transition is between 14 – 27 GW by 2050.
Liquefied Natural Gas (LNG): permitting reform to boost new US LNG supplies
We expect President-elect Trump to remove the pause on non-FTA permitting of US LNG capacity, facilitating development of additional US LNG export projects. In our recently released North America gas 10-year investment horizon outlook, we expect 50 million metric tonnes per annum (mmtpa) of US projects to reach FID in 2025-2027, compared with the 30 mmtpa in our prior forecast.??
The competitive environment for new US LNG projects will intensify during President-elect Trump’s second term. Global LNG prices are set to fall over the next few years as more capacity is developed from North America and the Middle East, but the market needs more LNG after 2030, and the US is competing with other suppliers to meet this need.
We expect the Trump administration to enact legislation simplifying and strengthening the permitting process. A more stable and predictable regulatory and legal environment should allow buyers to renew their reliance on the US for new LNG supplies.
Oil markets: slower economic growth drives oil global demand and prices lower
Our analysis shows that the tariff plan could lower global economic growth by 0.5 percentage points in 2025 and by 0.8 percentage points in 2026.
If fully implemented, tariffs would lower global oil demand is nearly 0.5 million b/d lower in 2025 and 1.1 million b/d lower in 2026.
L48 upstream: activity shifts on the margin
We do not foresee material rig additions from public E&Ps, as the group is already navigating lower crude prices as they set 2025 budgets. Keeping reinvestment rates low to support maximum investor returns will remain the top priority. We expect annual average oil production to reach 13.2 mb/d in 2024. Volumes rise to 13.6 mb/d in 2025.
While price is the most important determinant, private E&P activity could continue to rise in 2025. Washington’s more receptive tone to oil and gas, the potential for permitting reform on federal lands, and associated infrastructure expansion could catalyse operators with more flexible capital plans. The private E&P rig count has quietly returned to over 50% of the total and that has some upside.
US refining: trade tensions benefit traditional refiners
US refining would see an immediate boost from new tariffs, with the Atlantic Coast refinery gate pricing moving upwards as it is a major importer of gasoline and blend components. Despite near-term support to the refining industry, global headwinds on oil demand from weaker economic growth and lower oil demand growth limit long-term benefits.
In 2025, we see potential for domestic crude runs to increase by ~100 kb/d, as refiners look to capture higher margins. We would also expect to see a shift towards gasoline yields to replace import volumes that largely come from Europe. However, slowing economic growth begins to limit demand in 2026.
Coal: short-term demand uplift but no major resurgence
With anticipated load growth in the near term driven by data centres and electrification, the decline of coal generation may experience a brief pause. But as coal power plants become less economic to operate and continue to retire, domestic thermal coal demand will irreversibly weaken in the years ahead. Annual coal production has fallen from 774 Mst in 2017 to just over 500 Mst in 2024. Coal-fired generating capacity has tumbled 179 GW as of Q4 2024.
Metals: US tariff policies risk pushing metals prices higher
Under a Trump administration, we expect environmental policies around mining to be eased, allowing for faster permitting and potentially lower costs for domestic metal mining or processing operations.
However, despite declining US production costs, metal costs for US consumers are likely to rise significantly if Trump follows through with plans to impose tariffs.
Trade tariffs: the world should brace itself for more protectionism
President-elect Trump has pledged to hike tariffs on imports to at least 10% globally, with a more penal 60% rate for Chinese imports. The tariffs could be enacted early in 2025 by executive order, supplanting existing trade agreements.
In the short term, increases in US domestic production to substitute for imports will be minimal – spare manufacturing capacity is insufficient. Shifting trade patterns, especially to reduce imports from China, will be material.
But with tariffs rising for all trading partners, import costs will increase. We estimate raising tariffs could cost an additional US$450 billion in import duties in 2025, a burden that US businesses and households would carry. And this is before any global retaliation.
David Brown
Director, Energy Transition Practice
David is a key author of our Energy Transition Outlook and Accelerated Energy Transition Scenarios.
