Many European companies have been lured to the U.S. with the generous incentives the Act is offering for innovative green energy solutions.
Donald Trump could win a second term in office and continue the policy to back fossil fuels at the expense of clean energy.
Some European firms are delaying decisions amid overall reluctance for investment commitments in U.S. green energy until the election.
European green energy firms are holding off on decisions about their American operations amid growing concerns that a Donald Trump administration wouldn’t support clean energy policies.
Since the Inflation Reduction Act (IRA) was passed two years ago, many European companies have been lured to the U.S. with the generous incentives the Act is offering for innovative green energy solutions.
The IRA has nearly $370 billion in climate and clean energy provisions, including investment and production credits for solar, wind, storage, critical minerals, funding for energy research, and credits for clean energy technology manufacturing such as wind turbines and solar panels.
The EU has responded to the U.S. legislation with the Net-Zero Industry Act, but its provisions are not as generous as the support for green energy from the Biden Administration.
‘Green New Scam’
But President Biden will not be running in November and chances are that Republican nominee and former president Donald Trump could win a second term in office and continue the policy to back fossil fuels at the expense of clean energy.
If he wins in November, Trump is set to overturn or at least try to dismantle many of President Biden’s energy and climate policies, including methane rules, the pause on new LNG export permits, EV mandates, federal oil and gas leasing, and even parts of the Inflation Reduction Act.
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However, dismantling the IRA would first need a Republican-controlled Congress in both the House and Senate. And even then, it could be difficult to scale back or scrap the incentives, as they mostly benefit projects and jobs in Republican states, analysts say.
At a recent rally, Trump attacked the green policies of the Democrats and the “ridiculous and actually incredible waste of taxpayer dollars” on “things having to do with the green new scam.”
Trump vowed to redirect the money to infrastructure projects and not allow it to be spent on “meaningless green new scam ideas.”
“Analysis Paralysis” in Investment Decisions
Faced with another term in office by Trump, European companies of the green energy supply chain – which had flocked to the U.S. with manufacturing sites over the past year – are now pausing decisions and waiting to see the outcome of the U.S. election.
The growing uncertainties about America’s green energy policies after the election could lead to “analysis paralysis” in investment decisions, Marcus Berret, global managing director at Roland Berger, has told Reuters.
In the wake of the IRA passing, several European companies announced plans to build manufacturing sites in the U.S. to take advantage of the incentives in the Act.
Now some others with previous such plans are delaying decisions amid overall reluctance for investment commitments in U.S. green energy until the election.
For example, SMA Solar, a German solar inverter manufacturer, issued earlier this month a profit warning as it cut its earnings guidance amid rising political uncertainty with the newly elected righter-leaning European Parliament and the upcoming U.S. presidential election.
Norway-based Nel Hydrogen announced last year plans to build a new automated gigawatt electrolyzer manufacturing facility in Michigan. The company has yet to make a final investment decision on the plant, which would be built in steps to match supply with demand.
But German wind turbine manufacturer Nordex Group looks more optimistic as it said in June that it would restart production at its manufacturing facility in Iowa. Nordex will manufacture nacelles for both the current N163 turbine variant, and a product specifically tailored to the U.S. market, at its production facility in West Branch, Iowa.
Earlier this year, Nordex announced its intention to focus increasingly on North America in order to benefit from expected growth in the U.S. and Canadian market.
“Starting in the first half of 2025, production capacities will be ramped-up in line with order volume development,” said Manav Sharma, CEO of Division North America.
But Thyssenkrupp Nucera, which offers water electrolysis technology for green hydrogen, last week scrapped its previously communicated earnings guidance for the alkaline water electrolysis (AWE) business for the 2024/25 financial year.
“Unfortunately, the known braking factors, such as regulatory and funding uncertainties, have not lost any of their negative force,” CEO Werner Ponikwar said.
“Progress on the regulatory side is recognizable, but at the same time not yet sufficient to accelerate investment momentum again. The result is further delays to new projects on the customer side.”
A Trump presidency could jeopardize $1 trillion in clean energy investments, Wood Mackenzie said in May.
Although Trump – if elected – is not expected to fully repeal the IRA of 2022, he is likely to scrap major clean energy policies, including a pledge to decarbonize the power grid by 2035. He is also set to soften emission reduction goals and regulations, according to WoodMac.
The energy consultancy expects the U.S. to see $7.7 trillion in investment for the U.S. energy sector from now until 2050. But less policy support for clean energy and infrastructure improvements would reduce this base-case investment projection by about $1 trillion, Wood Mackenzie’s analysts say.
“This election cycle will really influence the pace of energy investment, both in the next five years and through 2050,” said David Brown, director of Wood Mackenzie’s Energy Transition Research.
By Tsvetana Paraskova for Oilprice.com
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