European companies focused on clean energy are reconsidering or delaying their expansion plans in the U.S. due to concerns about a potential second term for Donald Trump, who has criticized President Biden’s climate policies and is expected to challenge many of Biden’s climate initiatives if re-elected.
Impact of Trump’s Policies
Trump has denounced the Inflation Reduction Act (IRA)—a key piece of legislation that has provided significant tax breaks and subsidies for clean energy projects—as a “green new scam.” The IRA has been a major driver for European companies to invest in or expand their U.S. operations. The prospect of Trump reversing or undermining these incentives is causing hesitation and a reevaluation of U.S. investments.
Peter Roessner, CEO of Luxembourg-based hydrogen firm H2Apex, expressed concern over Trump’s unpredictability and opportunistic nature. H2Apex had planned to build a hydrogen tank production plant in the U.S., but Roessner decided to cancel the project due to fears about Trump’s potential re-election, despite having already engaged in initial discussions with potential customers.
Market Reactions and Projections
Market expectations of a Trump victory have increased recently, exacerbating concerns. Recent polls indicate a tightening race between Trump and Kamala Harris, the likely Democratic candidate. Analysts from Wood Mackenzie estimate that a Trump presidency could jeopardize up to $1 trillion in low-carbon energy investments by 2050. Roland Berger also suggests that while a full repeal of the IRA might be unlikely, Trump could still significantly impact incentives for electric vehicles, solar power, and energy efficiency.
SMA Solar, the world’s largest maker of solar inverters, issued a profit warning partly due to uncertainties surrounding U.S. political changes. The company had planned to finalize a U.S. factory location by June but has delayed this decision, citing the ongoing uncertainty as a major risk factor.
Impact on Clean Tech Shares and Investments
The broader clean tech sector has been affected, with the RENIXX index, which tracks the world’s top renewable energy firms, underperforming global stocks since Trump’s election rally incident. Orsted, the world’s largest offshore wind farm developer, has seen its stock decline after Trump’s vow to target the sector if re-elected. The company declined to comment on the situation.
Despite these challenges, some companies remain committed to the U.S. market. Nordex, a German wind turbine maker, has decided to resume production at a previously mothballed plant in Iowa, affirming that the U.S. will remain a crucial market regardless of political shifts.
On the other hand, firms such as Thyssenkrupp Nucera and Nel are experiencing delays in final investment decisions for U.S. projects. Thyssenkrupp Nucera has faced delays due to uncertainty about the IRA’s future, impacting its investment outlook. Nel is also holding off on finalizing plans for a Michigan facility until there is more clarity on U.S. demand and IRA policies.
Broader Economic Impact
The uncertainty surrounding the U.S. election is starting to affect other sectors as well. Trumpf, a German machinery firm, reported a 12% drop in U.S. sales for its 2023/24 fiscal year, attributing the decline to “geopolitical uncertainties” that have made industrial customers more cautious.
Marcus Berret of Roland Berger notes that the complexity of navigating global investment decisions has increased significantly, leading to “analysis paralysis” in boardrooms. Companies are grappling with the implications of potential policy changes, resulting in more cautious and delayed investment decisions.
Overall, the potential for significant policy shifts under a second Trump administration is creating substantial uncertainty for European clean energy companies and other sectors with U.S. operations, impacting their investment strategies and market performance.
