With the recent election of Donald Trump, energy sector insiders say the return of the renewables-skeptical former president to the White House could drive consolidation in the clean energy sector.

Industry insiders say it’s too early to begin planning for specific policy or regulatory initiatives the Trump administration might pursue. But a generally less supportive policy environment for renewable energy could put larger, well-resourced developers in a position to scoop up smaller players whose ability to navigate a change in DC weather patterns would be comparatively limited.

One area in which larger companies may hold an advantage is in their ability to lock in claims for tax credits through the bulk of the coming presidential term, under safe harbor provisions of the Inflation Reduction Act (IRA). Most experts spoken to by Infralogic in recent months have expressed cautious optimism that a complete repeal of the IRA’s clean energy tax credits is unlikely, even with the White House and both houses of Congress under GOP control.

But incentive programs may still get scaled down or pushed toward an earlier sunset period. In that scenario, companies able to secure incentives under the current regulatory regime for a large portion of their project pipeline will hold an advantage over their competitors, said Alex Kania, director of equity research for Marathon Capital.

Larger companies with better visibility on their project pipelines and greater resources will race to begin construction activities or make major supply purchases before the end of the year. That will allow them to claim tax credits under current rules as long as they complete those projects in the next four years.

Smaller developers won’t have that same ability in many cases, said Kania. Those smaller developers have already faced pressure related to lengthy approval processes to interconnect with the grid and supply chain uncertainty, he said. If major questions arise about the future of IRA incentives, those companies may find it preferable to partner with a larger competitor rather than to ride out the regulatory uncertainty.

“We were already getting a sense that we should maybe be expecting greater consolidation among some of these smaller developers.  With the additional uncertainty related to the Inflation Reduction Act, I would imagine that may add to the impetus,” said Kania.

Overall, Kania noted, a projected boom in energy demand coupled with price benefits enjoyed by core renewable technologies like onshore wind, utility scale solar, should continue to support growth, even without the robust support provided under the Biden administration. But larger companies will be better situated to adjust to the changing environment.

Elias Hinckley, a partner with Baker Botts’ Washington DC office who focuses on energy, tax, and project finance, agreed that the shift to a less supportive political environment for renewables could accelerate an already brisk environment for acquisitions in the sector.

“We’ve seen a pretty steady diet of acquisitions in the clean energy space anyway, and I think that’s part of a natural evolution as the industry grows,” said Hinckley.

“You have larger companies that are better able to use their balance sheets and lock in construction and make sure they fall inside the window for current tax credit eligibility. That probably does drive some additional acquisition activity,” he added.

Unfinished business

Much of the talk in coming months will be focused on policy signals from the incoming Trump team. But before the final page is turned on the Biden administration, industry stakeholders will also be watching closely for resolution of various regulatory matters related to clean energy.

Final rules for federal programs to support green hydrogen and renewable fuels, as well as technology-neutral tax credit incentives scheduled to replace current incentives for clean power generation, are all expected before Biden leaves office.

Hinckley said that with Trump’s election, the Treasury and IRS will almost certainly issue final rules before the transition, in order to ensure those programs align with the current administration’s priorities. Industry voices have been particularly vocal about renewable energy sourcing requirements to power green hydrogen projects. They also have focused on the methods and benchmarks for evaluating carbon intensity under the tech-neutral energy credits program under proposed guidance previously issued by the administration. The final regulations for both programs will likely include looser requirements to both address industry concerns and lower the chance that a new administration will seek to reverse the regulations, Hinckley said.

With Republicans in line to hold control of the legislative and executive branches of federal government in 2025, they’ll be in a position to revoke any regulations issued in the coming weeks under the Congressional Review Act (CRA). The CRA allows Congress to bypass the Senate’s 60-vote filibuster threshold to overturn recently-issued federal regulations by majority vote in both houses of Congress and a presidential signature. Regulatory language that’s seen as favoring environmental priorities to the detriment of industry may be more likely to draw a CRA effort under a Republican administration backed by a GOP-led Congress.

“I think the expectation is that the rules around carbon intensity measurements may be materially softened, and that’s for practical reasons, but also to guard against issuing something that’s going to create enthusiasm for a really strong CRA push,” said Hinckley.