Trump Presidency Could Mean A Rough Road Ahead For Solar Stocks

The election of Donald Trump to the presidency could have significant implications for the U.S. and global solar industries over the long term. While the renewable and environmental agendas of Republicans and Democrats have typically diverged, the contrast between the policies of Mr. Trump and the outgoing administration appear to be significantly starker. Below, we take a brief look at some of the potential ramifications for the industry at large.

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Policy Changes As GOP Takes White House And Maintains Majority In Congress 

Republicans have largely been against using incentives and taxpayer funds to aid the development of renewable energy sources, instead favoring a market-based approach. Now that the party will effectively have full control over the U.S. government – winning the White House and maintaining its majority in the Senate and the House of Representatives – there could be policy shifts over the near-to-medium term. At present, the solar investment tax credit remains the primary federal incentive driving U.S. solar demand and facilitating the flow of tax equity financing for solar projects. Congress extended the credit for three years beyond 2017 late last year. However, there is a possibility that the ITC could be dismantled by the incoming administration and by an act of Congress, as Mr. Trump’s plan to slash the corporate tax rate (from 35% to 15%) could put pressure on the federal budget, requiring such incentives to be reduced. Even if the credit is left untouched, a lower tax rate could harm the flow of tax equity financing to solar firms, as it would reduce investors requirements for write-offs via tax-equity investments.

Contrasting Stance On The Environment 

Mr. Trump has has expressed some skepticism about man-made climate change. He has indicated that he intends to rescind the Obama Administration’s Climate Action Plan (which aims to cut carbon emissions from power plants) and potentially cancel the Paris climate agreement that world powers signed in December 2015. While these moves would be positive for the oil and coal industries, they would reduce the urgency to invest in renewable sources such as solar. While the specifics of how this would be implemented remain unclear at the moment, it does mark a sharp contrast to the status quo. There could be global ramifications to this stance on climate change, as the United States is seen as a standard-bearer of sorts for the world when it comes to the environment and renewable energy policy. Rescinding key environmental policies could turn the clock back for climate regulation across the world, impacting longer-term growth prospects for renewables.

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