The US election upon us, and there is little to suggest that either candidate has the edge in the race to the White House.
As the two candidates, Donald Trump and Kamala Harris, continue their last-minute campaigning in a bid to capture voters in key states, the polls suggest the two are still neck and neck.
While the result of the election may be clear on 6 November, the likelihood, given how close the two candidates are, is that an official outcome might not be available until a few days after the polls close.
Among those keenly eyeing the impending result will be clean energy firms and their investors, with the result of the presidential race set to have markedly different impacts on the US energy sector whichever way it goes.
Face off: Clean energy firms will be holding their breaths ahead of the US election on Tuesday
Where do the two candidates stand?
If Kamala Harris comes out on top, the outlook for the clean energy sector in the US could look rather more rosy than under Trump.
While Harris is undoubtedly the greener of the two, she has yet to pin her colours to the mast in the way that clean energy firms may be hoping for, with her climate plan lacking in any real detail.
However, at the Democratic National Convention, Harris said it was a fundamental freedom for Americans to ‘breathe clean air and drink clean water and live free from the pollution that fuels the climate crisis’.
Tom Sosnoff, chief executive and founder of financial network tastylive, said: ‘Looking at each of the candidates in the US presidential election, the Biden administration, with Kamala Harris as Vice President, has emphasized clean energy initiatives, aiming to transition to renewable sources.
Trump, on the other hand, has been vocal about his scepticism of global warming and climate change.
Speaking last month in the wake of Hurricane Helene, Trump said ‘Do you ever notice, this was such a big deal, the environmental stuff… it’s one of the greatest scams of all time… people aren’t buying it anymore.’
Helene was the strongest hurricane to hit Florida’s Big Bend area since 1851, leaving more than 100 dead in its wake.
Trump has expressed his views on climate issues earlier in the year, with the Republican candidate saying in July: ‘All of the trillions of dollars that are sitting there not yet spent, we will redirect that money for important projects like roads, bridges, dams, and we will not allow it to be spent on meaningless green new scam ideas.’
Trump, it appears could prove positive for traditional energy sectors.
Morgane Delledonne, head of investment strategy at Global X ETFs Europe, told This is Money: ‘Trump’s campaign emphasises a return to fossil fuels, highlighting the U.S.’s vast oil reserves and linking energy prices to inflation.
‘This could lead to reduced federal support for renewables like wind, solar, and EVs, with likely rollbacks on tax incentives and emissions regulations with a possible total repeal of the Inflation Reduction Act under a Republican sweep.’
However, Justin Onuekwusi, chief investment officer at St. James’s Place, points out that traditional energy sources outperfromed under Biden as a result of external geopolitical forces.
He said: ‘It’s so important not to predict the reaction of sectors based on the politics, because it’s not just the politics which can drive the market. What ultimately drives the market is earnings. The thing that impacts earnings can be policy, but there’s lots of other exogenous factors that can do that.
‘You would expect, all things being equal, if you have a government that is more positive on clean energy sources, then you will see clean energy outperform traditional energy again.’
Where does the Inflation Reduction Act come in?
The Inflation Reduction Act, passed under Joe Biden, included $375billion in climate incentives which could cut the US’ emissions by two fifths by 2030, including electricity emissions by 80 per cent.
However, with the prospect of a Trump presidency on the horizon, there is a possibility that the act could be repealed if the Republicans make a clean sweep. This could prove difficult for firms in the clean energy sector.
Under Harris, tailwinds could be felt by companies benefiting from the climate and clean energy initiatives, such as the Inflation Reduction Act
Dzmitry Lipski, Interactive Investor
A repeal, Rahul Bhushan, managing director of Ark Invest Europe, said: ‘could introduce immediate headwinds for clean energy projects, as the Act’s financial incentives are crucial to many companies’ plans for scaling and innovation.
‘Major players in the renewable sector, including Tesla, Sunrun and First Solar, have aligned their strategies with these federal subsidies and a repeal would likely stall expansions and cut into the projected returns on their investments.’
Similarly, Sosnoff warns: ‘Clean energy firms dependent on government subsidies to enhance competitiveness may face reduced market presence [in the case of a full repeal], and firms focusing on clean technologies risk financial viability without statutory support, negatively affecting market confidence in renewables.’
Bhushan, however, also argues that a repeal would face major obstacles, especially with the Biden administration having already pushed to allocate 90 per cent of IRA funds by the end of the 2024 financial year.
‘The probability of a complete repeal is low,’ he said.
Harris, meanwhile, has been supportive of the Inflation Reduction Act, and is likely to throw her weight behind it if she enters the White House.
Bromance: Trump has received backing from Tesla boss Elon Musk, despite the Republican candidate’s lack of support for EVs
Dzmitry Lipski, head of funds at Interactive Investor, said: ‘Under Harris, tailwinds could be felt by companies benefiting from the climate and clean energy initiatives, such as the Inflation Reduction Act – already pursued by the Democratic government.’
Delledonne added: ‘If Harris wins, clean energy would see more substantial support through tax incentives and emissions reductions policies.
‘This would create a more favourable environment for renewables. Democratic support would also mean less likelihood of repealing the Inflation Reduction Act, allowing EVs and renewable sectors to benefit from continued federal support.’
A shift towards renewables
Despite having not set out a concrete plan on clean energy and a reversal of her stance on fracking in recent months, groups advocating further climate action, such as the Sierra Club, the League of Conservation Voters and the Green New Deal Network, have been vocal in their support for Harris over Trump.
Given their stance, they would be right to do so. Aside from backing the Inflation Reduction Act, Bushan says Harris has a ‘clear commitment to sustainable technologies and zero-emission solutions’.
Her policies, he said, ‘would provide ongoing support for companies focused on renewable energy.’
Indeed, AJ Bell’s Dan Coatsworth told This is Money: ‘Kamala Harris is on a mission to address climate change and environmental challenges in the US and investors might see her winning the election as generating a better backdrop for green companies to thrive.’
EV firms such as Tesla and Rivian, could be big winners under Harris, ironically given Tesla boss Elon Musk’s endorsement of her Republican rival.
Solar firms such as First Solar and SunPower, as well as wind and energy storage players such as NextEra Energy and Panasonic could also see a boost from the Democratic candidate, according to Sosnoff.
More traditional energy firms like Chevron and ExxonMobil are less likely to see strong benefits from a Harris presidency.
Is the future nuclear?
Trump is a more support of traditional forms of energy. ‘Drill, baby, drill,’ the former president has been chanting on the campaign trail, promising to push oil and gas production.
The country produced 13.4 million barrels of oil per day in August, a record high.
In spite of Trump’s oil-slicked rhetoric, a Republican administration is unlikely to see a total shift away from renewables.
It is nuclear power, though, that is more likely to be the main benefactor in the industry if Trump returns to power.
Future of nuclear power: The Vogtle plant in Georgia began operations in April this year
‘Trump has shown openness to nuclear as part of an independent energy mix, which could lead to investments in new technologies like small modular reactors (SMRs),’ Delledone told This is Money.
She added: ‘His administration may streamline regulatory processes, making it easier for new nuclear projects to move forward. However, without targeted subsidies, nuclear may still compete with natural gas and renewables for investment.’
According to Bhushan, a key driver of Trump’s is the energy security offered by Nuclear as a source of energy.
He said: ‘With Trump’s favour toward nuclear and natural gas, firms in these areas could experience a boost, particularly as nuclear power gains renewed focus as a reliable, low-emission energy source.
‘This diversity could offer a balanced energy strategy that includes a stronger emphasis on American energy independence.’
This could also benefit other parts of the renewables sector, however, with wind and solar investment both increasing energy security.
According to Seb Beloe, head of research at WHEB Asset Management, this is where domestic firms could see benefit under Trump.
He said: ‘We would expect US-based businesses to benefit in either scenario. We think FirstSolar as a the only major US-listed solar module manufacturer to be best placed given its domestic manufacturing footprint and US base. Chinese companies are likely to be increasingly shut out of the US market under both a Harris and a Trump presidency.’
Canada could benefit more from Harris
While Chinese firms are set to lose out if Trump takes the White House, Middlefield Canadian Income Trust warns that Canadian renewables firms engaged in cross-border projects could suffer if Trump takes the presidency.
Director of Middlefield Canadian Income Trust Dean Orrico, and Rob Lauzon, portfolio manager, said: ‘A Republican sweep of the Senate and House may place less emphasis on renewables, potentially slowing project approvals, reducing incentive funding, and resulting in less favourable tax conditions.
‘In this scenario, Canadian firms might pivot some spending toward growth in other international markets, such as Europe and Australia.’
They added: ‘Under a Harris administration, which is expected to prioritize clean energy, we would likely see stronger policy support through increased fiscal spending, streamlined permitting processes, and enhanced tax incentives.’
This, Orrico and Lauzon said, could provide significant opportunities for Canadian firms to capitalised on renewable projects in the US.
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