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Wind power and electric vehicles are in the crosshairs of the Trump administration, while solar has emerged relatively unscathed—until now. The Trump administration has advocated an “all of the above” approach to U.S. energy policy. So far, the administration has taken a whirlwind of actions to boost oil and natural gas and cut incentives for clean energy resources. While the administration has given a boost to fossil fuels and dealt blows to the adoption of electric vehicles, wind power and energy efficiency, solar energy falls somewhere in the middle. Under an executive order called “Unleashing American Energy,” the Administration eased restrictions around drilling and exploration for rare earth minerals. It also sought to end the “electric vehicle mandate” by ending state emissions waivers that limit sales of gasoline-powered cars and considering eliminating “unfair subsidies and other ill-conceived, government-imposed market distortions” that favor electric vehicles over other technologies. There is no federal mandate for electric vehicle adoption in the United States. The executive order also called for lowering energy efficiency standards for appliances, citing consumer choice and market competition as motivations for the action. In another executive action, Trump ordered a pause on offshore wind lease sales in federal waters, as well as pauses on approvals, permits and loans for both offshore and onshore wind. Power of solar energy Solar energy appears to be neither the apple of Trump’s eye nor the target of his crackdown. Regardless of the administration, it has been growing for decades. Under Trump’s first term, the industry grew by 128%, according to the Solar Energy Industries Association (SEIA). Solar is now the most dominant source of new electricity generation added to the grid in the United States. According to the Energy Information Administration (EIA), more than 64% of new capacity added to the grid through three quarters in 2024 was solar, followed by natural gas. “Solar power, already a $60 billion industry, is adding more new capacity to the U.S. grid than any other fuel source amid the largest increase in electricity demand since World War II,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA). Globally, clean energy investments are expected to surpass fossil fuel investments for the first time in 2025, according to S&P Global. S&P said investment in renewable power generation, green hydrogen and carbon capture and storage will reach $670 billion in 2025, marking the first time these investments have outpaced projected spending on oil and gas. “Solar PV is expected to account for half of all clean technology investments and two-thirds of installed megawatts,” said Edurne Zoco, managing director of Clean Energy Technology at S&P Global Commodity Insights. Cloudy solar Despite optimism about solar energy as the core of the energy mix going forward, there are several emerging risks in Trumps second term. The administration has withdrawn from the Paris Agreement, a legally binding international treaty to address climate change. Combined with the relaxation of restrictions on fossil fuel production, this action could shake up the comparative valuation between fossil fuels and solar energy, causing banks and lenders to reconsider investing in the energy transition. There is also significant uncertainty surrounding the Inflation Reduction Act (IRA) of 2022, the largest climate and energy spending package in the countrys history. The “Unleashing American Energy” executive action included an immediate halt to grants, loans, and other financial mechanisms within the IRA and the Infrastructure Investment and Jobs Act. In anticipation of this move, the Biden Administration has provided tens of billions in loans over the past two months, including $23 billion to utilities, and experts say these funds are legally tied up and highly unlikely to be revoked. This halt in new loans and grants will likely slow the growth of the sector. Law firm Baker Tilly said it “remains unclear” whether the pause covers all planned funding, such as direct payment provisions under IRAs, or applies only to federally administered grants, loans and contracts. Another risk for the solar industry at large is the application of tariffs. It is not yet clear which products will be subject to tariffs and at what rate. The United States has a long, bipartisan history of imposing tariffs on solar imports. Overall, tariffs are expected to increase the cost of products, creating another hurdle for the solar industry in its competition with other energy sources. One potential benefit of tariffs is the creation of a more level playing field for U.S. solar manufacturers to compete with low-cost global suppliers. Perhaps the most serious risk to the industry is the potential repeal of the Investment Tax Credit (ITC) within the IRA. Solar and energy storage projects of all sizes receive a tax credit of 30% of the installed system cost. Additional credits are offered for projects that use U.S.-made components or are located in low-income or economically impacted communities due to the energy transition. Uncertainty over the fate of these tax credits has cast a shadow over the industry, dampening forecasts and investment. Industry analysts have suggested that a complete elimination of the ITC is unlikely, but that phasing it out sometime in the next two years, rather than in the mid-2030s, has some political will. According to Roth Capital Partners, ITC cuts could come as part of the administration’s budget reconciliation bill, which would take place sometime in the fourth quarter of 2025. Until then, clouds of uncertainty may continue to hold back solar investment for some time. However, as a technology that now offers a levelized cost of electricity (LCOE) 56% cheaper than the weighted average LCOE of fossil fuels, solar now has a foothold in the market that is too strong to be affected by political turmoil. |
