European companies focused on clean energy are abandoning expansion plans, bracing for lower sales or see funding of US projects in doubt because of fears over what a potential election victory for former US president Donald Trump could mean for their sector.
Trump has dismissed US President Joe Biden’s policies to fight climate change as a “green new scam” and is expected to try to undo much of his administration’s work, including the Inflation Reduction Act (IRA) that offers tax breaks and subsidies to US and foreign companies investing in sustainable energy.
The law passed in 2022 has acted as a powerful incentive for European companies from the sector to expand or establish their US presence, but the specter of a second Trump presidency is giving them a pause.
Photo: Reuters
“With a Donald Trump who A) is very opportunistic, B) is also very polemic and C) is also fairly unpredictable, you have to ask yourself whether it makes sense to make such a bet,” Luxembourg-based hydrogen firm H2Apex Group SCA chief executive officer Peter Roessner said.
Under the IRA, the company could have built a hydrogen tank production plant in the US for about one-third of the US$15 million in costs.
However, in February, Roessner canceled the plan over concerns that Trump could be re-elected, even though the company already had held initial talks with potential customers.
Market bets that Trump would win back the White House in November have intensified this month after he was shot at during an election rally and days later secured the Republican Party nomination.
Recent polls show a narrowing gap between Trump and US Vice President Kamala Harris, the likely Democratic candidate with similar views on climate to Biden’s. Yet Roessner’s comments reflect anxiety among Europe’s clean tech firms over what a Trump presidency could mean and how they are trying to prepare for such a scenario.
Energy data and analytics company Wood Mackenzie Ltd said a Trump presidency would put a projected US$1 trillion in low-carbon energy investments at risk by 2050.
Consultancy Roland Berger AG said that while a full repeal of the IRA was improbable, a Trump administration could still jeopardize incentives for electric vehicles and charging, solar power and energy efficiency.
German solar firm SMA Solar Technology AG last month issued a profit warning, citing a possible government change in the US, the world’s second-largest solar market after China, as one of the risk factors.
The world’s largest maker of solar inverters initially aimed to choose a location for a planned factory in the US by the end of last month, but is yet to find one, saying it is still evaluating possible sites in a number of states.
While SMA has not abandoned its expansion plans, the company on July 4 said that it “is observing that the unclear outcome of the presidential elections in the USA is currently leading to a certain reluctance to invest in renewable energies locally.”
While Trump in May said he would target the offshore wind farm sector on his first day in office if he was re-elected, some renewable energy companies appear undeterred by the uncertainty.
German wind turbine maker Nordex SE last month said it would resume production at a mothballed plant in Iowa, saying the US would remain an important and sufficiently big market “regardless of political developments.”
However, several others report delays as prospective partners expected to co-fund projects hold off with their commitments.
Hydrogen firm Thyssenkrupp Nucera AG & Co KGaA has spoken of delays to final investment decisions concerning US projects, a factor that drove an outlook cut at its alkaline water electrolysis unit earlier this year.
The company said that while it continued to focus on the US, it was vital how the IRA program would look like after the election.
Strategic investors with a long-term focus on the cleantech sector were likely to resume projects earlier in the face of continuing uncertainty than those who are more opportunistic, it said.
Norwegian rival Nel ASA said it was yet to make a final investment decision for a planned production facility in Michigan, which was contingent on the demand for its products in the US market.
This growing complexity companies have to navigate globally can create “analysis paralysis” when it comes to investment decisions, Roland Berger global managing director Marcus Berret said. “Boardroom headaches have increased considerably as a result.”
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