Green energy will be a smart contrarian trade
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By George Hay
LONDON, Dec 17 (Reuters Breakingviews) -On the face of it, 2025 is shaping up to be a stinker for renewable energy. The planet seems ever further from restricting global warming to a manageable 1.5 degrees Celsius level, and the election of Donald Trump as U.S. president means that the world’s biggest economy will visibly retreat from the collective fight against climate change. Yet while the year ahead will be painful for some green power players, the wider sector may yet constitute a buying opportunity.
Given that Trump has called climate change a “hoax” and variously claimed that offshore wind harms birds and causes cancer, it’s tempting to fear his administration could bin Joe Biden’s Inflation Reduction Act, which Bernstein estimates resulted in $488 billion of U.S. clean energy investments in the two years after its inception in August 2022. The iShares Global Clean Energy exchange-traded fund of leading renewables groups fell 10% in the two weeks after the U.S. election, against a wider 2% gain for global equities. Offshore wind providers like Denmark’s Orsted ORSTED.CO initially led the slump. Green hydrogen players like Norway’s Nel NEL.OL, which makes electrolysers that split water molecules to create zero carbon hydrogen, fell over 20%.
Yet not all green stocks took a hammering. Those more exposed to the energy infrastructure end of the U.S. market like domestic giant NextEra Energy NEE.N, Spain’s Iberdrola IBE.MC and Britain’s National Grid NG.L – which makes around 45% of its EBITDA in North America – were largely flat. Germany’s RWE RWEG.DE, which bought into U.S. solar in 2022, saw its shares rise.
This makes sense if Trump is as focused on low-cost energy as he seems. Solar and onshore wind are cheaper than gas-fired electricity, according to Lazard, whereas offshore wind is not. As Republican states received 70% of clean energy investment in the IRA’s first two years, a wholesale scrapping of the act would also be bad politics. More likely, Trump will accelerate permitting for new fossil fuel projects, but also for solar and onshore wind. The reverse could happen with offshore wind permits and green hydrogen projects, which still require subsidies to be competitive.
Meanwhile, hyperscalers like Microsoft MSFT.O and Amazon AMZN.O need loads more energy to train their artificial intelligence models. This should underwrite demand both for solar and for grid expansion. McKinsey says that the build-out of U.S. data centres could require over 400 terawatt hours of extra electricity by 2030 – roughly France’s entire annual consumption.
The iShares Global Clean Energy ETF fell by nearly a quarter from the end of 2023 to late November. Trump’s ongoing trash-talking about green energy could yet just see him scrap the entire IRA. But to make a contrarian bet, there needs to be some risk.
Follow @gfhay on X
This is a Reuters Breakingviews prediction for 2025. To read more of our predictions, click here.
Graphic: Green stocks showed a wide dispersion post-election https://reut.rs/4gcaZRZ
Editing by Neil Unmack and Oliver Taslic
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