Donald Trump’s election victory sparked a solar and wind sell-off. Even as the broader market rallied to record highs on Wednesday, with stocks having their best day since 2022, investors fled renewables after America picked the “drill, baby, drill" candidate. But while many see Trump as a scourge for clean energy, some analysts believe the market has overreacted—and that quality stocks in the sector can be had at a bargain.
One reason is that, while Trump has lambasted the environmental provisions in President Biden’s Inflation Reduction Act (IRA) as the “Green New Scam," it is unlikely to repealed. This is not least because the law, which included billions in subsidies for renewables, has contributed to a clean energy boom in several red states, particularly when it comes to wind and solar projects.
Jay Hatfield, the CEO of Infrastructure Capital Advisors, believes the act will be modified, but he said existing providers should not have much to worry about.
“There's going to be sensible development of wind and solar,” he told Fortune. “Is there a catalyst for people to all of a sudden get excited about it? Probably not, but it's too cheap and it's over-shorted.”
The world, he said, simply needs more power than any one energy source can provide. That’s been apparent during the AI boom, which has thrust utility stocks — traditionally seen as boring, defensive plays — into the spotlight as tech giants like Microsoft and Amazon exhibit ravenous demand for power needed to fuel their data centers.
Morningstar energy analyst Brett Castelli also said the post-election sell-off has created opportunities.
“Structural drivers, such as technological advancements, cost declines, and state renewable energy policies, ensure the energy transition will continue regardless of which party is in the White House,” he wrote in a note Wednesday.
One company Castelli highlighted was First Solar, which saw its stock fall 10% on Wednesday before it traded relatively flat Thursday. The Arizona-based solar panel manufacturer, he said, might even benefit from some of Trump’s protectionist trade policies.
Hatfield, meanwhile, is a fan of Florida’s NextEra Energy, the country’s largest renewables developer. The company's shares dropped 5% on Wednesday, but they have held relatively steady since.
Parts of Biden's green policy popular with Republicans
While not a single Republican voted for Biden's 2017 green energy legislation, several right-wing lawmakers have warmed up to some of its provisions. A group of 18 House Republicans, for example, recently sent Speaker Mike Johnson a letter cautioning that some of the bill's incentives have created jobs and boosted investment in their districts.
“You’ve got to use a scalpel and not a sledgehammer, because there’s a few provisions in there that have helped overall,” Johnson recently said.
Some of Trump’s closest allies, meanwhile, stand to benefit if many clean energy tax breaks are preserved. Those include his son-in-law Jared Kushner and Cantor Fitzgerald CEO Howard Lutnick, the co-chair of Trump’s transition team, who run or have big stakes in companies that are significant beneficiaries of the IRA, a recent report from Reuters found.
“This is not liberals versus conservatives,” Hatfield said of the subsidies.
That said, the president-elect has been extremely critical of offshore wind, a sharp reversal from the outlook of his first administration. Shares of Danish wind giant Orsted, which has repeatedly been in Trump's crosshairs, plunged 14% on Wednesday but have since recovered slightly.
Hatfield isn’t a believer in offshore wind, but he believes it's irrational to pile in or out of renewables based off a presidential election. The best evidence of that, he said, might be the performance of solar stocks under Biden.
After the Democrat's victory in 2020, Invesco’s solar ETF (trading as TAN on the NYSE) soared over 50% before his inauguration, according to S&P Global Market Intelligence. The fund’s shares have dropped nearly 70% since.
