Donald Trump’s election victory led to a sell-off in solar and wind energy. Even as the broader market hit a record high on Wednesday and stocks had their best day since 2022, investors fled renewables after America picked the “drill, baby, drill” candidate. But while many see Trump as a blight on clean energy, some Analysts believe the market has overreacted – and that quality stocks in the sector are available at bargain prices.
One reason is that while Trump has labeled the environmental provisions in President Biden’s Inflation Reduction Act (IRA) as the “Green New Scam,” they are unlikely to be repealed. This is not least because the law, which provided billions in subsidies for renewable energy sources, has contributed to a clean energy boom in several red states, especially when it comes to wind and solar projects.
Jay Hatfield, the CEO of Infrastructure Capital Advisors, thinks the law will be changed, but says existing providers don’t have much to worry about.
“There will be sensible development in wind and solar energy,” he told Forgan. “Is there a catalyst that suddenly makes people excited about it? Probably not, but it’s too cheap and too short-circuited.”
The world, he said, simply needs more energy than any one energy source can supply. That’s been evident during the AI boom, which has put utility stocks – traditionally seen as boring, defensive investments – in the spotlight, while tech giants like Microsoft and Amazon are showing soaring demand for the power needed to fuel their data centers .
Morningstar energy analyst Brett Castelli also said the post-election sell-off has created opportunities.
“Structural factors, such as technological advances, cost declines and state renewable energy policies, ensure that the energy transition will continue regardless of which party is in the White House,” he wrote in a note on Wednesday.
One company Castelli highlighted was First Solar, which saw its shares fall 10% on Wednesday before trading relatively flat on Thursday. The Arizona-based solar panel manufacturer could even benefit from some of Trump’s protectionist trade policies, he said.
Hatfield, meanwhile, is a fan of Florida’s NextEra Energy, the nation’s largest renewable energy developer. The company’s shares fell 5% on Wednesday, but have remained relatively stable since then.
Although no Republicans voted for Biden’s 2017 green energy legislation, several right-wing lawmakers have warmed to some of its provisions. For example, a group of 18 Republicans in the House of Representatives recently sent Speaker Mike Johnson a letter warning that some of the stimulus measures in the bill have created jobs and boosted investment in their districts.
“You have to use a scalpel and not a sledgehammer because there are a few features in there that have helped overall,” Johnson said recently.
Some of Trump’s closest allies, meanwhile, will benefit from keeping many tax breaks for clean energy. These include his son-in-law Jared Kushner and Cantor Fitzgerald CEO Howard Lutnick, the co-chair of Trump’s transition team, who have major stakes in companies that are major beneficiaries of the IRA, according to a recent report from Trump’s transition team. Reuters found.
“This is not liberals versus conservatives,” Hatfield said of the subsidies.
That said, the president-elect has been highly critical of offshore wind energy, a sharp reversal from the prospects of his first administration. Shares of Danish wind giant Orsted, which has repeatedly been in Trump’s crosshairs, fell 14% on Wednesday but have since recovered slightly.
Hatfield doesn’t believe in offshore wind, but he believes pumping in or out of renewables based on presidential elections is irrational. The best evidence for this, he believes, could be the performance of solar energy stocks under Biden.
Following the Democrat’s 2020 victory, Invesco’s solar ETF (trading as TAN on the NYSE) rose more than 50% ahead of his inauguration, according to S&P Global Market Intelligence. The fund’s shares have fallen nearly 70% since then.
This story originally appeared on Fortune.com
