Second of a two-part series. For the first part, click here.

Soaring electricity demand and strong power pricing will help soften the financial blow to US renewables developers from weakened federal incentives and proposed tariffs on key trade partners expected under the incoming Trump administration.

Clean energy stocks have tumbled since the Nov. 5, 2024, election, reflecting investors' concerns that tax credits introduced in the Inflation Reduction Act (IRA) of 2022 will be pared back or eliminated. But thanks in part to unprecedented load growth, financing renewable energy projects should be business as usual in 2025, industry experts emphasized.

Powering datacenters became a priority for developers in 2024 as industry giants like NextEra Energy Inc. and AES Corp. expanded their project pipelines and signed gigawatts of contracts with hyperscalers.

During the first 11 months of 2024, corporate counterparties signed clean energy procurement contracts totaling 16,403 MW, up from 12,377 MW of capacity during the same period in 2023, according to S&P Global Commodity Insights data.

Preserving profits

Analysts at Mizuho told clients on Dec. 16, 2024, that they expect power purchase agreement (PPA) prices to increase if tax credits are axed, enabling developers to "maintain unlevered [internal rates of return] at the high single digit to low double digits level."

"Checks with renewable developers suggest that solar PPAs of [about] $30/MWh to $40/MWh in most profitable markets might increase by [about] 30% if IRA subsidies are removed," Mizuho added.

Marathon Capital LLC Senior Managing Director Ammad Faisal acknowledged that in the event of headwinds like new tariffs and changes to the IRA, developers looking to contract capacity "lose some wiggle room."

"But if you sign a PPA $5 or $10 more than what you could have six months ago, that definitely helps," Faisal said in an interview.

Developers like Brookfield Renewable Partners LP can also preserve returns because onshore wind and solar are still "so much cheaper" than alternatives like natural gas generation, Connor Teskey, CEO of Brookfield Renewable and president of parent company Brookfield Asset Management Ltd., said in November 2024 during a third-quarter earnings conference call.

Brookfield Asset Management is partnering with Microsoft Corp. for more than 10.5 GW of new renewable energy capacity globally over the next five years. The framework agreement, announced in May 2024, provides a path for Brookfield Renewable to deliver the renewable energy starting in the US and Europe between 2026 and 2030.

Jazib Hasan, managing director at investment firm EIG Global Energy Partners, affirmed during a November 2024 conference that datacenter customers' need for new generation sooner to meet project timelines is providing an opening for more lucrative PPAs for developers.

Nuveen LLC "is busier than ever" when it comes to investing in renewables, Don Dimitrievich, senior managing director and portfolio manager for energy infrastructure credit, said in an interview.

"Until there was clarity after the election, that kept certain investments from moving forward," Dimitrievich added.

In recent weeks, rPlus Energies LLC closed a $179 million construction debt facility for its Pleasant Valley Solar 2 Project in Idaho and Innergex Renewable Energy Inc. secured a $100 million nonrecourse bridge loan for solar and battery storage projects in Hawaii.

ENGIE North America Inc. similarly expects 2025 to be a "very big demand year" for US renewable energy procurement.

Contracts for repowering onshore wind and solar projects could also exceed market prices, analysts at Jefferies told clients Dec. 10, 2024, adding, "The logic is that these are generally proven projects with a track record so the certainty warrants a higher value."

Other headwinds

Business as usual, however, still includes weeding out uneconomic projects.

"There will be greater project selection, but that has as much to do with the fact that there's only so much infill left for a lot of those renewables projects" as with any new policies deployed by President-elect Donald Trump, Peter Gardett, head of energy transition research at financial services platform Karbone, said in an interview. "You start to run out of rope for easy-to-finance stuff and pay more attention to project quality."

At the end of November 2024, the New York State Energy Research and Development Authority told the New York State Public Service Commission that it terminated a contract underpinning a 1,300-MW transmission line designed to carry renewable energy to New York City.

The Clean Path NY project, a partnership between the publicly owned New York Power Authority and private developers Invenergy LLC and energyRe LLC, combined a 175-mile underground transmission line with 3,800 MW of renewable energy projects in upstate New York. It was expected to come online by 2027.

Clean Path NY asked the state in July 2023 to adjust the strike price of the generation portion of the project to account for inflation, but withdrew the petition in October 2023. The New York Power Authority in late December 2024 asked state regulators to revive the project.

Clogged interconnection queues and lingering supply chain disruptions also continue to delay timelines.

"You take a look at the average project from inception to commercial operations and it's now somewhere between 40 and 70 months," Nuveen's Dimitrievich said.

Developers and customers are turning to behind-the-meter generation as a result.

"You'll see an acceleration of projects that are somehow not necessarily reliant on going through that interconnection queue, but really finding ways to provide power to specific demand sources," Dimitrievich said. "We're seeing a lot of that type of activity being discussed. I think you're going to see a lot of those projects in 2025."

In December 2024, Google LLC unveiled a partnership with independent power producer Intersect Power LLC and global investment firm TPG Inc. to rapidly scale up datacenter development paired with new renewable and battery energy resources. The first colocated clean energy installation is already under construction in an undisclosed location and is expected to be operational in 2026.