By Simon Clements, investment manager, Liontrust Sustainable Investment team

Executive orders and new regulations from the US president, many diametrically opposed to the core values of sustainable investors (diversity and inclusion, equality, the need to combat climate change), have been coming thick and fast. This has affected the prospects for renewables and the energy transition to a much lower carbon economy over the next three to five years.

The biggest impact comes from the reversal, or the abrupt curtailing, of many renewable tax incentives for wind, solar, electric vehicles and green hydrogen which were included in Biden’s Inflation Reduction Act (IRA). A combination of executive orders as well as the so called One Big Beautiful Bill Act (OBBBA) – signed into law on 4 July 2025 – have been used to do this. 

There will be an accelerated phase out of key tax credits, with solar and wind projects needing to be in service by the end of 2027, rather than 2032 previously. However, projects that begin construction within one year of the OBBBA’s enactment will still qualify so long as they are in service by 2030 and show evidence of continuous construction.

The market has punished renewable energy stocks since President Trump won the election in late 2024, but the final bill is considered to be much more benign for the sector than many feared. The fact that projects can be completed by 2029 or 2030 and still qualify for tax credits is better than the market was expecting.

We believe the US onshore wind industry will see a significant pull forward in demand between now and 2026, as developers rush to lock in legacy tax credits and maximise returns. Management teams such as Vestas, expect onshore installations in the US to be strong in the next year or so. The downside is supply chains must cope with super-normal demand followed by a lull post-2026.

See also: Trump’s ESG hostility pushing more UK investors towards sustainability

Offshore wind, meanwhile, has stalled as a technology option. The Trump administration has mounted legal challenges to projects at both the planning and near completion stages. While offshore wind is likely to double in Europe in the coming years, it’s not viable technology in the US at present given the position of the US administration.

Looking beyond 2030, when subsidies will have largely disappeared, the economic viability of renewable energy remains compelling. 

The relative economics of different electricity generation technologies are often measured by working out the levelised cost of energy (LCOE), which captures the cost of building, funding and operating an asset over its lifetime, measured in a cost per unit of energy produced ($/MWh). 

Even without tax credits, wind and solar are still economically competitive versus all other generation types. So, there is a future for them in the US but the economics for developers and operators will be lower, while industrial consumers of this electricity will likely pay more.

If we consider solar energy in greater detail, this sector is likely to benefit from huge demand from developers of data centres, which are essential to the AI revolution. Around 9GW of data centre capacity is currently under construction. With capital expenditure in this area elevated, the demand for electricity to power these centres is expected to remain high. 

Owners of hyper-scale facilities, such as Amazon, Microsoft, Google, Meta, Oracle and Apple, want three main things from their electricity supplies: power delivered soon, available all the time, and with low carbon impact. 

See also: Data centres and deglobalisation: Inside £420m Utilico Emerging Markets portfolio

No single energy source ticks all these boxes without caveat, but solar is the clearest winner on these metrics – it can be constructed quickly and is cost competitive. Adding storage increases cost, but these customers are less price sensitive. According to Bloomberg, AI and data centre power demand will increase from 4.4% of US power demand to 17% by 2030. The hyperscalers are expected to spend more than $2trn on data centre capex between 2025-2030.

Despite the negative headlines, US solar industry growth rates are set to accelerate, providing an attractive backdrop for these companies. We therefore expect solar to see strong demand growth over the next five years driven by this AI-led build out.

Trump’s bonfire of green taxes has had a very negative effect on the US energy transition. Supply chains face strain this year as projects are brought forward to qualify for credits before they disappear, followed by a slowdown in build out through to 2030.

The outright energy winners are areas retaining the previous tax incentives – such as exploration and production of fossil fuels – which we don’t invest behind. But there are still sustainable options such as utility scale solar and battery storage whose attractions are largely unaffected by recent legislation.

Importantly, the removal of tax subsidies is less aggressive than originally feared. The longer-term economics underpinning renewables demand remain intact and even without subsidies, wind and solar projects are still viable. For long-term investors, the US renewable sector may be down – but it is far from out.