Clean energy impact of Trump’s ‘big beautiful bill’: ‘worst-case scenario has not materialised’

Clean energy shares surged during early trading in the UK, despite the US Senate narrowly passing President Trump’s so-called “big beautiful bill”. The legislation, passed by a razor-thin 51–50 majority, had been debated for three days and was ultimately voted through in the early hours of the morning Washington time.

Clean energy stocks had struggled with the uncertainty with share prices for firms like Ørsted and EDPR down more than 20 year on year.

The revised bill no longer includes taxes on energy projects with “foreign contents”, and it extends the sunset period for wind and solar tax credits. In practice, this means that projects beginning construction within a year of the bill becoming law will benefit from a four-year safe harbour period during which they will continue to receive wind and solar tax credits.

Tancrède Fulop, senior equity analyst and renewables expert at Morningstar, commented on the implications for European renewables: “This policy shift, coupled with the resumption of construction work on Equinor’s Empire Wind project off the New York coast, suggests that the worst-case scenario for the renewables sector under the Trump administration may not materialise. The developments imply potential resilience and optimism for renewables beyond what current share prices reflect.”

Morningstar remains cautiously optimistic. “We maintain stable fair value estimates for key players with significant US market exposure, including EDPR, Ørsted, Acciona Energía, RWE and Engie. Similarly, wind turbine manufacturers such as Vestas and narrow-moat Siemens Energy hold steady. Of notable interest is RWE, which we view as offering the best risk/reward potential due to its diversified power generation portfolio. A proposed additional share buyback, backed by Elliott Investment Management, could act as a positive future catalyst,” Fulop added.

However, Zach Friedman, senior director of federal policy at Ceres, highlighted that the bill still presents significant headwinds for clean energy infrastructure investment in the US.

Among other provisions, the US administration plans to phase down clean electricity investment tax credits and production tax credits from 2026. Moreover, residential property and home improvement clean energy tax credits will also be reduced after this year.

In addition, electric vehicle (EV) tax credits are scheduled to end as soon as September 2025. But the changes, which had been widely anticipated, have to some degree already been priced in, argues  Bryan McGannon managing director at USSIF: "Consumer EV incentives were an important driver to move the industry forward. The EV incentives were widely anticipated to be some of the first on the chopping block so I think the market is already adjusting to lower EV demand."

“By raising taxes on energy producers and users, this legislation puts the US at severe risk of ceding its leadership in the 21st century’s most important industries to China and other countries,” Friedman said. “It will lead to fewer manufacturing jobs, higher electricity bills for American families and businesses, and weakened global competitiveness.

“It is deeply disappointing to see Congress step away from proven, bipartisan policy solutions that are critical to meeting our widely shared goals of energy dominance, job creation, lower energy prices and global competitiveness,” he warned, while welcoming some of the concessions that had been secured.

Having passed the Senate, the bill now returns to the House for final approval, where Republicans hold only a slim majority.