Solar, Clean Energy Face Headwinds Amid Post-Election Uncertainty

The solar sector has been an attractive area of investment for Advantage Capital due to its proven technology and falling costs.

“When we first got into it …  there were still questions about the efficacy of the technology and how efficient it was and was it cost effective,” Tom Bitting, managing director and founding member of Advantage Capital’s renewable energy finance platform, told Hart Energy. “But as the industry has grown up, it has become very well-proven and broadly adopted industrywide by utilities, by investors, tax investors, cash equity investors.”

But solar, which dominates new utility-scale electricity generation capacity in the U.S., may be facing some more headwinds—even as power demand increases and companies seek out lower-carbon energy sources.

The global solar market hit 495 gigawatts (GW) of installed capacity in 2024, a 14% increase compared to 2023, Wood Mackenzie said Jan. 21. The growth, however, is expected to stall in 2025.

“Solar deployment will decelerate in many countries as policy changes come to fruition,” said Sylvia Leyva Martinez, principal analyst, utility-scale solar PV, North America for Wood Mackenzie. “Post-election uncertainty, waning incentives, power sector reforms and a shift towards less ambitious climate agendas, will drive solar installations to stagnate at 493 GW after years of exponential growth.”

Mercom Capital Group also reported this month that solar companies raised $26.3 billion in total corporate funding in 2024. That total, which included venture capital, debt financing and public market, was down 24% compared to 2023.

“2024 was a year of uncertainties for the solar industry, with inflation, high interest rates, trade disputes and policy ambiguity contributing to declines in funding and M&A activity,” said Raj Prabhu, CEO of Mercom Capital Group. “The market is awaiting clear policy signals from the new administration on the IRA [Inflation Reduction Act] provisions, ITC [investment tax credit] extensions and tariff measures before investors come off the sidelines and deal-making can return to healthier levels.”

Bitting acknowledged it has been a “wild ride” for the solar sector, which has endured “political hits.”

“But all of that aside, the momentum has been tremendous,” Bitting said. “Regardless of what’s happening in the political world, the business community [and] the energy community recognize that renewable energy is needed to satisfy our country’s need for energy on a go-forward basis.”

Staying strong

Advantage Capital and Natixis CIB provided construction, term debt and tax equity financing for the Swift Air Solar project being built by Origis Energy. Located in Ector County, Texas, the project will provide solar power for Occidental Petroleum and subsidiary 1PointFive’s Stratos direct air capture facility. The solar project is under construction and scheduled to go online in mid-2025.

“It is incredible to be a part of and fascinating to see the intersection between Big Oil and renewables and how those two can work together to improve everything,” said Bitting. “Big Oil is trying to improve its carbon footprint while still being active, and renewables can be a big part of that.”

Bitting called the state of clean energy investing “very strong” as more players enter the space.

“More communities are getting involved, more utilities are demanding it, more corporations are demanding it,” he said. “So, from that standpoint, it is very strong and the momentum is robust and very real.”

However, Bitting anticipates a slowdown in the U.S. amid regulatory question marks.

Former President Joe Biden’s signature climate law, the Inflation Reduction Act, along with the Bipartisan Infrastructure Law and other policies aimed at lowering greenhouse gas emissions, incentivized clean energy developments. They brought in, extended or sweetened tax incentives as well as offered loan and grant opportunities, strengthening the economics of many lower-carbon energy projects.

However, President Donald Trump on Jan. 20 issued an executive order that directed federal agencies to pause disbursement of funds appropriated through the IRA and the Infrastructure Investment and Jobs Act. The move was expected.

In the executive order called Unleashing American Energy, the “terminating the Green New Deal” section also calls for a review of the laws “processes, policies and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds for consistency with the law.” It gives federal agencies 90 days to report findings to the directors of the National Economic Council and Office of Management and Budget and include recommendations to enhance alignment with the administration’s energy goals.

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Looking ahead

Policy experts have said they don’t anticipate a complete repeal of the Democrat-backed IRA, especially given the jobs it has created in Republican-led states. Bitting agreed, singling out the amount of development that has already taken place and the billions of dollars deployed.

“A wholesale repeal of IRA and repeal of renewable energy tax credits to me feels incredibly unlikely and frankly shortsighted,” he said, adding some companies would likely significantly scale back. “As with any law, there can be improvements. It’s not perfect as it is.”

If he could, Bitting would tweak parts of the IRA concerning in-transfer transactions where third-parties can purchase the tax credits.

“The fact that recapture follows the buyer is a bit challenging because you still have to do the same level of diligence. … It effectively outsources the diligence needs and makes the buyers responsible for what they purchase. From that standpoint, I am fully supportive of why it’s there. But there are challenges around that because the expectation is this should be a much more simplistic structure.”

Streamlining processes and clarifying ambiguity around what is allowable are also among the parts of the IRA he would change. In addition, permitting reform remains on the list. “It shouldn’t take years and years to develop these projects,” Bitting said.

One of the fascinating aspects of the IRA, he added, was the conversion of the traditional ITC and production tax credit into a technology neutral credit.

“The idea is that we’re not picking winners. Let’s let the free market develop and build the carbon neutral technologies that make the most sense and the winners will pick themselves. … I am very excited to see what new technologies take hold and what becomes the next solar.”

Looking ahead, Bitting sees 2025 still being an “incredibly robust year” for clean energy.

“We’ll have a decent tail, but there will be some slowdown as people take a pause to figure out how the rules are going to change for projects that frankly might not turn on for several years,” Bitting said. “We might see a bit of a lull in a couple of years as a ripple effect of the uncertainty today.”