A Fair or a Loaded Coin?

Key Points

1. New trade and energy policies by the U.S. government are expected to reduce the growth of the clean energy industry in the country and globally.

2. Companies with bigger balance sheets and higher geographical diversification stand a better chance of surviving the increasingly harsh economic and political global environment.

3. Higher clean energy targets and bigger programs, by countries such as Australia, might alleviate the impact of the rollback in energy transition efforts in other countries.

Introduction

The ongoing evolution of trade and energy policy in the global scene is threatening to roll back gains made by the clean energy industry in recent years. For awhile, the industry has projected potential impacts but we are fast-moving from hypothetical scenarios to reality.

The tariff and non-tariff barriers introduced by the U.S. on clean energy technology imports are expected to decrease the deployment of such technologies in the U.S. given the country’s high reliance on importation of clean energy equipment. On the other hand, newly-elected governments in some countries have been reshaping their energy policies leading to more clean-energy friendly policies in some instances and less supportive policies in others.

Private sector

The trade and energy policies are having different impacts on original equipment manufacturers (OEMs) depending on their level of maturity (startup versus established), country of origin (US versus China) and geographical concentration/diversification. Overall, more established OEMs with geographical diversification are faring better than their smaller geographically-concentrated counterparts. A look into 3 energy storage system (ESS) OEMs demonstrates this phenomenon:

American Energy Storage Innovations (“AESI”)

AESI was founded as a spin off from American Battery Solutions in 2023 with the focus of developing and commercializing energy storage solutions (ESSs). The company is reported to be in the process of gradually decreasing operations as it heads towards complete closure. AESI’s strategy relied on battery manufacturing in China thus this unfortunate turn in business prospects has been partly attributed to the hiking of tariffs by the U.S. on China. The company is also expected to face additional headwinds due to the updated restrictions on foreign entities as covered in Reconciliation Bill 2025.

Our Next Energy (ONE)

In a clear manifestation of “one man’s meat is another man’s poison“, ONE is gearing to benefit from the trade barriers given its fully U.S.-based manufacturing operation and largely local (U.S.) market. However, ONE is expected to face headwinds due to an increased cost of raw materials due to the higher tariffs.

Contemporary Amperex Technology Co., Limited (“CATL“)

The world’s largest battery manufacturer recently conducted its initial public offering (IPO) on the Hong Kong Stock Exchange - a deal that raised $4.5 billion dollars for shares floated at $33.53. The company has been listed on the Shenzhen Stock Exchange since 2018 and the secondary listing is part of the company’s strategy to attract capital from global financial markets. This comes on the heel of CATL’s designation as a ‘Chinese Military Company‘ in January 2025. This designation prevents the U.S. Department of Defense from conducting business with CATL. It remains to be seen if the combination of the two factors will produce an overall growth or shrinkage effect on CATL. However, given its sheer size and market share, CATL might be able to outlast the anticipated difficult financial and trade environments ahead.

Public sector

At the national level, newly-elected governments have been reshaping energy policies to align them with the priorities of their administrations.

Australia

Australia’s federal administration of the past 4 years has recently won re-election and is already working towards actualizing its campaign promise of introducing the Cheaper Home Batteries subsidy. This subsidy program will reduce the upfront cost of residential ESSs leading to the tripling of Australia’s distributed storage capacity. Prior to this year’s federal elections, the federal government had also implemented tax credits for electric vehicles as well as green hydrogen, green aluminum and critical minerals production.

The story is more nuanced when we look at the provincial level. Compared to its predecessor, Queensland’s current administration seems less keen to support the deployment of renewable energy as evidenced by its revoking of a construction permit for a major hybrid wind plus storage project.

United States

The current U.S. administration seems to be moving to either terminate or accelerate the phase-down of most clean energy tax credits. Based to the House version of Reconciliation Bill 2025, the tax credits for clean hydrogen (45V), clean vehicles (25E, 30C, 30D and 45 W), residential clean energy and energy efficiency (25C, 25D and 45L) will be terminated in 2026 with advanced manufacturing (45X) ending between 2028 and 2032 for various technologies. The clean electricity PTC (45Y) and clean electricity ITC (48E) have two requirements namely, start of project construction within 60 days of bill enactment and placement in service by the end of 2028. Transferability of tax credits will also be affected with such provisions for clean fuel and advanced manufacturing ending in 2027. Additionally, stricter provisions on foreign entity restrictions are expected to affect most of the above listed tax credits. The new policy is expected to cause an increase in electricity prices to a tune of 7% for residential consumers and 10% for businesses. Additionally, 250,000 jobs in the clean energy industry could be lost. It is not all doom as nuclear energy emerges a net winner with the zero-emission nuclear power production (45U) and clean fuel PTC (45Z) being preserved until 2032.

The clean energy industry is expected to experience high growth between 2025 and 2028, should the House version of the Reconciliation Bill be passed, as developers scramble to complete their projects on time. However, the pace of the energy transition is expected to slow down given the significant role the U.S. plays both in the funding and adoption of clean energy technologies. That said, it should be remembered that U.S. states set their own clean energy targets and procurement mandates and most will continue to do so even with reduced federal support.

Conclusion

Overall, the messaging of many countries on climate change initiatives has not shifted in the past few months. If considered a coin flip, the new energy policies will likely produce a loaded outcome, that is, net negative impacts on the energy transition. However, a 50/50 chance of either net positive or net negative outcomes in the long run cannot be written off.