Democratic sweep in US midterms brings reprieve for solar, but federal gridlock persists 

The market reaction reflects a broader recalibration of political risk for the sector. Over the past two years, the Trump administration has cancelled or curtailed numerous clean energy projects and funding streams. Meanwhile, Republican control of Congress gave the White House a largely unobstructed path to scale back tax credits and incentives tied to the Inflation Reduction Act (IRA). 

With Democrats now holding both chambers, that rollback campaign faces a legislative brake, even though President Donald Trump remains in office and retains veto power over any new pro-solar legislation Democrats might attempt to pass. The path to any substantive changes in US federal clean energy policy therefore remains narrow.  

Nevertheless, the prospect of a Democrat-controlled Congress offers several glimmers of hope. In the aftermath of this week’s seismic events, PV Tech Premium spoke with several clean energy business and policy observers about the implications of the result and the extent to which it may signal a softening of the recent hostile policy environment for renewables in the US. The reframing of renewables as a vital catalyst for energy affordability, the possibility of bipartisan action on permitting reform and a reinforced Congress to act as a bulwark against further clean energy rollbacks all emerged as potentially positive outcomes from this week’s historic shift in America’s balance of power. 

A check on further rollbacks, though not a reversal 

A Democratic-controlled Congress won’t be able to immediately restore or expand tax credits targeted by Trump, but it could prevent any further rollback of incentives or any other measures targeting renewables. 

Tancrede Fulop, a senior equity analyst at investment research company Morningstar, said the rallying of share prices among clean energy companies he tracks with US exposure signified that: “The market reaction is [one of] stabilisation; maybe no more negative [or] regulatory headwinds against renewables and potentially favourable ones.” 

“One of the great things about this election is it sent a message that people can’t get so far from the concerns of their citizens and their communities on the ground and so I would expect that even in states and in Congress with strong Republican parties often aligned with President Trump, we’re still going to see a softening of the opposition to clean energy,” explained Sean Garren, executive director at Vote Solar. 

“People will understand that they’re accountable to keeping the lights on, to having energy bills be affordable, and that solar, energy storage and clean energy are a critical part of that solution set,” added Garren. 

However, Fulop said that he doesn’t expect a reinstatement of the federal tax credit “because Trump could veto that.” 

An anonymous source who spoke with PV Tech Premium said: “There’s been a lot of interest in curtailing Trump’s ability to impose tariffs through the executive branch. That’s not going to happen. 

“Democrats have between 54 and 56 seats in the Senate—there are two races that are yet to be decided—and that’s not 60,” the source added, in reference to the 60 votes that would be needed for a cloture vote to prevent a filibuster being used to prevent passage of a bill. 

“They would need Republican help. But even if you get 60 votes in the Senate to curtail the president’s tariff authority, then it goes to the president; of course Trump vetoes it, then you need two-thirds majorities in both houses [to overturn the veto]. This is a tall order, and Democrats won’t get two-thirds, even in the House, so we’re back to stalemate.” 

Ravi Manghani, senior director of strategic sourcing at Anza, mentioned that even though expectations for credit extensions have become a real scenario either as a standalone bill or part of an omnibus or larger spending bills, President Trump still has the power to veto bills and that Democrats don’t have enough veto-proof majority. 

“There are two ways that could play out. One is Democrats will try to rope in as many Republicans as possible, and that’s where the Republicans will probably try to be more practical, and potentially be open to compromises that are going to extend 45X, 48E and 45Y. And for the right reasons too, because there have been enough reports out there that show that a lot of the advantages of the IRA policies were actually being reaped by red districts. 

Two years of stalemate 

“Our big message is that, in general, we see two years of stalemate,” added the anonymous source. “We see two years in which the legislation doesn’t get better for solar, batteries, and manufacturing, but it also doesn’t get worse.” 

“This resonates with comments from Moustafa Ramadan, head of PV Tech Research, who said: “For solar, nothing changes. What I mean by nothing changes is that all the restrictions that have existed in the market, such as the existing trade tariffs like anti-dumping and countervailing duties (AD/CVD) or Section 232, are already in effect or will be before the new Congress takes its place. And ongoing investigations will most likely not be stopped by the incoming Congress.” 

Jon Powers, president and co-founder at Clean Capital, is also cautious about the possibility of policy change in the near future. He explains that we can expect conversations to circle back on the tax credits that the One Big, Beauitful Bill Act (OBBBA) removed, but that wouldn’t automatically translate into new clean energy legislation. 

“The election creates the potential for a more supportive federal policy environment for solar and storage. But I would caution our industry against viewing another change in political control as the finish line. We have spent the past several years moving from one policy regime to another, and that kind of whiplash makes it harder and more expensive to finance projects that operate for 25 or 30 years,” said Powers, adding: 

“The real opportunity for incoming policymakers is to create a durable energy policy that can survive the next election. To continue to advance energy infrastructure in the US, investors and developers need certainty. If we can build bipartisan support around policies that help put more affordable power on the grid faster, that will have a much greater long-term impact on our energy supply than simply swinging the pendulum back in the other direction every couple of years.”

“While the Big Beautiful Bill has changed the timelines for some of the support it had for the development side of the market, it did not for the manufacturing side with 45X. And solar manufacturing is one of the few sectors with bipartisan consensus. While we might see this Congress extend the 45X, it might not be their top priority, as the phase-out only starts in 2030.”

Affordability becomes the dominant framing 

Fulop said that there could be an opportunity to reframe clean energy as a central means of cutting household bills,  (rather than as a means to limit emissions , and this could be an effective way of making a positive policy case for more solar, wind and storage. 

“The affordability issue is at the political forefront,” he said. “This could be a boost to renewables, though the Republicans will argue that renewables are more expensive.” 

Powers agreed, adding: “Electricity affordability has become one of the most important issues facing American families and businesses, and I think that changes how we need to talk about energy policy.” 

Powers noted that the business case for renewables goes beyond climate change and that electricity is a major operating expense for manufacturers, hospitals, universities and other large energy users. These facilities are also competing with data centres for constrained power supplies.  

“Distributed solar and storage can help them manage that expense and make long-term operating budgets more predictable. 

“Solar and energy storage are practical solutions because they can be built quickly and affordably. Projects can often be developed in roughly 12 to 18 months, giving businesses options to address energy costs while larger infrastructure projects are still being built. 

“Congress should make that economic case central to energy policy: enabling businesses to deploy solar and storage is about supporting their operations and budgets, not just their climate goals, said Powers. 

Hasan Nazar, head of policy at Crux tied the importance of energy affordability with the onshoring of the solar PV and energy storage supply chain. 

“Energy affordability shaped this election, and it will likely be a central theme of the 120th Congress. Onshoring more of the energy supply chain, including for solar PV and energy storage, serves shared bipartisan goals: lower energy costs, stronger national security, and more reliable electricity,” said Nazar. 

A recent report from Crux highlighted the growth in 45X investment has helped accelerate the annual nameplate capacity for both solar and battery modules in the US, however the industry still relies on overseas supply for other parts of the supply chain. 

Nazar added: “The inputs these industries rely upon, from critical minerals to distribution transformers, still largely come from overseas, leaving the US vulnerable to supply chain disruptions and increased costs. 

“There are already numerous bipartisan proposals to expand 45X to cover these critical inputs, and we anticipate those will serve as a logical starting point for an energy package next year.”

“This election really was so clearly about affordability and energy is a really central part of that, and so everybody coming to Congress and at the state level is going to have this mandate to do something and show that they’re making movement on providing more energy and more affordable energy,” said Garren. 

Permitting reform remains a possible bipartisan opening 

Permitting reform has been floated as an area where both parties could find common ground, and on this topic, Fulop said there was an opportunity for a Democrat-controlled Congress to shape the US permitting regime in favour of clean energy.  

“An important topic is the permitting bill that got bipartisan approval in late September, and now I mean I think it is supposed to be voted next week, which aims at easing the permitting of all kinds of infrastructure,” he said, referring to the Bipartisan American Affordability and Jobs Act. 

“Republicans want to support gas power plants [and] transition lines and Democrats could be in favour of supporting renewables. So, with their new position, they have leverage to maybe shift the bill even more in favour of renewables. If that’s the case, that means that the bill will have to be postponed and voted on with the new Congress next January.” 

Analyst Wood Mackenzie highlighted this week that permitting reform was a likely move for the Democrats and could be “a top agenda for advancing power growth and reducing energy costs in the US”. 

“While we see the likelihood for permitting reform, how policy is legislated and implemented remains a risk to the US economy,” said David Brown, director of global integrated energy research at Wood Mackenzie. “Entrenched partisanship could fuel policy stagnation and regulatory confusion.” 

Manghani mentioned that permitting reform could be brought to the table in the coming days; however, a better outcome might be to leave it to the upcoming Congress. 

“Democrats could try to play more aggressively and wait for the next Congress. There’s a genuine possibility that they could get even more aggressive and aspire to add more clean energy-friendly aspects to the permitting reform, rather than pass this current version. It does open up the federal lands for renewable energy deployments. But obviously, the flip side of that is that it also provides the same level of certainty to fossil fuel-based projects.” 

Even though permitting reform could bring a bipartisan agreement, there are other topics that would have more chances of rallying both parties such as manufacturing, explained the anonymous source. 

“The Republican party has not been—in recent history—favourable to policies to deploy solar, but it has been favourable to manufacturing, including solar and battery manufacturing. Republicans like factories and, perhaps more importantly, the Trump administration likes factories; the Trump administration wants to show that it is onshoring and it’s perfectly happy to send high-level officials to solar factory openings to brag about how this was made possible with the Trump administration’s policies. 

“I wouldn’t say that they’re particularly effective at it, but they like to show successes of onshoring. I think policies to support manufacturing are in a better position. When we had the OBBB pass, it cut the solar investment tax credit (ITC), but it left the 45X manufacturing production tax credit alone, and it left the battery ITC alone, so batteries are another area where we have some bipartisan agreement.” 

State-level policy becomes more pivotal 

With federal gridlock likely continuing given the divide between the president and the legislative branch of government, state-level action —such as renewable portfolio standards, state tax incentives and interconnection rules —may become an even more important lever for solar deployment over the next two years. 

This is particularly significant considering that decisions regarding energy are made at the state level, according to Garren. 

“In the US, a huge amount of energy decisions are made at the state level, and so that’s part of why solar has been so successful throughout the Trump administration. Is that the states have continued to move forward with what is the most affordable source of energy, solar plus energy storage. 

“And coming through this election, I think it’s easy, especially for an international crowd, to focus on Congress and the federal battles. But the reality is that this wave happened every bit as much at the state level as it did across the country, and we saw that Democrats and clean energy majorities took over all of the legislature and the governor’s house in Nevada, in Minnesota, in Wisconsin, in Michigan, in Pennsylvania.” 

Garren explained that the suite of new leaders —whose campaigns featured energy affordability and clean energy as critical components —will “have a huge amount of power because they regulate our electric utilities to move a strong agenda for lowering energy bills with solar and energy storage and other community-based sources of power.” 

Similar to what Garren said regarding the decision-making at the state level, Powers added that “some of the most consequential energy decisions over the next several years will happen at the state and local level.” 

He expects more conversations on how states can accelerate deployment and bring new generation online, as electricity affordability has become an important issue for households and businesses.  

” Looking ahead to 2027, and beyond, I think we’ll see more discussions around new models for distributed energy, including community solar, virtual power plants and battery storage. The opportunity is to establish policies that work for energy consumers while providing the consistency developers need to invest and build,” added Powers. 

Fulop said: “Permitting for onshore wind and solar is at the state level, and we’ve seen last year, especially in Texas, some attempts to restrict, to tighten the permitting for onshore wind, for example. But now with those states like Texas or Iowa being Democrats, you have less risk of that kind of thing. So I would say overall, the perception is of a reduction of the political risk and less regulatory uncertainty [for clean energy], even though in the short term, there may be no concrete improvements.” 

An encouraging sign for investment 

As hinted at by the spike in share prices on 4 November, this result likely reduces near-term legislative risk of further federal rollbacks, even if it doesn’t create a path to new pro-solar legislation while Trump remains president. This could help inspire more confidence among investors in the sector. 

Fulop said: “The election result is a clear positive for renewable developers with US exposure, as it reduces some of the policy uncertainty that has weighed on sentiment in recent years. For companies that have spent the past few years dealing with regulatory delays and shifting political priorities, a more supportive backdrop should provide some much-needed confidence.” 

Garren added: “This election will give investors in the energy space a lot more confidence. Having a check on the power of this administration, which has been so clearly anti-new energy development, is going to be powerful. I think they’ll expect that Democrats in Congress go after some of the more brazen and often illegal attacks on offshore wind, for instance, and really try and strengthen the sanctity of contracts and the rule of law in this country. 

In the short term, and until the new Congress begins next year, there will not be a direct change compared to what we have at the moment, explained Manghani. 

“If we fast-forward 6-12 months from now, there’s likely going to be more certainty for renewable projects. But in the meantime, the projects that are currently in the pipeline, they still have to proceed, assuming that nothing has changed,” said Manghani, adding that companies still have to comply with Foreign Entity of Concern (FEOC) requirements, placement service requirements and securing ITC. 

“One of the outstanding questions where I don’t know where the details will fall is what happens to FEOC? Obviously there’s bipartisan support on both sides to limit China’s sort of involvement and the control that they have on the renewable supply chain,” said Manghani. 

He added that the bigger impact for solar modules has not been the OBBBA, but rather trade policies. 

“We hope that the administration will be a little more careful with putting tariffs on every single country and on every single product,” he said. “The reality still is that Section 232 is not going anywhere. Section 301 tariffs that are already in place are not going away, so I think those tariffs are here to stay.” 

The anonymous source said: “You talk to clean energies and they say, ‘we can adapt to the policy environment, just tell us what it’s going to be!’ If we know what it’s going to be, we can plan for it and we can adapt to it.”