A Brief Analysis of the Impact of Trump's New Energy Policy
Trump's overall attitude towards tariffs, IRA(Inflation Reduction Act Tax Credit)and other issues is relatively negative, but his attitude towards new energy has softened recently.
Trump and his advisory team once called IRA a harmful legislation, and claimed to revoke unused IRA funds and cancel tax credits. But Trump's remarks on new energy have softened recently, and as Musk publicly supported Trump's campaign, Trump's attitude has also changed. If the president wants to repeal the bill of the previous president, the process is long, and it is difficult to cancel the IRA, but he may use the presidential privilege to suspend the implementation of some clauses.
The demand for photovoltaic and energy storage in the United States is relatively strong, and it is highly dependent on the Chinese supply chain.
According to the American Photovoltaic Association, the installed capacity of photovoltaic power in the United States is expected to be about 37.8/38.6GW in 24-25, and the corresponding component demand is 49.2/50.2GW. Excluding the photovoltaic battery production capacity of the four Southeast Asian countries and China, the global battery redundant production capacity is limited and the gap is large. In terms of energy storage, we predict that the demand for energy storage batteries in the United States in 2024, 2025, and 2026 is expected to reach 70GWh, 110GWh, and 130GWh. At present, the energy storage batteries in the United States are mainly met by domestic suppliers, and the domestic production capacity in the United States will be difficult to meet the demand in the future.
Impact of US policies: The impact of tariff increase is relatively small, and the cancellation of IRA subsidies will have a greater impact on terminal demand.
For lithium batteries, China directly exports fewer electric vehicles and power batteries to the United States; for energy storage batteries, the United States is highly dependent on Chinese iron lithium, and may import from overseas production capacity of Chinese companies in the future. For photovoltaics, the local demand may be met mainly through overseas components outside the four Southeast Asian countries and component production capacity in the United States. However, if the IRA subsidies are cancelled, the initial investment of terminal photovoltaic energy storage power stations will be greatly affected, thereby affecting terminal demand; in addition, the cancellation of subsidies will also affect local production capacity.
Summary: The core of demand lies in IRA subsidies rather than tariffs, and it is expected that China will remain highly dependent.
We believe that the core of demand lies in the terminal economy brought by IRA subsidies. At present, the process for the new president to cancel IRA subsidies is long and difficult. The US photovoltaic and energy storage supply chain is highly dependent on China, so the increase in tariffs is unlikely to lead to the replacement of the Chinese supply chain in the short term, especially in the case of a lack of effective supply from US domestic production capacity and allied suppliers such as energy storage batteries. A substantial increase in tariffs may also be a difficult choice.