Headwinds on the horizon? How the Donald Trump election victory could impact the offshore wind sector

With Donald Trump elected as the 47th President of the United States, the renewable energy sector is preparing for the impact. Spinergie’s Lead Analyst, Yvan Gelbart, examines how the upcoming administration will likely affect the offshore wind sector in the near future and in the longer term.

The recent election of Donald Trump as the 47th President of the United States has sent shockwaves through the renewable energy sector, particularly the offshore wind industry. Trump's campaign rhetoric and past actions suggest a significant shift in federal energy policy, potentially challenging the burgeoning US offshore wind market.

Federal Policy Reversals Ahead‍

Trump has vowed to "end [offshore wind] on day one [...] in an executive order," (1) (May 11, 2024. Rally at Wildwood, New Jersey), signaling a dramatic departure from the current administration's clean energy initiatives. This stance, coupled with his intention to withdraw from the Paris Agreement once again, as he did in 2017 (2), paints a concerning picture for climate action and renewable energy development in the US.

There are three ways the upcoming Trump administration may affect offshore wind: at the permitting level, by controlling the Department of Interior and the BOEM; at the financial level, by killing parts of the Inflation Reducing Act; and finally, by imposing tariffs on a supply chain reliant on foreign companies.

‍How a changed Department of Interior could affect offshore wind permitting

The Department of Interior, which plays a crucial role in offshore wind development through the Bureau of Ocean Energy Management (BOEM), will likely face severe budget constraints under a Trump administration. This will hamper the federal government's ability to process permits and conduct lease auctions for new offshore wind projects.

In the context of the future Trump administration, the Department of Interior's approach to Construction and Operations Plan (COP) approvals, will change. By reducing BOEM’s budget, the processing of COP applications could become considerably slower, extending project timelines and creating uncertainty for developers. The industry has already previously suffered from long delays, such as when offtake agreements had to be signed far ahead of final investment decisions, creating a window of uncertainty badly affected by inflation. Delaying COP approvals would exacerbate that market dynamic.

Furthermore, there may be increased scrutiny of environmental impacts associated with offshore wind projects. This was one of the main concerns raised by President-elect Trump in speeches during the campaign: “They kill the birds. They kill the whales” (3). This heightened scrutiny would lead to more frequent rejections of COPs or requests for substantial modifications to project plans.

Perhaps in anticipation of a Trump victory in the presidential race, the BOEM approved many COP in the last months, earmarking five projects worth 5,844 MW (4) of capacity since the summer of 2024, bringing the total approved pipeline to 13 GW. Consequently, the US has a robust volume of approved projects, with developers currently looking for suppliers or offtake agreements and planning their installation campaigns. These projects will not be affected by COP approval troubles.

US Offshore Wind Farm Pipeline - Spinergie

The Leasing Rounds schedule might get several years of delay

Striking earlier in the project’s lifecycle, budget cuts to the Bureau of Ocean Energy Management (BOEM) will affect its capacity to process leasing rounds. The schedule of leasing rounds has previously demonstrated shifts aligned with political tenures.

The first auctions were launched during the Obama era, signaling commitment to renewable energy development. The pace slowed during President Trump's first tenure, with only one lease auctioned in 2018. The Biden administration then reinvigorated the offshore wind sector, setting ambitious targets of 30 GW of offshore wind capacity by 2030 (5) and 15 GW of floating offshore wind by 2035.

Overall, leasing is significantly influenced by the sitting administration's policies, which means the seven leases scheduled in 2025-2029 could be delayed or canceled, starving developers for fresh marine acreage.

This potential combination of COP approval hurdles and leasing on hold would create a climate of uncertainty in the industry, slowing down the development of offshore wind projects across the United States. Projects that have not received COP approval by the time a new administration takes office will face increased risks and delays in their development timelines. Seven projects are awaiting COP approval, such as Ocean Winds’ SouthCoast project, and their fates remain uncertain. Conversely, projects with approved COPs may be better positioned to proceed, as they have already cleared a significant regulatory hurdle.

Despite the potential federal setbacks, the offshore wind industry may find solace in state-level support. The election was also for new Governors, and nothing changed at this level. This implies previous support from local authorities should not waver: “Our goal persists no matter who is in the White House,” said New York State Research and Development Authority CEO Doreen Harris. (6)

With no changes in leadership across key offshore wind states following the election, policies, and project development could continue as planned at the state level, with no delays in state solicitations.

‍Dismantling the Inflation Reducting Act

President-elect Trump, bolstered by Republican congressional gains, is expected to curb parts of the Inflation Reduction Act (IRA), a Democratic climate law that he refers to as the “green new scam,” (7) which supports emission-free energy. He has criticized the IRA's green subsidies and plans to redirect funds toward other priorities on the GOP agenda.

Notable IRA targets include tax incentives for electric vehicles, methane fees on oil and gas, and clean energy loans. This potential cancellation or modification of IRA incentives poses a significant threat to offshore wind development, as the IRA currently provides crucial funding for clean energy projects.

Removing parts of the IRA could lead to economic unviability for some projects by increasing costs for projects dependent on IRA incentives and forcing developers to reevaluate their business cases. The US is no stranger to offshore wind Power Purchase (PPA) agreements being terminated, with 10 PPAs canceled in the last two years, on the backdrop of a global inflation crisis affecting developers and suppliers.

Still, Republicans may seek to retain IRA incentives that are popular with their base, like carbon capture and hydrogen production credits. Full repeal is unlikely, but Trump may phase out or cap IRA provisions, especially those related to clean energy and industrial policy. Some Republicans benefit from IRA-backed investments in red states and are wary of significant changes, potentially dragging the discussion.

‍Supply Chain and CAPEX Disruptions

One of the most immediate risks to US offshore wind under a Trump administration is the potential for higher tariffs on imports. The offshore wind industry depends heavily on global supply chains, mainly from Europe and China, meaning increased tariffs could significantly impact project costs.

A 10% increase in project CAPEX due to tariffs on European components could render many projects economically unviable. Trump went all-in on promises of tariffs against China, touting a 60% hike for Chinese pieces, much higher than the 7.5% to 25% levied in his first term (8). Since 60% tariffs would significantly increase inflation in the US, the actual value is expected to be below that (9) level. Still, so far, US offshore wind farms have relied mainly on components from Europe, with no OEM hailing directly from China involved in the top components.

Some suppliers, such as Nexans' Charleston cable factory, have previously invested in US-based factories to capitalize on offshore wind growth. While uncertainty affecting the project's pipeline would hurt suppliers, companies having a running factory by inauguration will have the upper hand regarding tariffs. However, overall, only a small number of suppliers are US-based, and no American installation contractor is capable of installing the giant foundation and turbines as of today - not until Dominion’s Charybdis is delivered in 2025. This will result in higher project costs as EU-based installation contractors get hit by tariffs.

Installation Vessel Activity - US Offshore Wind - Spinergie

Long-Term Outlook

While the short-term outlook for US offshore wind appears challenging under a Trump presidency, the industry will not come to a standstill. The economic promise of offshore wind, including job creation and local economic growth, could still appeal to Trump's "America First" agenda. The 2024 Trump campaign overwhelmingly resounded with blue-collar voters since a manufacturing-friendly, “America First” agenda was pushed. The next administration will not likely willingly affect US-based companies involved in offshore wind, such as Riggs & Distler, which is building secondary steel parts for Ørsted’s offshore foundations. (10)

Some even view a Trump presidency as an opportunity to bolster a home-grown supply chain. “With President Trump in office, we have the opportunity to harness even more investment and measurable economic benefits for communities across the country. The U.S. offshore wind industry stands ready to welcome new investments in American factories and shipyards,” Oceantic Network President & CEO Liz Burdock said. The sector has already catalyzed over $24 billion (11) in supply chain investments (manufacturing, shipyard upgrades, port infrastructure, transmission) and created thousands of jobs. This economic reality may encourage some Republican support or at least temper hostility towards offshore wind development.

‍Conclusion

The election of Donald Trump undoubtedly presents significant challenges for the US offshore wind industry. Federal policy reversals, resulting in budget cuts, uncertain schedules for project approvals and leasing, and supply chain disruptions, will all create headwinds for the sector in the short term.

However, the industry's resilience will be tested over the next four years. State-level support and approved project pipelines will help mitigate some of the federal-level challenges. While progress may slow, it's unlikely to come to a complete halt.

Ultimately, the US offshore wind sector may use this period to strengthen state-level frameworks, develop a local supply chain, and prepare for future growth. The coming years will be trying, but with careful navigation, the industry may weather this storm.