The Zhitong Finance App learned that Huatai Securities released a research report saying that nuclear energy is the direction of the US bipartisan energy consensus and continues to be optimistic about investment opportunities; US electricity demand broke out of a ten-year low, with a 4.2% increase in the first half of the year, optimistic about the important role of gas and electricity in meeting US electricity growth. If the Republican Party manages or liberalizes oil and gas production to benefit gas and electricity economy, gas turbine orders are expected to benefit. If the Republican Party takes power and weakens the IRA, there is still a chance for new energy to break the game by following the market-based development approach. For example, distributed energy may take the lead in improving fundamentals in the face of tight US electricity supply and demand compounded by interest rate cuts.

US: Compared to the Democratic Party, the Republican Party's energy proposition focuses more on oil and gas extraction and nuclear energy revival. It is a bipartisan consensus

“Make America the most important energy producer in the world so far” is one of the 20 core promises of the Republican Party's latest party platform. Huatai Securities believes that if the Republican Party is in power, the US energy policy may change as follows:

1. On the energy issue, the Republican Party first supports the release of oil and gas production. Oil and gas is America's energy dominant industry, and it is also an important supporter of the Republican Party and Trump. Refer to the “Energy Cost Reduction Act” (H.R.1) proposal passed by the Republican Party in the House of Representatives in 2023. Specific measures include promoting approval of land leases, pipeline construction, refining and chemical permits related to oil and gas extraction. The US has become the world's largest producer of natural gas (25% in 2023). Huatai Securities believes that the US will further relax natural gas production or have an impact on global prices, but at the same time, it is beneficial to the development of local gas and electricity.

2. Under the Republican administration, there is a tendency to relax electricity environmental regulations. Refer to Trump's previous term measures, or once again tighten approval and financial support for renewable energy projects, weaken the environmental agency (EPA) fossil power plant emission control function and devolve it to various states, and institutional support for new energy development has weakened marginally.

3. Nuclear energy is currently the only energy transition and safety plan with bipartisan consensus. The passing of the “Multipurpose Advanced Nuclear Energy Act to Accelerate the Deployment of Clean Energy” (Senate 88/2, House 393/13) in June this year marks a bipartisan consensus on nuclear energy development. Huatai Securities expects that if the Republican Party takes office, it will continue to promote measures such as extending the life of existing nuclear power plants and funding new nuclear energy technology demonstrations during the previous term.

If the Republican Party takes power and weakens the Biden Inflation Reduction Act (IRA), what are the prospects for clean energy development?

Clean energy investment accounts for 64% of the 437 billion dollar IRA bill. Trump promised to “end the clean energy policy” during the election campaign. Huatai Securities analyzed that the actual extent and speed of IRA weakening depends on legislative process protection, the bipartisan composition of the National Assembly, and the relationship of interests:

1. Procedural protection provides a fixed time buffer for amendments to the Act. Amendments to US laws and budgets have to go through Congress and take months to years; executive orders can be issued directly by the President without going through Congress; it takes several months.

2. The bipartisan composition of the National Assembly determines the probability of passing amendments to the bill. If the Republican Party successfully runs for president and heads both houses, the new administration may make substantial changes to the IRA's fund allocation, tax relief regulations, and the federal budget; if the Republican Party is in power but the Senate and House of Representatives are controlled separately by the Democratic Party and the Republican Party (splitting the National Assembly), the new government faces greater congressional resistance to amending the IRA Act, and is more likely to delay disbursement of funds and tighten access to tax relief through presidential executive orders, weakening the IRA's effectiveness from the executive side.

3. IRA provisions that partially meet the interests or protections of the Red State are in the common interest of both parties. On the one hand, as of March 2024, 86.5% of the clean energy and industrial production investment promoted by the IRA has been concentrated in Red State and swing states. The relevant investments are in line with the Republican Party's platform to promote the return of manufacturing and create jobs, so the IRA was completely terminated or faced with political resistance. On the other hand, Musk recently announced his support for the Trump campaign, which may influence the future government's attitude towards the electric vehicle industry, but it will not change its attitude towards subsidies.

If we enter Trump's “2.0 era,” the new energy industry will even need to “practice internal skills” to “turn the game against the wind.” During Trump's last term, the cumulative number of new installations added to the US landscape increased by 33% compared to Obama's second term. Looking forward to the future, even if institutional impetus weakens, the economic growth of new energy sources, the share of renewable energy in RPS targets in various states, and clean electricity demand from tech giants are still expected to boost the market-based development of new energy sources.