US green energy slap is amber light for Europe

The U.S. green energy boom just hit a red light. President Donald Trump’s “Big Beautiful Bill”, signed into law on Friday, neuters much of predecessor Joe Biden’s 2022 Inflation Reduction Act. But while that’s a setback for European developers with U.S. ambitions, it may not signal a flood of capital returning home.

At the heart of the IRA were generous federal tax credits covering up to 30% of capital expenditure on renewable kit associated with wind, solar, and batteries. Last year alone, the U.S. clean power sector attracted $80 billion in investment, representing over 90% of new electricity capacity in the country. Trump’s bill changes these incentives. Projects can still qualify for credits if they spend at least 5% of capex or commence construction by mid-2026 – and take no more than four years to complete.

Granted, this is more lenient than feared. And a mooted tax on foreign-made kit, such as Chinese solar panels, was dropped. Still, back in 2023 Denmark’s Orsted ORSTED envisaged up to 40% of its capex this decade being deployed in the Americas. It now surveys a less enticing market: Goldman Sachs analysts reckon that without subsidies U.S. power purchase agreement prices would need to jump by 25% to keep project returns viable. Whether they do depends on whether buyers like Google and Amazon play ball. Meanwhile the path of Trump’s tariffs remains unclear, a foreign equipment tax could return, and planning and permitting rules may change.

In theory, Europe is the natural fallback. Its power demand is growing less quickly than the U.S., but supply chains are mature and governments remain relatively committed to decarbonisation. The UK, for instance, could sweeten green subsidies to support developers.

Yet a rapid shift back to Europe may not happen. Big developers are still reeling from the post-2022 inflation of supply chain costs. Offshore wind in particular demands heavy upfront spending, and balance sheets are stretched. Morningstar reckons European players now carry net debt equal to 5 times forward EBITDA on average.

The upshot is a less gung-ho approach to new investments. In May, Orsted shelved the Hornsea 4 offshore wind project in the UK despite favourable pricing and stable input costs. Germany’s RWE RWE has cut long-term capex plans.

These two, plus peers with big U.S. exposure like Acciona Energia ANE and Engie ENGI, all trade far below the 10 times 2026 EBITDA rival Iberdrola IBE fetches. That suggests their bosses may see share buybacks and debt reduction as better uses of their spare capital. Hence rather than a green light for renewable power in Europe, Trump’s subsidy-slashing is more likely to see the continent stuck on amber.