European clean energy stocks slide after Trump’s US election victory

Shares in leading European clean energy companies took a sharp dive on November 6, following Donald Trump's resounding victory in the US presidential election. This happened as investors grew concerned about the future of US renewable energy policies under a second Trump administration, according to a detailed report by Reuters.

Trump has earlier expressed intentions to roll back climate policies, including leaving the Paris Agreement. He has also discussed about the undoing of President Biden's signature Inflation Reduction Act (IRA), which provides significant incentives for clean energy development, apart for this he also vowed to halt offshore wind projects through executive orders, casting doubt on the future of the critical renewable energy sectors in the US, the Reuters report explained further.

Due to these developments, stocks in leading European clean energy firms corrected significantly. Danish offshore wind giant Ørsted (ORSTED.CO) saw its shares drop by up to 14 per cent, whereas wind turbine manufacturers Vestas (VWS.CO) and Nordex (NDXG.DE) lost 11 per cent and 7.6 per cent, respectively.

Uncertainty is back for the US renewable energy sector

Alphavalue analyst Pierre-Alexandre Ramondenc stated that the election result reintroduced significant uncertainty into the market. "The key message is that uncertainty is back," he stated, the Reuters report explained further.

The US renewable energy sector is crucial for many European utility companies, including Portugal’s EDP Renováveis (EDPR.LS), Ørsted, and Germany’s RWE (RWEG.DE), all of which have substantial operations in the country.

Deutsche Bank analysts indicated that a full repeal of the IRA would depend on the US Congress, but changes to the law could still disrupt planned projects, particularly those that are still years away from completion.

Despite the market downturn, companies like Ørsted and Vestas remained optimistic about long-term US growth. Both firms had stated prior to the election that they expected US demand for clean energy would persist regardless of the election outcome.

Angelo Meda, head of equities at Banor SIM in Milan, defended the sharp decline in Ørsted's share price as an "overreaction," explaining that the shift toward green energy was unlikely to be reversed entirely. He further added that he saw the dip as a buying opportunity.

Nordex, another wind turbine maker, acknowledged potential delays in project timelines but remained hopeful about continued growth in the US onshore wind market.

Other notable declines included shares of RWE, which dropped 6.6 per cent, and EDP Renovaveis, which saw an 11 per cent slump. The iShares Global Clean Energy ETF (INRG.L) also saw a 6 per cent decrease, reaching its lowest level since mid-2020.

Despite these concerns, analysts are divided on the potential long-term impact of Trump's presidency on the clean energy transition. Some view it as a temporary setback, while others warn of more significant disruptions ahead.