The following is re-posted with permission from Fox Rothschild LLP. The original article can be found here.
With the Trump administration imposing new tariffs on steel, aluminum and other goods, and pulling back on implementation of the Inflation Reduction Act, we asked Ben Snowden to discuss how the energy sector is responding.
Q: The possibility of tariffs on steel and other key materials has always been a known risk in energy development, but the Trump administration’s priorities have sharpened that focus. What concerns are you hearing?
A: Right now, developers are trying to assess not only the likelihood of new tariffs but also how the new administration’s broader regulatory shifts might affect their costs and financing structures. The energy sector has always dealt with economic uncertainties, but tariffs add another layer of unpredictability—especially in long-term project planning and contracting. With the Trump administration, we’re also seeing executive orders and agency actions that may not align with traditional expectations of what a presidential administration could do without involving Congress. And of course, many of the steps taken by the administration are being challenged in court. So overall, this is a policy environment that is harder to predict than in past years.
Q: When renewable energy developers ask about tariffs, what is top of mind?
A: The biggest concern is financial exposure. Many developers get contracts through competitive processes, where they have to commit to deliver energy at a price that may be set five years or more before construction even starts. If steel, solar panels or other materials suddenly jump in cost due to tariffs, they’re locked in. Depending on how the procurement is set up, they can’t just adjust pricing later. If a developer miscalculates, they could be forced to walk away from contracts and potentially lose millions in forfeited security payments. I’ve seen that happen before, and I expect that many companies that have projects under contract are having to make hard decisions about whether to keep those projects moving forward. And in ongoing procurements, we’re seeing some companies opt out of bidding entirely rather than take on that level of risk. At the same time, many utilities are scrambling to add new generation to their system to meet the challenges of rapid load growth.
Q: How do utilities and regulators figure into this equation?
A: In many regulated markets, utilities run competitive procurement processes where independent developers bid for contracts. Historically, those processes allocated all of the risk of market and regulatory changes to the developer. In other industries, contracts might include cost-adjustment clauses—like how the federal government has price escalation provisions for procurement contracts. But in the utility world, regulators are often hesitant to allow cost adjustments after the fact—even though utilities that build power plants frequently ask for (and usually get) recovery of costs in excess of their original estimates. The concern is protecting ratepayers, but in reality, rigid pricing could drive developers away, leading to higher prices in the long run. This is especially problematic given that adding solar generation is potentially the fastest, and often the cheapest, way to add new sources of energy to the grid. So we’re trying to engage utilities and regulators in a conversation about how we evolve our contracting processes to more reasonably allocate risk while still protecting ratepayers.
Q: Are there factors other than trade policy that contribute to this uncertainty?
A: Yes. Historically, tariffs on materials like steel or solar panels have come and gone depending on trade disputes and political priorities. But what’s different now is that we’re seeing more unpredictable shifts—policy decisions that aren’t necessarily rooted in a long-standing framework. For example, the federal investment tax credit for renewables is statutory, meaning the executive branch can’t eliminate it outright. But there are ways to make access to that credit more difficult through agency interpretations or enforcement priorities. The combination of uncertainty about both tariffs and tax policy at the same time is unusual and hard to navigate. Developers have to read between the lines of not just what policies exist today, but how they might be applied tomorrow.
Q: Beyond steel, what other supply chain risks are affected by tariffs or trade policy?
A: It’s a mix. Steel is a major one because solar panels are mounted on steel racking, and any increase in steel prices directly raises construction costs. But there are also concerns about electronic components—things like inverters and transformers, which often come from overseas. And then there’s labor—energy projects are construction-intensive, and labor shortages, particularly with increased immigration enforcement, are already driving up costs. Developers are looking at all these factors together and trying to make long-term financial commitments in a world where every cost variable is in flux.
Q: Are these concerns unique to the renewable energy industry?
A: Not at all. Although some of the policy changes we’re tracking are focused on renewables, the entire energy industry is feeling the effects and grappling with increased cost and uncertainty. For example, tariffs on materials such as steel and copper, as well as components of critical equipment like transformers, will disrupt critical supply chains and increase the costs of energy resources across the board.
Q: If you could tell policymakers one thing to make this process more sustainable, what would it be?
A: Recognize that risks and uncertainty increase costs—not just for developers of projects, but also for utilities and ultimately ratepayers. It’s not just about whether a tariff exists, or a policy is changed; it’s about the fact that developers are very unclear about what the rules will be in a year. That kind of unpredictability discourages investment, slows down projects, and ultimately makes energy more expensive. Whatever policy decisions are made, the industry would benefit most from consistency.
Q: Final thoughts—what’s your current outlook?
A: We’re in a period of ongoing uncertainty, and I don’t see that changing soon. At the same time, the demand for energy, especially in the Southeast, is growing at an unprecedented rate, and we need to build new generation capacity quickly. That means everyone—utilities, regulators, developers and customers—has an interest in making this process work more efficiently. But I wouldn’t bet on immediate clarity. I’m hopeful that we’ll see more evolved and nuanced approaches to managing risk in energy procurements. In the meantime, the best we can do is help clients navigate it as strategically as possible.
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