The Uncertain Future of Renewable Energy

Speaker 1 Graham Alexander has been working in solar energy for a long time.

Speaker 2 Been in the industry for about 25 years now.

Speaker 1 You were in it before solar panels were cool.

Speaker 2 Oh, well, before they were cool.

Speaker 1 Were you on the roof?

Speaker 2 I was on the roof, yep. All right.
I thought I was a roof guy. I thought I was just, I was one of the guys that could get up and get things done.

Speaker 2 Turns out, I was much better at planning and talking about it than actually doing it.

Speaker 1 These days, Graham's more of an office guy. He co-owns a company called Southern Energy Management.
And so, in really simple terms, what does Southern Energy Management do?

Speaker 2 Ah, simple terms. Simple terms.
We are a solar installation company, both residential and light commercial.

Speaker 2 We work with the dentist's office, the mechanics, and on the commercial side, and we work with the homeowners, putting solar up on the roofs.

Speaker 1 The company also has another line of business, certifying green buildings.

Speaker 1 And in the last few years, solar energy and Graham's business have really taken off.

Speaker 2 What's exciting is this, it's growing to the mainstream. It's growing to the neighborhoods that traditionally would have said, no way am I putting solar on my house.

Speaker 2 That's ugly or that's like, that's for the hippies out in the country there. And it's in the last three years, we've seen it grow into neighborhoods that we never would have seen before.

Speaker 1 But a recent law out of Washington threatens to put the brakes on that momentum. Congress passed President Trump's so-called big, beautiful bill.

Speaker 1 And the entire renewable energy industry is bracing for the end of government support.

Speaker 1 Welcome to The Journal, our show about money, business, and power. I'm Andy Minoff.
It's Tuesday, July 15th.

Speaker 1 Coming up on the show, green energy has been booming. Could that boom turn into a bust?

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Speaker 6 This thing is an innovative device called a solar collector. The idea is to catch sunshine for purposes other than tan or sweat.

Speaker 6 A lot of people think that for a country in an energy crisis, this is the wave of the future.

Speaker 1 Solar energy isn't new. For a long time, the U.S.
government has offered incentives to invest in solar and other renewables.

Speaker 1 President Jimmy Carter even installed solar panels on the roof of the White House in 1979 to promote the young industry.

Speaker 7 This afternoon, I've arranged for this ceremony to be illuminated by solar power.

Speaker 3 And

Speaker 7 I think we've done an excellent job in utilizing that tremendous, sometimes untapped resource.

Speaker 1 But in recent years, cheaper technology and more generous subsidies at both the state and federal level have really kicked the renewable energy industry into high gear.

Speaker 3 The United States has seen a renewable energy boom, the likes of which we have not seen before in this country.

Speaker 1 That's our colleague David Uberty.

Speaker 3 There was incredible amounts of investment in solar arrays, battery infrastructure, new types of wind power, et cetera, and by some measures, the vast, vast majority of new power generation capacity added in this country were actually from renewables as opposed to fossil fuels, which is something we just had not seen before in recent history.

Speaker 1 And so how much of our power at this point comes from renewables?

Speaker 3 It's still a minority, to be sure. Natural gas is the largest source of power in this country, but renewables is growing quite quickly.

Speaker 3 In 2024, federal forecasters said something like 80% of new power generation capacity came from renewables, and that's compared with about 4% from natural gas.

Speaker 1 Government subsidies have fueled a lot of that growth. Renewables often take big upfront investments, the type that established energy sources like oil and gas already have.

Speaker 1 But for years, state and federal tax credits have helped subsidize those investments, helping renewables compete.

Speaker 1 Tax credits, for example, can help make it less expensive for homeowners to install solar panels on their roofs. And it's driven an entire industry, companies like Graham's, to meet that demand.

Speaker 1 In 2022, those government subsidies were supercharged.

Speaker 8 And I'm about to sign the Inflation Reduction Act and a law, one of the most significant laws in our history.

Speaker 1 Let me say. That year, Congress passed President Joe Biden's mega bill, the Inflation Reduction Act.

Speaker 1 What did that law do for renewable energy?

Speaker 3 So the Inflation Reduction Act was a collection of different tax incentives and subsidies that spanned electric vehicles, renewable energy investment and production, as well as improvements to people's homes for energy efficiency and renewables development on your rooftop as well.

Speaker 3 At the time, it was essentially projected to cost something like $400 billion over the course of 10 years. It was this huge injection of capital.
into the U.S.

Speaker 3 economy geared toward these lower carbon, if not zero carbon forms of energy.

Speaker 1 The Inflation Reduction Act expanded federal subsidies for green energy and extended many of them for 10 years.

Speaker 1 It was also aligned with one of Biden's bigger goals, to fundamentally shift the country away from fossil fuels.

Speaker 3 The United States for years has been an energy superpower, in large part because of oil and gas.

Speaker 3 And what the Biden administration wanted to do at the time is actually reorient the economy more broadly speaking around renewable energy.

Speaker 1 For Graham, the Inflation Reduction Act was a confidence booster.

Speaker 2 The IRA gave us a path. So it took the tax credits that were there and said, hey, these make sense for American energy for the next 10 years.
We said, great, we can plan a business model around that.

Speaker 2 Got it.

Speaker 1 So people already had subsidies, opportunities for tax breaks to put solar, for example, on their house. But now you're looking at the IRA and thinking, Ah, here's a promise.

Speaker 1 Here's a promise that these subsidies are going to continue.

Speaker 2 It's a commitment for the tax credits. Yeah.

Speaker 1 That commitment helped Graham feel more comfortable taking a big risk. Last year, he and six of his colleagues bought Southern Energy Management from its longtime owners.

Speaker 2 Certainly takes a stretch for the seven of us to take on our second mortgages and buy them out. And we were able to close on that in October of 2024.

Speaker 2 We were able to close and buy out the company and we're just super stoked and excited on the next phases of what the company had in store for us.

Speaker 1 But the timing was challenging. The month after Graham and his colleagues became co-owners of Southern Energy Management, President Trump was elected to a second term.

Speaker 1 What is President Trump's position when it comes to energy?

Speaker 3 His position can be summed up into three words.

Speaker 10 It's called drill, baby, drill.

Speaker 3 You know, we need to, you know, throw out all this renewables garbage. We need to end these subsidies for some of these really costly new industries that have been propped up.

Speaker 9 But we don't want wind and we don't want solar because they're a blight on our country. They hurt our country very badly and smart countries don't use it.

Speaker 3 And we need to get back to the United States' bread and butter, which is producing oil and gas better than anyone else in the world can do.

Speaker 3 What Trump was promising is to take that reorientation of the economy that President Biden promised, shifting away from oil and gas toward renewable energy, and then basically turning the table back toward oil and gas.

Speaker 1 In addition, Trump and Republicans generally are just more skeptical of government subsidies. They believe that the free market should and will support energy sources that are truly competitive.

Speaker 3 They will say, hey, these were gigantic subsidies for untested industries. And if these companies couldn't survive without subsidies, then they shouldn't survive now.

Speaker 3 And that's a fair argument if you're a total free marketer on this sort of thing.

Speaker 1 So as Trump's mega bill started to take shape, a big part of it was ending federal subsidies for renewable energy. The sooner, the better.

Speaker 1 Graham saw the details of a draft of the bill and was concerned.

Speaker 2 It was scary. My immediate thought goes to my team.
I've got a team of 200 folks that I was afraid to turn around and say, hey, I'm not sure how we're going to maintain this business.

Speaker 1 In June, Graham and others in the solar industry went to Washington, D.C. to lobby lawmakers.
Their message, if they couldn't stop the rollbacks, they at least wanted to delay them.

Speaker 1 Even a few more years could make a difference.

Speaker 2 We're not looking for a 10-year tax credit.

Speaker 2 We need a couple years as energy costs continues to increase, as technology continues to evolve, as clients get more savvy and get more educated about their options. We don't need 10 years.

Speaker 2 It's a three-year process to get us to a point where we won't see much of a market interruption.

Speaker 2 But because of the way this bill cuts it off at the end of 2025, there's going to be a pretty significant market interruption.

Speaker 1 Graham's lobbying efforts didn't go very far. The bill passed.
What it means for his business, that's next.

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Speaker 1 The final version of Trump's mega bill hits the renewable energy industry hard. It's expected to cut more than half a trillion dollars in tax incentives for renewable energy over the next decade.

Speaker 1 That's according to the Congressional Budget Office. For Graham, that means fewer customers will get federal tax rebates on solar panels.

Speaker 1 Do you think you might have to lower your prices?

Speaker 2 I think we'll likely have to in the short term. It's not sustainable, obviously, in the long term.

Speaker 2 There's not a whole lot of margin in the solar side for a company that's been in business like us and is trying to treat our team members correctly.

Speaker 2 And we, you know, it's all W-2, all health insurance for all our team members. These aren't just laborers that we bring in.

Speaker 2 So we have a decent amount of costs that, you know, there's a certain point where we say we can, we'll do what we can.

Speaker 2 So we'll just watch the market and see where we are.

Speaker 2 It's going to hit our volume, our ability to maintain our staff.

Speaker 1 And volume meaning fewer people are going to come to you and say, hey, I want those solar panels on my roof.

Speaker 2 They are.

Speaker 2 I mean, if you turn a system all of a sudden, it costs $10,000 more for the average homeowner.

Speaker 2 You could want all the green energy, all the clean energy you want, but you're going to think a little bit harder about that. I would as a homeowner myself.
It shrinks that client base down in a way.

Speaker 1 How much do you think it shrinks it? Is it 20% less business, 30%, 40%?

Speaker 2 We are throwing everything at the dartboard right now. I think in the short term, it's going to be potentially 60 to 80% shrink.

Speaker 1 Oh, wow.

Speaker 1 What's also challenging to Graham is just how fast the subsidies are being taken away. Tax credits for residential solar panels are set to end this year.

Speaker 2 There's no warning. It didn't feel like.

Speaker 2 So the conversations with our ownership team are maximizing transparency to our team and saying, hey, we need to work really hard over the next five months and we're going to do everything we can to keep this team in place.

Speaker 2 but it's going to be a huge shift in a very short period of time for a business.

Speaker 1 Your real beef, it sounds like, with this bill is the abrupt cutoff.

Speaker 2 Yeah, yeah.

Speaker 1 So it's the pulling of the rug as you're kind of perceiving it.

Speaker 2 That's where I see it.

Speaker 1 Graham hopes that one day the solar industry can exist without subsidies and tax credits. He says it's getting closer, but isn't there yet.

Speaker 3 Just the way

Speaker 2 we as a company believe that tax credits work and the way that they are, why they are in in place, is to

Speaker 2 move a country and move an industry forward. And now it feels like we're going from the training wheels to come off to, hey, let's just take the wheels off and see what happens.

Speaker 2 No, no, no, we don't need the wheels off. We need a path.

Speaker 2 So it feels like the, yeah, the federal government basically just took the wheels off the bike and said, nope, we're not going to do this anymore where the market really is asking for it.

Speaker 1 Gramps' business is one of many that are affected. Our colleague David Uberty says the impact of the Big Beautiful bill on the renewable energy industry is huge.

Speaker 3 I mean, this sort of takes their feet out from under them in a big way.

Speaker 3 I've, you know, spent years speaking to companies who are in this space across the country, and they have built into their business models a lot of these subsidies.

Speaker 3 And a lot of these technologies are pretty nascent. They're still developing.
The costs are still coming down in a significant way.

Speaker 3 But the subsidies have been key to getting them up and running, right?

Speaker 3 So what this bill does to many of them is it changes the business model. Some of these projects are not economical anymore.

Speaker 1 So you talked about this clean energy boom that we've experienced over the past few years. Is it over?

Speaker 3 When does a boom actually end, if not become a bust? It's a really tough question to answer.

Speaker 3 I think there's going to be sort of a pause.

Speaker 3 I don't think renewable energy development is going to stop by any stretch of the imagination, but the projects will have to come within different economics than they did previously.

Speaker 3 And ultimately, what that means is the price will go up over the course of time.

Speaker 3 But the trajectory that it was on, this sort of meteoric growth that we saw over the last couple of years, I don't think many people think that's going to continue.

Speaker 3 The big question that I have is once all of these subsidies wind down, what will be the actual level of investment that we're at?

Speaker 3 If I was betting...

Speaker 1 Because it kind of becomes a true test, right?

Speaker 3 Right. That becomes a true test.
Like, is this industry actually an industry that could stand on its own two legs?

Speaker 3 I would bet, given how much it's grown in the last couple of years, that the level of investment will exceed what it was before the IRA.

Speaker 3 And I think all things considered, you know, folks might see that as a win if you support this industry growing.

Speaker 3 That said, if you worry about the climate, if you worry about emissions, it's safe to say at this point that the pace of the build out of this stuff will be way slower.

Speaker 1 That's all for today, Tuesday, July 15th. The journal is a co-production of Spotify and the Wall Street Journal.
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