Patricia Voorhees,
Director,
The Alta Group

While the Republican sweep of the U.S. presidential and congressional elections in 2024 undoubtedly brings in an administration less inclined to prioritize government investment in fighting climate change, many market-based dynamics will continue to drive private-sector investment in clean-energy equipment and efficiency technologies in 2025.

Chief among these is an exponentially increasing demand for electricity. The expansion of data centers — now supercharged by artificial intelligence — the reshoring of manufacturing and a spike in crypto mining driven by increased market value for currencies like Bitcoin have driven a shift in the trajectory of power consumption growth in the U.S. A recent report by Wood MacKenzie states that the U.S. is facing a fundamental shift in the relationship between GDP growth and electricity demand growth.¹ During the 2010s, the report states, the economy expanded by a cumulative 24%, while electricity demand remained unchanged. The relationship between growth and energy consumption — a trend that has been in place for seven decades — is reversing, according to the report, and American utilities face a steep climb to be able to meet expected demand growth of 2% to 3% per year.

Equipment related to the energy transition and the shift away from a carbon-based economy is forecast to generate $18 trillion in financing between now and 2030.² The demand for investment for solar and supporting battery storage is being driven by market dynamics, as solar is currently the most cost-effective means we have to expand the supply of energy. The equipment needed to support clean energy remains a massive opportunity for the equipment finance industry. As an example, the U.S. battery energy storage system market, estimated at over $700 million in 2023 according to a market analysis by Grand View Research, is expected to grow at an annual rate of 30.5% through 2030.³

Understanding how to effectively finance clean-energy equipment requires equipment finance firms to look strategically at many aspects of their business, including risk management, legal resources, asset management and more. There are plenty of reasons to continue to invest in this work in 2025 and beyond.

The U.S. Energy Information Administration in December predicted that U.S. power consumption would reach record highs in 2024 and 2025, and that trend does not show signs of easing.⁴ A single hyperscale data center can consume as much electricity as a small city. In addition, the reshoring of manufacturing facilities for semiconductors, batteries and solar power equipment is growing, not only because of the CHIPS Act and Inflation Reduction Act, but also in response to tariffs and the need for a more resilient supply chain. Getting these manufacturing facilities up and running will require increased investment in energy-storage batteries and other equipment. These are some of the most energy-intensive manufacturing processes, placing greater demand on the U.S. power grid.

While the energy transition may not be a priority for the new administration, U.S. energy security and independence certainly are top of mind. President Trump has also repeatedly stated his goal for the U.S. to lead the world in energy production and to deliver lower energy and electricity prices for consumers. Meeting this demand will require all the energy-generation options the U.S. has, and this will drive continued investment into cleaner energy technologies, notably nuclear and solar.

As heightened demand puts pressure on the price of power, regulators and businesses will need to focus on energy efficiency. This will drive increased investment in batteries for energy storage and energy efficiency equipment for homes and commercial buildings. Battery storage has the potential to drive grid efficiency and to take pressure off the grid both in front of and behind the meter. The incentive posed by rising energy prices will lead to increased innovation in battery technology in the near-term at every level of the energy supply chain. From improved batteries to support electric vehicles to larger batteries that can capture and efficiently manage the distribution of power from renewable sources, this will be an area of significant investment in the coming years.

THE IRA MAY NOT COMPLETELY DISAPPEAR
While the new administration has pledged to roll back the incentives in the Inflation Reduction Act that have driven investment in clean energy projects, there’s reason to believe that some of these subsidies may remain in place. In August, 18 House Republicans urged House Speaker Mike Johnson not to repeal the IRA’s clean-energy tax credits. They stated that the incentives have “spurred innovation, incentivized investment and created good jobs in … many districts represented by members of our conference.”

A Financial Times analysis of the IRA found that in its first year, $180 billion of investments it spurred were committed to districts represented by Republicans in Congress, compared to approximately $10 billion in districts represented by Democrats.⁵ This creates a strong incentive for politicians on both sides of the aisle to retain some of the law’s provisions, although incentives for electric vehicles and offshore wind are likely to be early targets for the administration.

ENERGY TRANSITION IS A GLOBAL EFFORT
It’s important to remember that most of the companies that will need to transition their operations to meet zero-carbon standards are operating on a global stage. They are subject to climate standards set by the European Union and countries in other areas of the world where addressing climate change remains a priority. The open-source database Net Zero Tracker noted a year ago that 66% of annual revenue of the world’s largest 2,000 companies is now covered by a net-zero target.⁶ Although the credibility of those targets is often debatable, the fact remains that the economic necessity of the energy transition is increasingly seen as a reality by the global business community. Increasingly, corporations are seeing clean energy not as a government mandate but as a competitive advantage.

China — the world’s largest carbon emitter — has aggressive decarbonization plans and continues to advance technological development in solar, electric vehicles and other clean energy areas. There is a strong incentive for the U.S. to maintain competitiveness in these areas.

CLIMATE EVENT COSTS ARE GROWING
According to the U.S. National Centers for Environmental Information, as of Nov. 1, there had been 24 confirmed climate disaster events with losses exceeding $1 billion each in the United States. The annual average from 1980 to 2023 (adjusted for inflation) was 8.5 events. The loss of life and property caused by hurricanes, wildfires and other natural disasters is increasing, and it will directly impact capital expenditure decisions by companies that operate within the U.S.

KEY QUESTIONS FOR 2025
For equipment finance leaders, it’s important to look at your existing client base and ask how these dynamics will impact your customers in the coming years. How are your customers thinking about energy, efficiency and equipment? What capital expenditures might be needed to respond to these trends?

The investment in climate-focused equipment is driven by a diverse array of dynamics, not all of which depend on the outcome of U.S. politics. This is an area that equipment finance leaders should continue to examine and learn about as we enter 2025 as it promises to be a massive space for investment and innovation in the coming years. •

¹ Seiple, Chris, “ Gridlock: The Demand Dilemma Facing the U.S. Power Industry,” Wood Mackenzie, Oct. 2024.
² Berns, Maurice, et. al., “A Blueprint for the Energy Transition,” Boston Consulting Group, Sept. 6, 2023.
³ “U.S. Battery Market Size, Share & Trends Analysis Report by Product,” Grand View Research.
⁴ “Short-Term Energy Outlook,” U.S. Energy Information Administration, Dec. 2024.
⁵ Chu, Amanda, et. al., “Republican Districts Dominate U.S. Clean Technology Investment Boom,” Financial Times, Aug. 13, 2023.
⁶ “New Analysis: Half of World’s Largest Companies Are Committed to Net Zero,” Net Zero Tracker, Nov. 3, 2023.

Patricia Voorhees is a director with The Alta Group and chair of the ELFA Climate Finance Working Group. She has written and presented widely on the market opportunity for equipment finance for projects that reduce carbon emissions or mitigate the environmental impact of greenhouse gas emissions. She was the lead author of the ELFF Research Report “Climate Finance: A Massive Commercial Opportunity for Equipment Finance.”