Energy Price Volatility and the Political-Economics of U.S. Electricity Markets: Assessing Long-Term Investment Risks and Opportunities in Renewable Energy vs. Fossil Fuels Under the Trump Administration

The U.S. electricity market has undergone significant transformation under the Trump administration's energy policies, marked by a stark divergence in support for fossil fuels and renewables. This analysis evaluates the long-term investment risks and opportunities in these sectors, drawing on empirical data and policy shifts from 2017 to 2025.

Policy Shifts and Subsidy Dynamics

The Trump administration prioritized fossil fuels through expanded subsidies and regulatory rollbacks, while systematically dismantling incentives for renewable energy. By 2023, coal, oil, and gas interests received over $16 billion in subsidies, with total government support for fossil fuels estimated at $34 billion annually by advocacy groups like Oil Change International. These subsidies included tax preferences that reduced the after-tax costs of fossil fuel projects, such as deductions for drilling expenses and production incentives.

Conversely, the administration's One Big Beautiful Bill Act (OBBB) accelerated the phase-out of tax credits for wind and solar, requiring projects to be operational by 2027. This policy shift led to a projected 57–62% reduction in renewable energy deployment over the next decade. Despite these challenges, renewable energy's cost competitiveness-onshore wind and solar PV projects in 2024 were cheaper than 91% of fossil fuel alternatives-suggests resilience driven by market forces according to IRENA.

Electricity Price Volatility and Consumer Impact

The administration's pro-fossil fuel agenda has exacerbated electricity price volatility. Residential electricity bills increased by 10–13% since 2017, attributed to the expansion of fossil fuel-based generation and the cancellation of offshore wind projects. A 2025 report by the Environmental Defense Fund (EDF) found electricity costs rose in 47 states, with 10 states seeing at least a 10% increase. The EDF projects households will pay an additional $100 annually in 2025 due to the rollback of clean energy projects and subsidies for aging coal plants.

Fossil fuel-dependent markets face heightened volatility due to exposure to global commodity prices, particularly natural gas. Modeling suggests this trajectory could lead to a 10–18% increase in electricity rates by 2035. In contrast, renewable energy projects, with fixed-cost structures, offer greater price stability, though their deployment has been constrained by permitting delays and regulatory uncertainty according to consumer advocacy groups.

Investment Trends and Sector Growth

Capital expenditures in renewable energy were driven by a race to complete projects before tax credit expiration, resulting in a surge of onshore wind and solar installations between 2025 and 2027. However, fossil fuels remained heavily subsidized, with the administration promoting domestic oil, gas, and coal production.

Employment growth in renewables outpaced fossil fuels, with clean energy jobs increasing by 12% from 2021 to 2024, reaching 3.6 million workers. Renewable energy hiring grew at twice the rate of fossil fuels and the overall economy according to WRI research. Despite this, the OBBB's policy rollbacks have slowed clean energy job growth to its lowest rate since 2020, with risks of losing 830,000 jobs and canceling $22 billion in projects.

Financial Risks and Opportunities

The Trump administration's policies reshaped investor risk perceptions. Fossil fuel companies benefited from reduced regulatory burdens and expanded production, but faced long-term climate-related risks. Renewable energy developers, meanwhile, grappled with policy uncertainty, as the OBBB's restrictions on tax credits and permitting created project viability concerns.

Financial market analyses highlight the impact of political decisions on sector valuations. The U.S. withdrawal from the Paris Agreement in 2017 caused a 7.4% drop in renewable energy company rankings, while renewed climate focus under Biden led to a 3.7% improvement. Fossil fuel companies, however, faced increasing financial risks due to market shifts toward renewables, which became cost-competitive with traditional energy sources.

Long-Term Outlook

While the Trump administration's policies have created headwinds for renewables, market forces and state-level initiatives continue to drive growth. The Inflation Reduction Act (IRA) under Biden spurred $130 billion in clean energy investments by 2024, but Trump's agenda sought to eliminate IRA subsidies for solar and wind. Despite these challenges, renewable energy's deployment is projected to grow faster between 2025 and 2030 than it did between 2020 and 2025, outpacing fossil fuels.

Investors must weigh short-term policy volatility against long-term trends. Fossil fuels offer near-term gains but face existential risks from climate policies and market shifts. Renewables, though politically vulnerable, present durable opportunities due to their cost advantages, job creation potential, and alignment with global decarbonization goals.

Conclusion

The Trump administration's energy policies have created a polarized landscape for U.S. electricity markets. While fossil fuels have seen short-term subsidies and production booms, renewables face regulatory headwinds but retain strong market fundamentals. Investors must navigate this duality, recognizing that political uncertainty will persist but that long-term economic and environmental imperatives increasingly favor renewable energy.