Amid a volatile day for the energy sector, clean power and utilities in a select number of states managed to defy the downward trend. As oil prices tumbled to a one-month low, optimism about potential peace talks with Iran buoyed markets, while concerns about the burgeoning data center industry following significant Democratic gains in recent elections added pressure.
Despite a 3% surge in the Dow Jones Industrial Average, driven by expectations of political gridlock, energy stocks predominantly fell, particularly in traditionally Republican strongholds like Texas, which witnessed unexpected Democratic victories.
The shift in political power has cast doubt on the future of bipartisan efforts to expedite energy project construction, crucial for both renewable and fossil fuel sectors. Analysts from TD Cowen adjusted their predictions for the passage of the Bipartisan American Affordability and Jobs Act, reducing the likelihood from 40% to 25% during the current session of Congress.
Charles Hua of the PowerLines nonprofit described the Democratic wave as “seismic,” attributing it to widespread dissatisfaction with rising utility costs and economic instability. “You only get such seismicity in political results if something is fundamentally unsteady or unstable, and I think one of the big manifestations of that really has been energy costs,” Hua told Fortune.
Local ballot measures reflecting voter discontent resulted in over 40 initiatives aimed at regulating data centers, with only one failing in North Dakota. Hua remarked, “That’s a staggering statistic.”
While Wall Street saw varied performances among utilities and independent power producers, companies heavily invested in gas-fired power generation in Texas, like NRG Energy and Vistra, experienced steep declines of 12% and 15%, respectively. GE Vernova, a gas turbine manufacturer, saw a 10% decrease.
Jefferies analyst Julien Dumoulin-Smith emphasized the “Texas shock,” noting the unexpected Democratic support could hinder future data center developments.
Elon Musk, CEO of Texas-based Tesla and SpaceX, expressed his disappointment on X, saying, “Data centers in space looking pretty appealing right now.”
Conversely, utilities in Republican-led Florida, like NextEra Energy and Duke Energy, saw gains of 5% and 3%, respectively. Renewable energy firms also benefited, with First Solar increasing over 4%, and solar parts manufacturer Nextpower surging by 13%.
Following President Donald Trump’s remarks downplaying Iran-related tensions and Vice President JD Vance attributing electoral losses to the conflict, the global oil benchmark fell below $100 per barrel, impacting oil producers like ExxonMobil and Chevron, which dropped by 4% and 5%. Refiners Marathon Petroleum and Valero Energy also suffered declines of 9% and 7%, respectively.
Dan Pickering, founder of Pickering Energy Partners, noted, “We had a referendum on inflation, high oil prices, and Trump in general,” suggesting that the electoral results may constrain Trump’s approach to the Iran conflict.
What’s next?
While there is hope for peace negotiations with Iran, Pickering cautioned that the war is far from resolved. “I think the Iran conflict gets more complicated for the U.S. We’ve been looking for an off ramp, but we want an off ramp that doesn’t leave the Middle East in chaos,” Pickering told Fortune. “I think that issue probably transcends the election. Even with more Democrats, I don’t think they’re going to want a bad outcome for the Iran crisis. Oil is down, but it’s not cratering.”
Domestically, the focus remains on the data center controversy and energy permitting reforms. Democratic victories in states like Texas, Georgia, and Ohio have led to discussions on data center moratoriums. Hua mentioned, “‘Moratorium’ certainly is the buzzword,” but its implications are still uncertain. “How high on the priority list is electricity? I suspect that electricity vis-a-vis data centers will remain a top-of-mind issue for these new administrations.”
The AI boom has encouraged bipartisan support for diverse energy solutions, but the Democratic wave may result in proposals that are less favorable to fossil fuel projects. Dumoulin-Smith remarked, “With greater leverage heading into 2027, Democrats have less incentive to accept pipeline provisions during the lame duck, pushing the debate toward a narrower clean energy-transmission package or no deal.”
The legislation, aimed at enhancing long-distance transmission lines, primarily benefits renewable energy. As a result, Quanta Services, a leading transmission developer, saw a 12% decline in its stock.
Senator Sheldon Whitehouse, D-R.I., urged Democrats to support the bill, emphasizing its role in reducing costs for families. “Democrats ran and won on affordability, and this bill lowers costs for families and will allow us to start delivering on our election promises,” Whitehouse told Fortune. “It’s a bird in the hand. We’d be fools not to take it.”
Original Story at fortune.com