How Clean Energy Projects Can Manage Political Risk

As the global transition from fossil fuels to renewables accelerates, green energy project organizers must develop strategies for managing political risks. With the world still far from achieving carbon neutrality, political risks remain one of the most significant barriers to the expansion of renewables. Nevertheless, renewable energy adoption has advanced considerably in the U.S., aided by falling green energy prices, federal incentives, and state mandates.

Between 2014 and 2023, the U.S. added more than 121 gigawatts (GW) of small and utility-scale solar capacity and increased wind capacity by 83%, marking growth rates of 688% and 130%, respectively. However, the current administration’s actions highlight the disruptive potential of political opposition and are likely to slow America’s green transition for years. Unlike the Biden administration, which invested billions into building America’s renewable capacity and infrastructure, the Trump administration has taken a firmly anti-renewable stance since President Donald Trump assumed office.

President Trump has reversed hundreds of climate-related policies enacted by the previous Democrat-led government and instructed states to stop using federal funds to construct public electric vehicle charging stations. His administration has also accelerated the expiration dates of federal EV tax incentives and several renewable energy programs, underscoring the politically driven challenges faced by green energy projects in the U.S. and abroad. Considering the high costs of launching new green energy projects, the loss of these tax credits is a major blow to America’s emerging renewable sector.

Political risk insurance (PRI) offers a safety net for renewable energy companies facing potential disruptions from political changes or instability. It can protect against losses caused by nationalization, confiscation, or contract frustration. While common in developing markets, demand is growing in developed regions, including North America.

Recent examples highlight its use in large-scale energy projects. In April 2024, Marsh arranged PRI for a $36 million renewable energy project in Mali, powering a lithium mine and protecting against government interference. Similarly, the World Bank’s $150 million Sri Lanka program includes $40 million in guarantees to lower investment risks.

Green energy developers should also understand that regulatory roadblocks don’t have to mean the end of the line, especially when there’s room to negotiate with federal and state authorities. Governments on both sides of the aisle are more likely to listen when major investors and large-scale infrastructure projects are at stake.

With the right approach, framing proposals around jobs, investment, and local benefits, renewable energy developers can often secure a pause or “reset period” to keep projects on track, even when the rules change midstream.

Locking in stronger contractual protections before the next political storm hits may also help project developers deal with emerging issues. Force majeure clauses that clearly list “political risks” like policy reversals, new regulations, or trade restrictions give projects a better shot at relief when unexpected changes drive up costs or delay timelines.

Combined with solid insurance coverage, open lines of communication with regulators, and contract updates that reflect today’s realities, these safeguards can help keep green energy projects moving forward. In an industry where the political winds can shift without warning, blending smart negotiation with airtight legal language is the best way to stay steady.

Each situation is different, and entities like Bollinger Innovations, Inc. (NASDAQ: BINI) that can no longer count on U.S. federal government incentives to support buyers of electric vehicles now have to look for other innovative ways to drive sales.

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