Introduction

SDCL focuses on solutions that deliver efficiency, resilience, and cost savings, at the same time as driving carbon emission reductions. While policy shifts can introduce market uncertainty, our energy efficiency investments should remain well-positioned. By prioritising energy efficiency and decentralised energy generation solutions across heavy industry, district energy and commercial buildings in the U.S, our nationwide portfolio should continue to drive sustainable impact and commercial value.

 

Navigating U.S. Energy Policy Shifts

The new U.S. administration continues to implement significant changes aimed at prioritising domestic energy production and restructuring clean energy incentives. These include:

• A 90-day pause on Inflation Reduction Act (IRA) funding for clean energy projects.
• Rollbacks on climate-focused commitments and regulations.
• Tariffs on steel and aluminium imports to protect domestic manufacturing.
• A broader emphasis on energy security and domestic supply chains.

While these changes introduce new dynamics in the energy sector, we believe that our investments  should remain largely resilient due to their focus on commercial solutions that are economically competitive and do not rely on government support. This note explores three key pillars of SDCL’s investment strategy in the U.S. within the context of the changing federal energy policy landscape, using examples from the portfolio contained in the London Stock Exchange listed investment trust that we manage, the SDCL Energy Efficiency Income Trust plc (SEEIT), to illustrate potential impacts of the new U.S. administration.

 

1. Heavy Industry

Heavy industry is traditionally one of the hardest sectors to decarbonise, but efficiency solutions are critical for reducing emissions and improving operational performance.

One of SEEIT’s largest investments is Primary Energy, which plays a crucial role in supporting the U.S. steel industry. Primary Energy is made up of five different sites, three of which are designed to recycle waste gas and heat from steel mills to produce on-site energy services that cut costs and carbon, prevent air pollution and improve resilience.

The U.S. administration’s introduction of 25% tariffs on steel and aluminium imports is designed to bolster domestic steel production. As Primary Energy’s performance is closely linked to demand from U.S. steel mills, these tariffs could positively impact its long-term operations.

Moreover, Primary Energy is not reliant on IRA funding, which reduces its exposure to recent federal energy policy changes. Primary Energy does sell Renewable Energy Certificates (RECs) of waste energy onto the Ohio REC market, which is a state-level market, not directly impacted by federal regulations. Broad shifts in sentiment could have indirect impacts on possible extensions of the Ohio REC market. That said, Primary Energy is an example of an energy efficiency investment servicing heavy industry, which is not directly impacted by federal energy policy changes but could experience indirect impacts.

By delivering energy-efficient solutions to industrial clients like the US steel industry, SDCL continues to support both economic and carbon saving goals irrespective of federal energy policy changes.

 

2. District Energy

District energy systems are a cornerstone of modern, lower-carbon urban infrastructure, delivering reliable and cost-effective energy to businesses, communities, and public-sector organisations. Unlike some renewable energy projects, district energy systems predominately operate on long-term commercial agreements and demand-driven models, making them less susceptible to sudden federal-level policy shifts.

For example, RED Rochester (RED), SEEIT’s large district energy system located in the Eastman Business Park, NY, is not reliant on any specific federal-level funding and therefore has not experienced direct impacts from the federal energy policy changes. RED’s revenues are generated under a commercial tariff.

However, one of RED’s customers, Li-Cycle, has a closed and binding Department of Energy (DOE) loan that is signed under the Advanced Technology Vehicles Manufacturing program.  Li-Cycle continues to work with the DOE to satisfy the drawdown conditions to access the DOE loan. This would enable it to  complete the construction of the factory that RED will serve, generating additional revenues for RED.

As with Primary Energy, RED is otherwise not directly impacted by current federal policy changes, because it is an ‘in the money’ district energy system with long-term commercial agreements, rather than dependent on subsidies.

At SDCL, we plan to continue to invest in new, and expand existing, district energy projects, ensuring they remain a scalable solution for achieving energy resilience.

 

3.Commercial

In addition to providing energy efficiency solutions to heavy industry and district energy, SDCL seeks to reduce costs and emissions for commercial customers. Commercial energy solutions play a crucial role in accelerating the transition to a low-carbon economy, offering businesses both sustainability and cost-saving benefits.

Onyx, SEEIT’s largest solar and battery storage company, provides onsite energy to commercial and industrial customers in the US, decreasing their emissions and improving energy resilience. Onyx does benefit from some federal government support mechanisms, specifically Investment Tax Credits (ITCs), which have long been a driving force behind U.S. solar deployment.

While no immediate changes to ITCs have been announced, we remain vigilant in monitoring policy developments. Onyx’s pipeline remains strong, with tax equity agreements secured for most projects planned for 2025, and by sourcing materials from domestic manufacturers wherever possible.  Onyx mitigates supply chain risks and minimises exposure to potential tariff-related cost increases.

This strategic approach ensures that solar and battery storage remain a profitable and scalable component of our portfolio.

 

Looking Ahead: SDCL’s Strategic Outlook

Notwithstanding an evolving policy environment in the U.S., SDCL believes that it remains well-positioned to deliver strong, stable returns for its investors while continuing to drive energy efficiency and decarbonisation for end customers. Our approach is built on:

• Delivering cheaper, cleaner and more reliable energy than the grid,
• Commercially viable solutions that do not rely on government subsidies,
• A diversified portfolio across multiple sectors and geographies,
• Proactive monitoring of policy developments to mitigate risk and capitalise on opportunities.

 

Conclusion

SDCL will continue to monitor policy developments to ensure that our investment strategy remains aligned with market needs and evolving regulations.

The energy transition is not a straight path. It requires innovation, adaptability, and a commitment to long-term value creation. SDCL is committed to investing in energy efficiency solutions that aim to reduce carbon emissions, lower costs, and provide energy resilience and security to businesses and communities.

For more information on our investments and strategic outlook, visit www.sdclgroup.com.